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2022 (1) TMI 1399 - ITAT BANGALOREAccrual of income - Waiver of term loan - nature of receipt - addition made by the AO by holding that the principal amount of loan/borrowings taken by the assessee from banks and which were waived off by the banks, was income of the assessee - HELD THAT:- So far as the term loans were concerned, these were taken by the assessee for the purpose of capital assets from time to time. With regard to this loan, the amount did not come into the possession of the assessee on account of any trading transaction; the receipts were capital in nature being loan repayable over a period of time along with interest. Therefore, on waiver of this term loan, no benefit or perquisites arose to the assessee in the revenue field. On the other hand, it is a capital receipt. Thus, the waiver of the term loan cannot be treated as income of the assessee. However, waiver of overdraft, letter of credit, pre-shipment advance, export bills, benefit had arisen to the assessee. These loans were received in the course of carrying on business of the assessee even if it was treated as loan at the time of receipt of said loan and waiver of said amount will result in revenue receipt and to be liable for tax. Since it was the money had been borrowed for day-to- day affairs and not for purchase any capital assets, the said loan were not term loan taken for the acquisition or purchase of capital assets. On the other hand, it is used as a circulating capital not as a fixed capital and the money was used in ordinary course of business in carrying the day-to-day affairs of the assessee. Being so, writing off the over draft cash credit, letter of credit, pre-shipment advance and export bills, etc. which was received for carrying out the day-to-day operation of the assessee and waiver of the same to be treated as income of the assessee u/s 28(iv) of the Act. Similarly, interest waiver, if any and if it is allowed as a deduction in any earlier assessment years, then only the waiver of such interest could be treated as revenue receipt liable to tax u/s 41(1) of the Act. With this observation, we remit this issue in dispute to the file of AO for reconsideration. Appeal filed by the assessee is partly allowed for statistical purposes.
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