TaxTMI 
TaxTMI 
2008 (7) TMI 1025
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....on for doubtful debts amounting to Rs. 7,70,000. Your appellants submit that the same is allowable and ought to be allowed. 3. The learned Commissioner of Income-tax (Appeals) erred in not allowing deduction for depreciation amounting to Rs. 12,64,420 in respect of fixed assets scrap during the year. Your appellants submit that the same is allowable and ought to have been allowed. 4. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition of Rs. 5,95,591 being the provision made for doubtful deposits. Your appellants submit that the same is allowable and ought to be allowed as claimed. 5. The learned Commissioner of Income-Tax (Appeals) erred in confirming disallowance of Rs. 5,77,950 in respect of filing fees and stamp duty expenses incurred for increase in share capital. Your appellants submit that the same is allowable and ought to have been allowed. Without prejudice to the above, your appellants submit that in any event, the learned Commissioner of Income-tax (Appeals) ought to have allowed Rs. 50,200 as expenses in connection with the issue of shares. Without prejudice to the above, your appellants submit that in any event, the learned Comm....
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....g promoters were to fulfil the obligations of the employees and the shareholders. The existing promoters had to keep the assessee-company going on by meeting the company's day-to-day expenses, current liabilities and providing the funds for running the company. Further, the assessee was under obligation to fulfil another condition that the old liabilities should be cleared and the new management should be left with the relatively clean balance sheet. In view of the above, in order to keep the company in running condition, to discharging the old loans/liabilities and fulfil the obligations of the employees and the shareholders, etc., assessee borrowed Rs. 3,51,34,000 from M/s. Saurabh Digital Devices & Circuits Private Limited (SDD & CPL), a concern belonging to the assessee's promoter group, over a period of 4 months from September 1998 to January 1999 as per the details in the table given below : Date of payment Particulars Debit amount in Rs. 23-9-1998 To Bank 3,25,000 23-9-1998 To Bank 8,00,000 22-12-1998 To Bank 20,00,000 22-12-1998 To Bank 17,50,000 30-12-1998 To Bank 15,00,000 9-1-1999 To Bank 1,29,59,000 9-1-1999 To Bank 9,00,000 12-1-1999 To Bank ....
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.... [1980] 131 ITR 37 2 (Delhi) and Mahindra & Mahindra Ltd. v. CIT [2003] 261 ITR 501 3 (Bom.). Assessee also mentioned the Apex Court's judgments in the cases of CIT v. T.V. Sundaram Iyengar & Sons Ltd. [1996] 222 ITR 3444 and Sawhney Steel & Press Works Ltd. v. CIT [1997] 228 ITR 2535, which were considered by the Commissioner (Appeals) in the impugned order. Commissioner (Appeals) made use of the judgment in the case of Sawhney Steel & Press Works Ltd. (supra) for the proposition that the any central subsidy under certain conditions must be treated as an assistance for the purpose of trade and also made use of the Apex Court judgment in the case of T.V. Sundaram Iyengar & Sons Ltd. (supra) for the proposition that if an amount is received in the course of trading transaction even though not taxable in the year of receipt, the amount looses its character and it becomes assessee's own money because of limitation or contractual right. When such things happen, a commonsense demands that the amount should be treated as income of the assessee. Thus, the amount payable by the assessee, when forfeited by the creditor, the said amount becomes a taxable receipt in the year of such forfeitur....
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....ade deposits but only loans. In the context of the applicability of the provisions of section 28(iv), relying on the decision of the Tribunal in the case of Helios Food Improvers (P.) Ltd. v. Dy. CIT [2007] 14 SOT 546 (Mum.), the ld. AR argued that the loan waived by the lender, when the same is written off by crediting the same to the capital reserve account, is not chargeable to tax as income of the assessee under the said provisions of the Income-tax Act. Ld. AR mentioned that the Hon'ble Tribunal held the same in that case after considering the Apex Court judgment in the case of T.V. Sundaram Iyengar & Sons Ltd. (supra). Further, ld. AR relied on the jurisdictional High Court judgment in the case of Mahindra & Mahindra Ltd. (supra) for the proposition the loan waived by a foreign company is neither a case of remission of liability nor assessable under section 28(iv) of the Income-tax Act, 1961. 8. Ld. DR for revenue argued that the important aspect in taking loan was undisputedly for meeting the trade expenses such as paying the salaries, for meeting the running cost of the company, for clearing the loans of the company, for making the assessee-company to kept it worthy for ta....
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.... one. 10. First, we have examined the provisions of section 41(1) and their applicability to the instant case. The relevant extracts of section 41(1) reads as under :- "41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first mentioned person) and subsequently during any previous year,- (a)the first mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and, accordingly, chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b )****** Explanation 1.-For the purposes of this sub-section, the expression "loss or expenditure or some benefit in respect of any such tradi....
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....s received by the assessee in respect of trading liabilities, we have examined, if the spending of loans/amounts for meeting the trading liabilities entitles such amounts are covered by the provisions of section 41(1) and found that the same are not covered by the said provisions. But section 41(1) deals with the amounts or benefits received and not the ones input. 12. In the light of the above, we are of the considered opinion that the Assessing Officer action of linking the loss of the assessee to the loans given by lender (SDD&CPL) and thereby considering that the amount given by the lender is in respect of the said loss, is an incorrect finding and the same is not in accordance with section 41(1) of the Act. Probably, for this reason the Commissioner (Appeals) did not insist on this view of the Assessing Officer, before the Commissioner (Appeals) relied on the Apex Court's judgment in the case of T.V. Sudaram Iyengar & Sons Ltd. (supra) for confirming the addition in the impugned order. It is almost a settled law that 'A debt waived by the creditor cannot be the income of the debtor' as held in the case of British Mexican Petroleum Co. Ltd. v. Jackson [1932] 16 TC 570(HL) affi....