Loan waiver on capital asset funding not taxable under section 28(iv) because the benefit was a money receipt, not a perquisite in kind.

Waiver of a principal loan taken for acquisition of capital assets was held not taxable under section 28(iv) because the liability was not a trading liability and the amount was credited to reserves and surplus. Section 28(iv) applies to benefits or perquisites received in kind, not to cash or money receipts, so a waiver of principal outstanding does not fall within its scope. The reasoning applicable to trading receipts was therefore inapposite, and the addition under section 28(iv) was unsustainable.

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Issues: Whether waiver of principal loan taken for acquisition of capital assets could be brought to tax as income under section 28(iv) of the Income-tax Act, 1961.

Analysis: The loan was used for acquiring capital assets and this position was not disputed by the Revenue. The waiver related to the principal amount of a liability that was not a trading liability, and the amount was credited to reserves and surplus. Section 28(iv) applies to benefits or perquisites in kind and not to cash or money receipts. On these facts, the waiver did not fall within the ambit of section 28(iv), and the reasoning applicable to trading receipts was inapposite.

Conclusion: The addition under section 28(iv) was unsustainable and the issue was decided in favour of the assessee.

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