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2015 (1) TMI 390 - HC - Income TaxDeemed income u/s 41 - waiver of loan - Swedish Company waived the loan stating to be as part of discharge of obligations under the Scheme of amalgamation - Held that:- The agency, which advanced the loan, has written-off the same. The fact that the writing-off the loan was as part of the obligation under the Scheme framed under B.I.F.R, would certainly become important, for keeping the entire amount outside the purview of the trade activity. The waiver of loan has only resulted in cessation of the liability on the part of the respondent to repay it. The entire controversy is as to whether such a cessation has the effect of transforming the loan amount, into income. It is too primary to refer to Section 14 of the Act to identify the sources or categories of income. However, the necessity is felt only as a step in the elimination process. The amount received as a loan for revival of a sick company does not fall into any of the categories of income under Section 14 of the Act. It safely becomes part of the capital. The Act does not provide for levy of tax on capital. A loan advanced to a Company as part of a scheme framed by B.I.F.R for its revival, can, by no stretch of imagination, be treated as its trade receipt. It has already been mentioned that, at the most, it can be treated as part of the capital. The writing-off such loan would, if at all, result in the fluctuation of the value of the capital assets. Though in a remote sense, the situation can be compared to the one of the increase in the market value of a land owned by a company/assesee. - if loan was taken by an assessee, not being for trading purpose and it is written-off, to certain extent, it would result in fluctuation in the asset value, and the amount cannot be treated as an item of income. The judgment of the Supreme Court in T.V.Sundaram Iyengars case [1996 (9) TMI 1 - SUPREME Court] was in relation to deposits received by the assessee in the course of its trade. - The facts of the present case are totally different. Firstly, the respondent did not enter the loan amount in the profit and loss account, before, or after it was written-off. Secondly, it was not a trade receipt. - waiver of loan is not taxable - Decided against Revenue.
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