TaxTMI 
TaxTMI 
2019 (8) TMI 297
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....t the main factors for increase in the capital are current year's business income of Rs. 14,63,875/- and a sum of Rs. 2,31,98,954/- which was written off out of ABN AMRO's loan account. The assessee explained that the offer letter from the M/s Roayl Bank of Scotland dated 23/01/2012 for one time settlement of the loan was accepted. On perusal, the AO found that the assessee has taken loan jointly with his brother Shri Sunil Bansal and Pawan Bansal (other two appellants under consideration). The AO further observed that the total outstanding balance in the loan account was Rs. 1532.79 lakh which comprising of principal of Rs. 1342.52 lakhs and unpaid interest of Rs. 190.27 lakhs . The AO further noticed that the bank had given offer to pay a sum of Rs. 706.23 lakh in full and final settlement of complete outstanding amount. 4. According to the AO, the total outstanding balance of the loan related to the assessee was Rs. 384.91 lakhs and the assessee has transferred waived off amount of Rs. 2,31,98,954/- in the capital account of the assessee, therefore, the assessee was asked to explain why waived the amount should not be treated as income u/s 28(iv) of the Income Tax Act, 1961 (....
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....geable to income-tax under the head "Profits and gains of business profession",-- x x x (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; " 13) On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of Rs. 57,74,064/- can be taxed under the provisions of Section 28 (iv) of the IT Act. 14) Another important issue ....
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.... 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 assessment years. Here, we deem it proper to mention that there is difference between 'trading liability' and 'other liability'. Section 41 (1) of the IT Act particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, we find no force in the argument of the Revenue that the case of the Respondent would fall under Section 41 (1) of the IT Act. 17) To sum up, we are not inclined to interfere with the judgment and order passed by the High court in view of the following reasons: (a) Section 28(iv) of the IT Act does not apply on the present case since the receipts of Rs. 57,74,064/....
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....sion in the matter of Mahindra and Mahindra Limited (supra) would not be applicable in view of the subsequent decision of this Court in the matter of Solid Containers Ltd. v. Deputy Commissioner of Income Tax reported in 308 ITR 407. In the above case, this Court has distinguished the decision rendered in the matter of Mahindra and Mahindra Limited (supra) and held that waiver of loan taken for trading activity would become the assessee's income and be subject to tax. Alternatively, Mr. Gupta submits that the loan amount written off would be taxable under Section 28(iv) of the Act as a benefit arising from business. 7) As against the above, Mr. Pardiwalla, Counsel for the respondent-assessee submits that the issue arising in this appeal would stand covered by the decision of this Court in the matter of Mahindra & Mahindra Ltd. (supra). According to him, the decision of this Court in the matter of Solid Containers (supra) is not applicable as in that case the loan was taken for business purposes and not for purchase of a capital asset as in this case. So far as the alternative submission is concerned, Mr. Pardiwalla submits that Section 28(iv) of the Act would not apply....