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2022 (9) TMI 1514 - ITAT BANGALORERectification of mistake u/s 254 - Income chargeable to tax - Waiver of Principal amounts of loan/borrowings - one time settlement (OTS) with banks and financial institutions - Assessee also received waiver of interest due on the aforesaid loans - While the principal amount waived was claimed as not taxable in the return of income, the interest component that was waived on the loans were offered to tax by the Assessee u/s.41(1) - HELD THAT:- In the case of CIT v. T.V. Sundaram Iyengar & Sons Ltd [1996 (9) TMI 1 - SUPREME COURT] the court observed that the moneys had arisen out of ordinary trading transactions. The assessee had received certain deposits from customers in the course of carrying on his business, which were originally treated as capital receipts. Since these credit balances, standing in favour of assessee’s customers, were not claimed by the customers, the assessee transferred such amounts to its profit and loss account. The assessee did not include such amounts in its total income. The Court held that although the amounts received originally were not of income nature, the amounts remained with the assessee for a long period unclaimed by the trade parties. By lapse of time, the claim of the deposit became time barred and the amount attained a totally different quality. It became a definite trade surplus. Although it was treated as deposit and was of capital nature at the point of time it was received, by efflux of time the money has become the assessee’s own money. What remains after adjustment of the deposits has not been claimed by the customers. The claims of the customers have become barred by limitation. Here we see the concept of ‘changing of character of receipt by efflux of time’ and the action of the assessee of crediting it to profit & loss account which shows that the assessee treats it as revenue, as in the present case, where receipts have been shown as extraordinary items in the profit and loss account (Note 14 of notes to Profit & Loss Account). It is based on these decisions that the AO made the impugned additions in AY 2005-06 & 2006-07. Waiver of working capital loan was taxable. Therefore, the view taken by the Tribunal in it’s order [2022 (1) TMI 1399 - ITAT BANGALORE] cannot be said to be an unsustainable view. The tribunal has given reason as to why waiver of principal portion of working capital loan is taxable and has taken a conscious decision after considering the Tribunal’s order for AY 2005-06. It is no doubt true that to the extent the waiver of loan was towards term loan, it was not taxable as was held by the Tribunal in it’s earlier order for AY 2005-06. Therefore, to the extent that the Tribunal order dated 21.1.2022 holding that the waiver of principal of loan availed for capital account purpose is not taxable. Whether any mistake can be rectified in exercise of powers u/s.254(2)? - The Hon’ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange case [2008 (9) TMI 11 - SUPREME COURT] has held that non-consideration of the decision of the jurisdictional high court/Supreme Court constitutes mistake apparent from record and is rectifiable within the meaning of section 254(2) of the Act. It can be said that in the case of Reliance Telecom [2021 (12) TMI 211 - SUPREME COURT] the Hon’ble Supreme Court based its conclusion by holding that a detailed order was passed and issue decided and such order cannot be recalled in exercise of powers of rectification u/s.254(2) of the Act. By doing so, it has not diluted the ration laid down in the case of Saurashtra Stock Exchange [2008 (9) TMI 11 - SUPREME COURT] or Honda Siel [2007 (11) TMI 8 - SUPREME COURT] and the power to rectify orders which do not follow binding decision of Supreme Court or High Court or earlier order of Tribunal in Assessee’s own case. The mistake apparent on the record of the tribunal is in not distinguishing the nature of loan waived in AY 2005-06 from the one waived in AY 2006-07, which mistake is apparent from the details of the loan waived In the given facts and circumstances, we are of the view that there is a mistake apparent on the face of record which requires to be rectified.
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