TMI Blog2024 (4) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee. The other requirement is that the assessee has subsequently obtained any amount in respect of such loss or expenditure or obtained a benefit in respect of such trading liability by way of a remission or cessation thereof. Even if for argument sake it is assumed that the aforesaid first requirement is satisfied, yet the other requirement in assessee s case is not satisfied as the appellant assessee has neither subsequently obtained any amount in respect of the bank interest debited in his books of account in the A.Y. 1991-92, 1992-93 and 1993-94 nor waiver of interest on bank loan in the A.Y. 2003-04 is remission or cessation of a trading liability. Law laid down in Mahindra And Mahindra (Supra) is applicable on facts of the present case that waiver of loan amounts to cessation of liability other than trading liability. Hence Section 41(1)(a) of the Act, 1961 is not attracted on facts of the present case. Thus Tribunal has committed manifest error of law to hold that the interest waived by the bank was chargeable to tax in the hands of the appellant assessee for the assessment year 2003-04 u/s 41(1). Consequently, the impugned order of the ITAT deserves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(3) in which also the losses were not allowed to be carried forward as the returns were filed beyond the prescribed time. Subsequently, during the assessment year in question, i.e., A.Y. 2003-2004, the assessee entered into a settlement with the lender bank for settlement of dues. The total loan dues of the assessee was stated to be Rs.89,79,585/- out of which the bank agreed to waive a sum of Rs.44,70,585/-. The assessee paid the aforesaid agreed amount to the bank and thus, the loan liability of Rs.44,70,585/- was waived by the bank which included bank interest of a sum of Rs.23,52,984. 4. For the assessment year 2003-2004, the assessee disclosed total income as NIL . The case was selected for scrutiny and an assessment order under Section 143(3) of the Act 1961 dated 17.03.2006 was passed by the assessing officer making certain additions including an addition of Rs.29,31,698/- allegedly being the deemed income on account of settlement of the bank loan. The income was assessed at Rs.26,65,361/-. The assessee filed an appeal before the CIT(A) which was dismissed. Aggrieved, the assessee filed second appeal before the Income Tax Appellate Tribunal, B Bench, Kolkata, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994-95 only. The Ld. A/R of the appellant also pointed out that no loss was allowed to be carried forward in the Asstt. Year 1992-93 for which he drew my attention to the order u/s. 143(3) dated 23.03.1995. Section 41(1) provides that, Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year. 6.1. From the aforesaid facts it is very much clear that no allowance or deduction has been made for any year in respect of loss, expenditure or trading liability in the present case. The case cited by the ACIT reported in 271 ITR 17 are not on the facts of the case and are distinguishable. This was a case of a partnership firm for Asstt. Year 1976-77 where loss was determined and set off in the hands of the partners. Hence benefit was derived by the partners who constitute the partnership. I have considered the explanations and documents on record which were filed by the ld. A/R of the appellant as Paper Book pages 1 to 70. I find force in the arguments of the Ld. A/R of the appellant. I find from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equested to upheld the same. 8. After hearing the rival submissions and on careful perusal of materials available on record, we are of the view that when once assessee has debited the interest in the profit and loss account assessee has already taken the benefit of the interest in its accounts whether he has taken the benefit of the Income Tax Act it is not the relevant issue for consideration. If we accept the contention of assessee and the ld. CIT(A) we are of the view that we are acting to the contrary to the provision of the IT Act. Since in this case assessee himself has admitted that he has filed the returns of losses belatedly and not entitled for carry forwarding of the losses then when we allow the interest component which was part of the losses which is not allowable to the assessee to set off because the said loss return has been filed belatedly by assessee then this will be contrary to the provisions of the IT Act. Therefore we are unable to accept the contention of the assessee as well as the ld. CIT(A). In the result we concur with the view of AO and upheld the same by setting aside the orders of the ld. CIT(A). 9. In the result ground Nos.2 to 4 of the revenue are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From bare reading of the afore-quoted provisions of Section 41(1)(a) read with the Explanation 1, it is evident that only those allowance or deduction would fall within the purview of Section 41 which have been made in the assessment. Section 41(1)(a) comes into play where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year if such person has obtained any amount, whether in cash or in any other manner, in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, then the amount obtained by such person or the value of the benefit accruing to him shall be deemed to be the profit and gains of business or profession and accordingly chargeable to income tax as income of the 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. Thus, Section 41(1)(a) of the Act 1961 has been enacted to neutralise the benefit by way of deduction already obtained by an assessee, in the circumstances ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed return pursuant to the provisions of Section 139(4) of the Act 1961. An intimation under Section 143(1)(a) of the Act 1961 and assessment orders under Section 143(3) for the assessment years 1992-93 and 1993-94 were issued to the assessee by the assessing officer specifically mentioning that as the return was filed late, as such, loss will not allowed to be carried forward. The CIT(A) has perused the records and come to the conclusion in afore-quoted paragraph 6.1 that no allowance or deduction has been made for any year in respect of loss, expenditure or trading liability in the present case . He further recorded a finding that the assessing officer has not been able to point out the factum that the assessee has been allowed an allowance or deduction in any assessment year in respect of loss, expenditure or trading liability. He also recorded a finding that the amount of loss which was on account of bank interest was a sum of Rs. 23,52,984/- only which was part of loss. 15. On perusal of the impugned order of the ITAT, it is evident that the ITAT has not set aside or reversed the aforesaid findings of the CIT(A). The ITAT has allowed the appeal of the Revenue merely on an ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability. It is an undisputed fact that the respondent had been paying interest at 6% p.a. to KJC as per the contract but the assessee never claimed deduction for payment of interest under Section 36(1)(iii) of the IT Act. In the case at hand, the learned CIT(A) relied upon Section 41(1) of the IT Act and held that the respondent had received amortisation benefit. Amortisation is an accounting term that refers to the process of allocating the cost of an asset over a period of time, hence, it is nothing else than depreciation. Depreciation is a reduction in the value of an asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the respondent in previous assessment years was due to the deprecation of the machine and not on the interest paid by it. 19. Moreover, the purchase effected from Kaiser Jeep Corporation is in respect of plant, machinery and tooling equipments which are capital assets of the respondent. It is important to note that the said purchase amount had not been debited to the trading account o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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