2020 (4) TMI 491

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..../2016 by proposing the following question, stated to be a substantial question of law: "Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 4,42,95,650/- made by the Assessing Officer being the amount of unsecured interest free loans taken from M/s. Matrix Logistics Pvt. Ltd. invoking the provisions of Section 41(1) of the Act?" 2. The assessment year is 2013-14 and the relevant accounting period is the previous year i.e. 2012-13. 2.1 During the course of assessment proceedings, the Assessing Officer noticed that the assessee had credited Rs. 4,42,95,650/- in the profit and loss account being the interest free unsecured loan obtained from Matrix Logistics Private Limited in the previou....

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....ows that the liability of Rs. 4,42,95,650/- became null and void by virtue of order of the High Court. The Assessing Officer was of the view that the assessee had become richer by an amount of Rs. 4,42,95,650/- and that, the assessee had failed to prove that the loan amount, taken from Matrix Logistics Private Limited was used for purchase of capital asset and that, on the contrary, it was established that the loan amount was used for purchase of shares, that is, for trading purpose in the business of the assessee, and held that the waiver of such loan was required to be taxed as income under section 41(1) of the Act on account of cessation of liability. 2.2 The assessee carried the matter in appeal before the Commissioner (Appeals), who....

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....lowance or deduction should have been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and it is only when the assessee derives any benefit in respect of waiver of such liability that the provisions of section 41(1) can be invoked. In CIT v. Mahindra & Mahindra Ltd., (2018) 302 CTR 213 (SC), the Supreme Court has held that it is a well settled principle that creditor or his successor may exercise his right of waiver unilaterally to absolve the debtor from his liability to repay. After such exercise, the debtor is deemed to be absolved from the liability of repayment of loan subject to the conditions of waiver. Hence, the waiver of loan by the creditor results in the debtor hav....