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2022 (4) TMI 583 - ITAT BANGALOREIncome from waiver of loan - income changeable to tax or not? - brought to tax under section 28(iv) of the Act or under section 41(1) - income was claimed as exempt from tax and same was shown as a capital receipts - AO treated the said income as the value of benefit or perquisite arising from business u/s 28(iv) - HELD THAT:- In the instant case, the assessee has not claimed any deduction on account of acquisition of capital asset as the same has been reflected in the balance sheet. Remission of principal amount of loan so obtained from related parties had not been claimed as expenditure or trading liability in any of the earlier previous years so far as the waiver of the same cannot fall into the provisions of section 41(1) - the provisions of section 28(iv) applies to the value of benefit or perquisite whether convertible into money or not, arising from business, but it does not apply to benefit received in cash or money, as held in the case of Mahindra & Mahindra Ltd. [2003 (1) TMI 71 - BOMBAY HIGH COURT] waiver of principal amount of loan also does not come under the definition of income as contained under section 2(24). In the light of the above decision of Hon'ble Bombay High Court in the case of Mahindra & Mahindra Ltd. (supra), it is clear that in the case where capital assets are acquired by obtaining a loan, and subsequently, the loan amount is waived by the other party, the principal amount of loan waived by the other party cannot be brought to tax under section 28(iv) of the Act or under section 41(1) of the Act. In the present case, the money was received by the assessee in the course of carrying on business. Although it was treated as unsecured loan from related parties under the head ‘long term borrowings’, and on its waiver the parties have not claimed the same. The assessee itself as treated it as its own money and taken to Profit & Loss account. There is no explanation as to why the assessee has taken it to Profit & Loss account even it was somebody else’s money. At this stage, it is appropriate to refer to the decision of Aries Advertising (P.) Ltd. [2002 (2) TMI 84 - MADRAS HIGH COURT] and Solid Containers Ltd. [2008 (8) TMI 156 - BOMBAY HIGH COURT] As following the decision of Hon'ble Bombay High Court in the case of Solid Containers Ltd. (supra) where the principle enunciated by the Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar & Sons Ltd. [1996 (9) TMI 1 - SUPREME COURT] has been applied, we held that the principal amount of loan, which is taken for the purpose of business or trading activity, on its waiver by the creditor, would constitute income chargeable to tax under the Act. However, if the loan is utilized for the purpose of acquiring any capital asset, the same on its waiver, would not constitute income changeable to tax as held by Hon'ble Bombay High Court in the case of Mahindra & Mahindra Ltd. (supra) and Hon'ble Delhi High Court in the case of Tosha International Ltd. . [2008 (9) TMI 31 - HIGH COURT DELHI] either under section 41(1) or 28(iv) or 2(24) of the Act - Decided against revenue.
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