Tribunal rules loan waiver not taxable under Income Tax Act

The Tribunal directed the Assessing Officer to delete the impugned addition of Rs. 33,48,570 as waiver of loan does not amount to cessation of trading liability under section 41(1) of the Income Tax Act, allowing the appeal of the assessee for the assessment year 2002-03.

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Issues:
The judgment involves the issue of addition of Rs. 33,48,570 on account of waiver of liability treated as cessation of liability under section 41(1) of the Income Tax Act.

Details of Judgment:
The appeal was filed against the order of the CIT(A)-5, New Delhi dated 26.06.2019 for the assessment year 2002-03. The Tribunal had earlier remanded the matter to the Assessing Officer (AO) for fresh adjudication as the purpose of taking the loan amount which was waived needed examination before determining the taxability of the waived amount. The AO observed that the nature of the loan changed to revenue receipt upon waiver, leading to the addition. Following the order of the Hon'ble High Court, the AO made the addition once again. However, the Hon'ble Supreme Court in the case of Mahindra and Mahindra held that waiver of loan does not amount to cessation of trading liability under section 41(1) of the IT Act. Consequently, the Tribunal directed the AO to delete the impugned addition, thereby allowing the appeal of the assessee.

Separate Judgment:
The judgment was pronounced by Sh. N. K. Billaiya, Accountant Member, and Ms. Astha Chandra, Judicial Member.

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