Tribunal Rules Loan Waiver on Capital Account Non-Taxable; Dismisses Revenue Appeal on Asset Depreciation Disallowance.

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....The Assessing Officer disallowed depreciation claimed on Plant & Machinery to the extent of the External Commercial Borrowing (ECB) amount waived off during the previous year, invoking Sections 43(1) and 41(1) of the Income Tax Act. However, the Tribunal held that the waiver of loan on capital account cannot be taxed u/s 41(1), as per the Supreme Court's ruling in Mahindra & Mahindra. Since the assets were purchased in the relevant year, Section 43(1) is not applicable as the cost was not met by any other person. The Tribunal relied on the Supreme Court's decision in Tata Iron & Steel Co., which held that the mode of loan repayment does not affect the actual cost of the asset acquired by the assessee for business purposes. The cost of an asset and the cost of raising funds are separate transactions. Consequently, the Tribunal dismissed the Revenue's appeal.....