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2010 (4) TMI 1125 - AT - Income TaxTaxability of income - Waiver of the principal amount - Purpose of business or trading activity or acquiring any capital asset - AO held that since this loan amount was related to the business of the assessee, the same would be assessable under the head "Business" therefore, brought the said amount to tax as income includible in the assessee's total income - CIT(A) decided this issue in favour of the assessee by holding that the provisions of s. 2(24) or s. 28(i) or 28(iv) and s. 41(1) are not applicable to the present case. Being aggrieved, the Revenue is in appeal. Assessee had taken or obtained loan from the SBI, and later, as a result of compromise between the assessee and SBI, the outstanding liability towards interest payable on loan amount was waived. Thus, there is no dispute with regard to the waiver of interest includible in the total income of the assessee for the year under consideration. However, a dispute has arisen between the Department and the assessee with regard to waiver of the principal amount HELD THAT:- In the light of the discussions, and following the decision of Hon'ble Bombay High Court in the case of Solid Containers Ltd. vs. Dy. CIT [2008 (8) TMI 156 - BOMBAY HIGH COURT] where the principle enunciated by the Hon'ble Supreme Court in the case of CIT vs. 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 chargeable to tax as held by Hon'ble Bombay High Court in the case of Mahindra & Mahindra Ltd. vs. CIT [2003 (1) TMI 71 - BOMBAY HIGH COURT] and Hon'ble Delhi High Court in the case of CIT vs. Tosha International Ltd.[2008 (9) TMI 31 - HIGH COURT DELHI] either u/s. 41(1) or 28(iv) or 2(24). The assessee has not brought any material or evidences on record to show that the loan taken by the assessee from bank in cash credit account, CTL account and WCTL account was utilized for the purpose of acquiring any capital asset. On the other hand, the material available on record including the notes to the accounts indicates that the assessee has obtained the loan or credit facility by way of hypothecation of finished goods, semi-finished goods, raw material, book debts, receivable claims, securities, and rights by way of first charge, which indicates that the assessee have obtained the loan facility for its business activity or trading operations. However, this aspect of the matter, whether the whole of the loan amount has been utilized either for the purpose of acquiring capital asset or for the purpose of business activity or trading activity, has not been looked into or examined by the authorities below nor the assessee has established that the loan amount was utilized only for the purpose of acquiring capital asset. We, therefore, restore this issue back to the file of the AO for his fresh adjudication with a direction to the assessee to furnish all the details and particulars of loan, and the purpose for which the loan taken from bank was utilized. In the result, this appeal filed by the Revenue is treated to be allowed for a statistical purpose in the manner as indicated above.
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