AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 750
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. The Assessee has raised the following grounds of appeal : "On the facts and circumstances of the case and in law the learned Commissioner of Income Tax(Appeals) has erred : Ground No.1 : In upholding the addition of Rs. 75,00,000 being waiver of non-convertible debentures on grounds that it is a revenue receipt taxable u/s.28(iv)/41(1) of the Income-tax Act, 1961. i. the debentures were capital borrowings from SIDBI Venture Capital Ltd and utilized for financing the business structure and not for trading activity ii. the waiver of such capital liability does not give rise to taxable income iii. the learned CIT(A) has not clearly specified the exact section under which the addition is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....levant paragraph 3.2 and 3.3 of the Assessment Order are reproduced here as under : "3.2 It was brought to the attention of the assessee, that if the debentures were issued for capital transaction such as acquisition of assets then the debt waived by the debenture holders is capital receipt not subject to tax. The assessee was given numerous opportunities to prove that the funds received through issue of debentures in the year 2004 are actually utilized for acquiring capital assets & none of the expenses were debited to Profit & Loss account. 3.3 However the assessee has failed to submit any documentary evidence to prove that the funds received through issue of debentures were actually utilized for acquiring capital assets....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ench decision in Seco Tools India Private Limited Vs. Addl.CIT in ITA No.445/PUN/2020 3. The ld.AR submitted that in all the above decisions, the decision of Hon'ble Supreme Court(supra) in the case CIT Vs. Mahindra & Mahindra Ltd., has been followed. 4. On a specific query raised by Bench, ld.AR specifically submitted no interest pertaining to debentures of Rs. 75 lakhs have been debited to Profit and Loss Account in any of the years. This fact pleaded by ld.AR has not been rebutted by ld.Departmental Representative(ld.DR) for the Revenue. 5. Hon'ble Supreme Court in the decision of CIT Vs. Mahindra & Mahindra Ltd., has held as under : "13. On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or........." 15. On a perusal of the said provision, it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt in any of the assessment years. Here, we deem it proper to mention that there is difference between 'trading liability' and 'other liability'. Section 41 (1) of the IT Act particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, we find no force in the argument of the Revenue that the case of the Respondent would fall under Section 41 (1) of the IT Act. 17. To sum up, we are not inclined to interfere with the judgment and order passed by the High court in view of the following reasons: (a) Section 28(iv) of the IT Act does not apply on the present case since the receipts of Rs 57,74,064/-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wing Hon'ble Supreme Court(supra), we hold that no addition can be made u/s.41(1) of Rs. 75 lakhs. 7.1 Accordingly, we direct ld. Assessing Officer (AO) to delete the addition of Rs. 75 lakhs. 7.2 Accordingly, Ground No.1 raised by the assessee is allowed. Ground No.2 8. Ld.AR for the Assessee pleaded that Assessing Officer has not allowed set-off of brought forward business loss and unabsorbed depreciation. Ld.AR filed a Chart as under : Sr No Assessment Year Date of Filing Loss From Business Loss From Depreciation 1 2006-2007 28.11.2006 4,539,159 9,299,377 2 2007-2008 Nil Nil Nil 3 2008-2009 29.09.2008 640,332 217,097 ....