2021 (3) TMI 590

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....e Tax (Appeals) [CIT(A)]-11, Hyderabad in Appeal No.32/2018-19/Cir.4(1), VSKP/CIT(A)-2, VSKP/18- 19 dated 20.02.2019 for the Assessment Year (A.Y.) 2015-16. Cross objections are also filed by the assessee supporting the order of the Ld.CIT(A). 2. Brief facts of the case are that the assessee is a company engaged in the business of manufacturing of cylinders, availed loans from a consortium of three banks, viz, State Bank of India, State Bank of Hyderabad and Punjab National Bank in F.Y.2006-07 for its business activities. The company stated to be ran into losses and entered into one Time Settlement with the consortium of banks for settlement of outstanding loans and accordingly received the waiver of loan amount of Rs. 32,88,97,775/- whi....

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..... The AO considered the explanation of the assessee and called for information from the banks u/s 133(6) of the Income Tax Act, 1961 (in short 'Act') and found that the entire loan taken by the assessee was for the purpose of working capital and viewed that both the principal and interest constitute income. Accordingly, the AO placing reliance on the decision of T.V.Sundaram Iyengar and Sons Ltd. (1996) 222 ITR 344 (SC) and Rollatainers Ltd. Vs. CIT, Delhi High Court and the decision of Hon'ble Madras High Court in the case of M/s Ramaniyam Homes Pvt. Ltd. (Order No.278 of 2014 dated 22.04.2016) held that the entire amount i.e. interest as well as principal waived by the banks as a result of One Time Settlement is liable to tax u/s 41(1) of....

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....,03,47,150/- representing the term loan. The assessee also filed cross objections supporting the order of the CIT(A) with regard to deletion of term loan of Rs. 22,03,47,150/-. During the appeal hearing, the Ld.AR argued that the assessee has debited the interest to the Profit & Loss account and rightly offered the waiver of interest component as income and taken the principal amount directly to the balance sheet as capital reserve. The Ld. AR and submitted that the waiver principal does not constitute income, since it was never claimed as deduction or expenditure in the earlier years therefore, argued that the Ld. CIT(A) ought to have deleted the entire addition of Rs. 31,07,14,975/-, instead of partly allowing the appeal. The Ld.AR relied....

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....sessee that the sum of Rs. 40.00 crores were settled for outstanding loans of Rs. 57.39 crores which includes the interest up to 28/02/2015. Similar letters were also given by other consortium banks, thus, there was no bifurcation of principal and interest component in the sanction of banks. Against the outstanding loan of Rs. 71,07,14,973/-including up-to-date interest, compromise was reached for one time settlement at Rs. 40.00 crores and the Banks have waived the balance sum. The assessee had arrived at the interest waiver of Rs. 1,81,82,800/- and the basis was not given. On perusal of the financial statements filed by the assessee, we find that the financial cost for the Financial Year 2014-15 was Rs. 39,21,699/- and for the F.Y. 2013-1....