TaxTMI 
TaxTMI 
2021 (3) TMI 673
X X X X Extracts X X X X
X X X X Extracts X X X X
....aking the following additions and disallowances: (i) Disallowance of depreciation: Rs. 4,46,250/- (ii) Notional interest: Rs. 5,25,000/- (iii) Write back of Sundry Creditors: Rs. 4,37,38,637/- (iv) Difference in computation of short term capital loss: Rs. 21,70,651/- 2.1 Aggrieved, the assessee approached the Ld. First Appellate Authority, who was pleased to adjudicate the appeal of the assessee as under: (i) The disallowance of depreciation on Car amounting to Rs. 4,46,250/- was upheld. (ii) The Notional interest added to the income of the assessee amounting to Rs. 1,20,000/- was also confirmed. (iii) The challenge to addition pertaining to writ back of sundry creditor amounting to Rs. 4,37,38,637/- was sustained to the extent of Rs. 2,56,68,848/- and the balance addition of Rs. 1,80,69,789/- was deleted. (iv) The short term capital gain was confirmed to the extent of Rs. 2,56,68,648/-. 2.1 Aggrieved, the assessee is now before this Tribunal challenging the order of the Ld. CIT(A). The following grounds have been raised by the assessee in this regard: "1. That on the facts and in the circumstances of the case the learned CIT(A) was not justified in upho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this loan, but the Assessing Officer had made a notional addition @ 12% on this loan. It was submitted that the advance/loan had been given for the purposes of business of the assessee company and, further, the assessee company had sufficient reserves and shareholders' funds to make the loan as would be evident from the balance of the company. It was submitted that the advance had not been made from any interest bearing loan. Reliance was placed on numerous judicial precedents for the proposition that if the assessee had sufficient interest free fund at its disposal, no disallowance/addition can be made towards notional interest on interest free advance/loan. 3.2 With respect to ground No.3, it was submitted that during the year under consideration, the assessee had shown loss on sale of fixed assets grossing to Rs. 5,39,16,901/- and the net loss on sale of assets at Rs. 1,01,78,264/-. It was submitted that the Assessing Officer had required the assessee to explain why the gross loss should not be added back to the assessee's income and it had been submitted during the course of assessment proceedings that it pertained to purchase of license which was specific to the business of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rightly made. 5.0 We have heard the rival submissions and have also perused the material on record. 5.1 As far as Ground No.1 regarding disallowance on depreciation is concerned, the only objection to the allowance of depreciation by the Lower Authorities is that the assessee could not produce copy of purchase invoice of the vehicle. It is undisputed that the Department has allowed interest on vehicle loan as well as has also allowed the expenditure towards car running. Thus, in fact, it is accepted by the Department that the assessee has a vehicle which is used for the business purposes. Although, the assessee could have made efforts to obtain a copy of the purchase invoice from the hypothecating bank and produced it before the Lower Authorities, all the same, it is our considered opinion that the assessee should not be penalized for his failure to produce the purchase invoice, specially, when the Department has in principle accepted the assessee's claim of interest on car loan as well as claim of Car running expenditure. Therefore, in view of the facts of the case, we delete this disallowance. 5.2 As far as ground No.2 is concerned, it challenges the addition on account of not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duly reflected in the audited financial statements (Schedule 17) and that write back of liability of Rs. 4,37,38,637/-, being liability in respect of fixed assets was deducted therefrom and only the net sum of Rs. 1,01,78,264/- has been added back in the computation. As far as the contention of the assessee regarding non-applicability of Section 41(1) of the Act is concerned, we are in full agreement with the same. The Hon'ble Apex Court in the case of CIT vs. Mahindra And Mahindra Ltd. reported in [2018] 404 ITR 01 (SC) has laid down that waiver on loan amounts to cessation of liability other than the trading liability and it is neither taxable as perquisite u/s 28 (iv) of the Act nor taxable as a remission of liability u/s 41(1) of the Act. On similar reasoning the write back of sundry creditors pertaining to purchase of assets would not constitute income of the assessee. We have also gone through Note No.17 in Notes to the Financial Statements and it is seen that in the audited financial statements, the assessee has declared loss on sale of fixed assets of Rs. 5,39,16,901/- and has, thereafter, deducted the unpaid creditors for license amounting to Rs. 4,37,38,637/- and has thu....