TaxTMI 
TaxTMI 
2007 (12) TMI 519
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....8,170/- by the Deutsche Bank is on capital account and not chargeable to tax u/s 41 (1) or 28 (iv) of the I.T. Act inspite of the fact that the purchase which were so remitted were claimed by the assesses as a revenue expenditure in the same assessment year?" 2. The assesseee is a private Limited Company engaged in the business of leasing and hire purchase and also indulged in trading in securities. The paid capital of the assessee is Rs. One Crore, out of which 30% is subscribed by Deutsche Bank, 24% by Brooks Bond India Ltd. and balance 46% by the employees of Deutsche Bank and unilever group companies. For the relevant assessment year, Deutsche Bank had written off in its Books amounting to Rs. 47.73 Crores due by the assessed company....
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.... the loan transaction has to be treated as business income in view of section 28 (iv) of the I.T. Act. Accordingly, he dismissed the appeal. Aggrieved by the concurrent findings of the authorities below, the assessee filed and appeal before Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal held that either sec 41(1) or sec 28(iv) of the I.T. Act. does not attract the facts and circumstances of the case, since it is a liability payable by the assessee toward the loan borrowed from Deutsche Bank. Accordingly, the contention of the assessee was up-held. However, the matter as remanded to the Assessing officer only to limited extent to find out whether and amount of Rs. 5,03,67,404/- or even any portion thereof is included with i....
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....e passing the order of assessment. The same has been up-held by the Commissioner of Income Tax (Appeals). 5. Therefore, we have to examine whether Sec. 41(1) or Sec.28(iv) of the I.T. Act can be pressed into service to the facts and circumstances of this case. When the Assessing Officer is not disputing that the assessee had over draft facilities with the Deutsche Bank and if the assessee had discharged the loan payable by it to its customers and if the assessee has purchased the securities by utilizing the overdraft facilities, then such transaction has to be treated as loan transaction. There cannot be any dispute in regards to treating the above transaction as loan transaction. Sec. 41(1) of the I.T. Act reads as here under: ....
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....e or treating liability incurred by it by way of remission or cessation thereof in the previous assessing years, in such circumstances sec. 41(1) can be pressed into service. If the transaction between the assessee and the Deutsche Bank is not a trading in nature and if it is clearly a loan transaction then the question of applying Sec. 41(1) of the Act does not arise at all. 7. Mr. Indra Kumar, the learned Senior Counsel appearing for the revenue does not dispute this legal position. 8. So far as sub-section (iv) of sec. 28 of the I.T. Act is also concerned in Commissioner of Income Tax vs. Chetan Chemicals Pvt. Ltd. in 267 ITR 770, the Hon'ble Gujrat High Court has held that the remission of unsecured loan was not taxable in the han....