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2014 (11) TMI 715 - AT - Income TaxAddition of waiver of loans – Loans granted as one time settlement by BIFR order - AO was of the view that the sum is to be treated as income u/s 28(iv) of the Act - Held that:- The company was declared a sick company which was registered under BIFR and in terms of BIFR order, there was a onetime settlement of outstanding loan of ₹ 941.27 lacs, which was settled for payment of ₹ 300.72 lakhs - there was a waiver of ₹ 640.55 lacs - Following the decision in Logitronics P. Ltd. Vs. CIT and Ant. [2011 (2) TMI 12 - DELHI HIGH COURT] - CIT(A) ignored the fact that the amount was ₹ 3,00,72,095/- was paid by the assessee and so the balance amount comes to ₹ 2,39,46,429/- and erroneously held that ₹ 5,40,60,301/- is taxable - when there is a waiver of loan by financial institution as far as the 'term loan' is concerned, it cannot be treated as "income" at the hands of the assesse - Whereas, waiver or writing off loans on "working capital" which was received for carrying out day to day operations of the assessee, will be treated as 'income' in the hands of the assesse - To that extent, CIT(A) has been correct in bifurcating the loan into 'Term Loan' and 'Working Capital Loan' - the onetime settlement of outstanding loan was to the tune of ₹ 941.27 lacs and it comprised of the term loan of ₹ 401.08 lacs and working capital loan of ₹ 540.19 lacs and the assessee infused payment of ₹ 300.72 lacs to the banks - Though there was waiver of ₹ 640.55 lacs comprising of the term loan and working capital loan, the AO had erroneously added the entire amount of ₹ 640.55 lacs as the income of the assessee. When a loan which is the term loan is waived by a financial institution, then, that amount pertaining to the term loan shall not treated as income in the hands of the assessee; whereas if the loan which is waived is the working capital loan which is used for day to day operations of the assessee, then that loan amount which is waived will be treated as 'income' in the hands of the assesse – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for verification – Decided in favour of assessee.
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