TaxTMI 
TaxTMI 
TaxTMI 
2023 (9) TMI 1322
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....paragraphs. (I) BRIEF FACTS: 2. The petitioner is stated to have taken term loans and working capital loans from Banks and had entered into an One Time Settlement (OTS) with the Banks, whereby portion of the interest charged by the Bank and also part of the principal amount stood waived. 3. While petitioner had offered the waiver of interest to assessment, however, the waiver of the principal amount of term loans and working capital loans was treated to be a capital receipt and was not subjected to tax. 4. The subject matter of dispute relates to the Assessment Year 2006-2007. 5. The history of litigation is as follows:- 23.03.2011 28.02.2018 The appellant/petitioner herein, preferred an appeal ITA No.185/CIT(A)-3/BNG/2014-15 before the Commissioner of Income Tax (Appeals) challenging the order dated 12.11.2010 passed by the Assistant Commissioner of Income Tax, Circle-11(4), Bangalore, for A.Y. 2006-2007. 28.02.2018 The Commissioner of Income Tax (Appeals) dismissed the above said appeal (Annexure-B). 27.12.2021 The ITAT "B" Bench, Bangalore, disposed off the appeal filed by the Revenue against the order dated 31.10.2019 of the Commissioner of Income Tax (Appeals)....
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.... to the Assessing Officer for reconsideration, while observing that upon waiver of loans taken in the course of carrying on day-to-day affairs, the amount of loan that was waived would be treated as income under Section 28(iv) of the I.T. Act. 7. Miscellaneous Application came to be filed under Section 254(2) of the I.T. Act contending that ITA No.1317/2018 ought to have been allowed in its entirety, that waiver of principal amount of term loans and working capital loan constituted a capital receipt which was not taxable income, that the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2005-2006 had affirmed to the stand that waiver of loans was a capital receipt which was not taken note of, that the judgment of Apex Court in Commissioner of Income Tax v. Mahindra and Mahindra (2018) 16 SCC 79 : (2018) 404 ITR 0001 SC [Mahindra and Mahindra] was not taken note of. 8. The said Miscellaneous Petition came to be partly allowed while holding that waiver of term loan was taxable. 9. It is this order that is challenged in the present Writ Petition not being satisfied with the partial allowing of Miscellaneous Petition. 10. Sri E.I.Sanmathi, learned counsel ap....
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....rities being bound by such law laid down, its application did not require any detailed discussion on facts. It is contended that the order in challenge before the Tribunal ought to have been rectified after taking note of the legal position. 14. Though learned counsel Sri E.I. Sanmathi has relied on the Division Bench's judgment of this Court in L. Sohanraj and others v. Deputy Commissioner of Income Tax and Another W.A.No.3852-55/2000 dated 03.08.2000 [L. Sohanjraj], affirming the order of learned Single Judge 2003 (260) ITR 147 (KARL) and the judgment of this Court passed in Deputy Commissioner of Income Tax v. H.V. Shantaram ITR (260) 2003 156 [H.V. Shantaram], however, a close reading of the said judgments and orders do not support the proposition of the Revenue. Before the learned Single Judge in L. Sohanraj and others v. Deputy Commissioner of Income Tax and another 2003 (260) ITR 147 (KARL), though the conclusion was that Writ ought not to be entertained as the petitioners had an alternative, effective and efficacious remedy provided under the statue, however, such conclusion cannot be elevated to a rule prescribing non-entertaining of Writ Petitions where alternative r....
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....emand an elaborate examination of evidence to establish the right to enforce which the writ is claimed. The High Court does not therefore act as a court of appeal against the decision of a court or Tribunal, to correct errors of fact, and does not by assuming jurisdiction under article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another Tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under article 226 of the Constitution the machinery created under the statute to be by-passed, and will leave the party applying to it to seek resort to the machinery so set up." 15. The conclusion of learned Single Judge L. Sohanraj & Ors. v. Deputy Commissioner of Income Tax and Another (supra) declining the Writ Petition cannot be read out of context including reference to the order of the Apex Court in Thansingh Nathmal (supra) which speaks for itself and lays down the proposition that the exercise of jurisdiction of the High Court under Article 226 of the Constitution of India is cou....
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....orders? As noticed by me earlier, in my view, when alternative remedy of right of appeal provided is to this Court and that too before a Division Bench of this Court, it will be totally inappropriate for this Court to exercise its extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. The power of this Court under Articles 226 and 227 of the Constitution of India is exercised to set right the injustice done to a party and when generally no remedy is provided to the party under a statute. The scope of examination by this Court with regard to the grievance made by the parties against the order passed by the subordinate authorities, the Tribunals and Courts in exercise of the power under Articles 226 and 227 of the Constitution of India is much narrower and circumscribed by in-built limitations imposed on it than the right of appeal conferred in a Statute. Therefore, question number 2 is also required to be answered against the petitioner. However, the submission of Sri Acharya that the respondent also would not raise any objection with regard to the maintainability of the appeal under 260A of the Act is placed on record." Finally, the Court has conclude....
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....ning the exercise of writ jurisdiction by the High Court in the presence of an alternate remedy. This Court has observed: "28. The principles of law which emerge are that: (i) The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well; (ii) The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person; (iii) Exceptions to the rule of alternate remedy arise where (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged; (iv) An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law; (v) ....
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....ctly that the High Court should not decline to exercise its jurisdiction merely for the reason that there is a statutory alternative remedy available even when the case falls in the above stated class of cases. It is a settled principle that the courts/tribunal will not exercise jurisdiction in futility. The law will not itself attempt to do an act which would be vain, lex nil frustra facit, nor to enforce one which would be frivolous-lex neminem cogit ad vana seu inutilia-the law will not force anyone to do a thing vain and fruitless. In other words, if exercise of jurisdiction by the tribunal ex facie appears to be an exercise of jurisdiction in futility for any of the stated reasons, then it will be permissible for the High Court to interfere in exercise of its jurisdiction. This issue is no longer res integra and has been settled by a catena of judgments of this Court, which we find entirely unnecessary to refer to in detail..." (emphasis supplied)" 19. Finally, the judgment of Apex Court in M/s Godrej Sara Lee Ltd. v. The Excise and Taxation officer Civil Appeal No.5393/2010 dated 01.02.2023 , apart from reiterating the exceptions for entertaining Writ Petitions despite a....
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....on;". (b) Maintainability relates to an objection which if upheld would operate as a bar for taking up the writ petition and result in rendering incapable adjudication of the lis while the question of entertainability is entirely within the realm of discretion of the High Court Writ remedy being discretionary M/s Godrej Sara Lee (supra) - para - 4 . (c) "In other words, if exercise of jurisdiction by the Tribunal ex-facie appears to be an exercise of jurisdiction in futility for any of the stated reasons, then it will be permissible for the High Court to interfere in exercise of its jurisdiction Executive Engineer v. Seetaram Rice Mill - para - 82" 21. Accordingly, where the petitioner contends that the legal question raised is covered by the judgment of Apex Court in Mahindra and Mahindra (supra) which lays down a pure principle in law and does not require detailed investigation into the facts, such assertion if accepted, would lead to the allowing of Miscellaneous Application for rectification in its entirety and taking note of the principle noticed at point (c) above, no purpose would be served in relegating the parties to avail the statutory remedy. That apart, as noticed ....
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.... within the definition of 'benefit' under Section 28(iv) of the I.T. Act and would be income which was taxable. However, if the loan was taken for a capital purpose and upon waiver of it, the benefit would not constitute 'benefit' for the purposes of Section 28(iv) of the I.T. Act being capital in nature and hence would not constitute income chargeable to tax. 27. Reliance is placed on the judgment of High Court of Mumbai in Solid Containers Ltd., v. Deputy Commissioner of Income Tax and Another (2009) 308 ITR 0417 - High Court of Bombay has held that any amount received as loan by the assessee for trading activity and retained in business upon waiver is taxable under Section 28(iv) of the IT Act.. Extending the aforesaid logic, reliance is also placed on the judgment of Apex Court in Commissioner of Income Tax v. T.V. Sundaram Iyengar & Sons Ltd. (1996) 222 ITR 0344 to contend that there could be 'changing character of receipt by efflux of time'. It is submitted that a receipt which is capital in nature in earlier year can change its character as revenue receipt with efflux in time which needs to be kept in mind. 28. The assessee on the other hand has relied on ....
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...." 16. 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." 30. The clinching factor as per the Apex Court in Mahindra and Mahindra (supra) to bring the benefit/perquisite within the term 'income' under Section 28(iv) of the I.T. Act was that the 'benefit/perquisite' should be 'other than in the shape of money', while h....