TaxTMI 
TaxTMI 
2019 (2) TMI 105
X X X X Extracts X X X X
X X X X Extracts X X X X
....dabad under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to "The Act"). 2. The assessee company filed his return of income on 14.03.2013 showing total income Nil. Upon scrutiny a notice u/s 143(2) of the Act was issued on 12.08.2013 followed by a notice u/s 142(1) dated 04.09.2013 due to change of incumbent in office against the assessee. Further notice u/s 142(1) of the Act dated 10.09.2013 calling for details was also served. During the assessment proceeding, upon verification of the Profit and Loss account it was found that the assessee has disclosed the loan amount of Rs. 2,56,86,457/- as written off and Rs. 38,001/- as interest others. After deduction of expenses net loss was shown of Rs. 5,27,86,067/-, while co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt was utilized for financing the cost of capital expenditure was also sought to be established by documentary evidences filed by the assessee before the Learned Assessing Officer. However, though the said fact was admitted by the Learned AO he further observed that while computing the total income, the assessee has deducted such amount being loan written off stating that income considered separately as capital receipt but the said receipt was not offered to tax. According to the Learned AO if the said income is treated as capital receipt then the same should have been offered for taxation as capital gain. Otherwise it should be treated as revenue income as gathered during the year under consideration. It was further pointed out by the Lear....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case of CIT-vs-Chetan Chemicals Pvt. Ltd. [2004] 267 ITR 771 (Guj) where it was held that the benefit arising as a result of remission of unsecured loans was not taxable u/s 41(1) as admittedly there had been no allowance or deduction of the loans in any of preceding years. Further that, it was held that if the company is not in the business of obtaining and giving loans, remission of loans by the creditor of the company is not taxable u/s 28(iv) of the Act. Reliance was also made upon the judgment passed in the matter of Mahindra & Mahindra Ltd.-vs-CIT (261 ITR 501) passed by the Hon'ble Bombay High Court holding that the loan taken for acquiring capital assets when waived by the lender, either in whole or in part, the amount of loan waiv....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... matter of Mahindra & Mahindra Ltd. (supra) observed as follows: "In the light of the above judicial pronouncements, the law is fairly settled that if the loan obtained for capital purposes was written off, it is not taxable either under the provisions of Sec. 41(1) or under the provisions of Sec. 28. However, if the loan obtained was for trading or revenue purposes, write off of such loan would be assessable as income under the provisions of Sec. 28(iv), [though it is not assessable u/s 41(1)]. In the instant case, the loans were obtained from F.Y. 2005- 06 to F.Y. 2010-11. Though the appellant contended before the AO that the loans were utilized for acquiring fixed assets, there is no discussion on this aspect in the assessment order. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nefit. Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time, hence, it is nothing else than depreciation. Depreciation is a reduction in the value of an asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the Respondent in previous assessment years was due to the deprecation of the machine and not on the interest paid by it. 16. Moreover, the purchase effected from the Kaiser Jeep Corporation is. in respect of plant, machinery and tooling equipments which are capital assets of the Respondent. It is important to note that the said purchase amount had not been debited to the trading account or to the profit or loss account in any of the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be taxed as perquisite u/s 28(iv) as receipt in the hand of the assessee in the form of cash on money neither can be taxed as a remission of liability under section 41(1) since such waiver of loan was not account of liability other than trading liability as rightly followed by the Learned CIT(A). However, whether such loan were utilized for acquiring fixed assets or not no such discussion was not available in the assessment order. Therefore, the Learned CIT(A) directed the Learned AO to verify this particular aspect of the matter by the order impugned before us with a further direction thus in the event it is found to be correct the impugned addition to be deleted to the extent of loans utilized for capital purposes. 7. In the light of th....