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2007 (2) TMI 348 - AT - Income TaxNature Of Income - Applicability of section 28(iv) - Addition on account of remission of foreign currency loan - Term "Benefit" Or "Perquisite"- HELD THAT:- In the present case also the assessee has created capital reserve which itself is indicative of nature of this amount even at the time of such a write-off as being of capital nature. Here, no material has been brought on record to say that loan so received was in the nature of revenue grant or subsidy or assistance originally or it was convertible into such type of receipts in the situation of the assessee not being in position of paying back the same, hence, its character of loan at all points cannot be doubted. We would further like to mention that the income as such or by way of retained earning is capable of being distributed or used for the purpose of the business and in the present case, the loan taken earlier have been repaid, therefore it cannot be distributed as retained earnings directly or indirectly, hence, on this count also the address of capital reserve created by the assessee cannot be termed as income. All the receipts mentioned in section 28 have inherently of income nature except in case or receipt under a Key Man Insurance Policy which is a recovery of expenditure already allowed as deduction. Hence, prima facie, the loan received by an assessee in the course of business is not envisaged an income. Now, coming to specific provisions of sub-section (iv) of section 28 it is also in connection with the value of any benefit or perquisite arising from business which means that such benefit or perquisite should be in the nature of income from the very beginning or it must have characteristics of income before it becomes chargeable at a later stage, if the original transaction is completed as designed. As stated that no material has been brought on record to show that the loan agreements provided for such waiver at subsequent stages, hence, this receipt cannot be construed as a benefit within the meaning of section 28(iv) of the Act. In the present case, the assessee has not such special right or privilege. The only privilege which he enjoyed was regarding no liability to pay any interest as the funds were interest-free, hence, assessee derived benefit to this extent only and had it been a case of interest being payable by the assessee originally which was waived subsequently, in part or toto, the same would have been a benefit u/s 28(iv) surely. We are further of the opinion that provisions of section 28(iv) can be applied in a number of situations but the bottom-line or crucial fact would always be circumvention of income by taking or receiving income in other forms. To conclude, we hold that the order of the CIT(A) is not correct in law and accordingly, we quash the same and direct the Assessing Officer not to charge the amount of loan waived by the lender as income of the assessee. Thus, this ground of the assessee stands accepted. In the result, appeal filed by the assessee is allowed.
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