Section 56(2)(X) of Income Tax Act

[Ethirajan Parthasarathy]

An individual has defaulted in repaying Bank Loan. Later one time payment is settled and the barrower was asked to pay only let us say 2 crore as against outstanding demand of ₹ 3.5 crores.

Whether the sum of ₹ 1.5 crores waived by the Bank will be treated as his income U/s 56(2)(X)

[Ashwani Garg]

When the liability towards the bank to the extent of INR 1.5 crores would be written off and credited in the Profit & Loss account, it would be anyways taxable as his business income. Hence, the question of taxability under section 56(2)(x) should not arise.

AI Summary

Debt waiver treated as business income when lender writes off liability and credits profit and loss account. If a waived loan liability is written off and credited to the profit and loss account, the waived amount is treated as business income for tax purposes and not as income under Section 56(2)(x).