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2016 (5) TMI 49 - AT - Income TaxDisallowance u/s 14A - Held that:- We find that the assessee had not claimed any expenditure in its books of accounts for earning tax free income, that it had not earned exempt income during the year under consideration, that the investment was made in purchasing shares of one of the group concerns and of a cooperative bank, that such investments were made long back. In our opinion if the assessee had not claimed any expenditure, no disallowance can be made u/s. 14 A read with rule 8D of the rules. - Decided in favour of assessee Applicability of the provisions of section 41(1) / 28 - waiver of loan - Held that:- The nature of the loan is the touchstone on which the waiver is to be examined. In other words, if a loan was taken for acquiring a capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if the loan was for trading purpose and was treated as such from the very beginning in the books of account the waiver thereof may result in income more so when it was transferred to the profit and loss account. We find that in the case under consideration, this very basic aspect has not been looked into by the AO or the FAA. Before the AO the assessee had stated that there was no reduction of liability and that it was a capital restructuring exercise. The assessee had not produced the documents with regard to sanction or waiver of the loan and the AO had not called for such details. The FAA also did not deliberate upon the issue as to whether the loan was in the field of capital asset or was trading liability. Nomenclature given by the assessee/AO do not decide the real nature of any transaction until and unless the relevant documents are examined and looked into. It is true that cases relied upon by the AO/FAA laid down certain principles. But, how those principles were applicable to the facts of the case under consideration has not been discussed either by the AO/FAA. We are of the opinion, that provisions of section 28 are not applicable to the facts of the case. But, same cannot be held for the provisions of section 41(1)of the Act, as proper investigation about the real nature of the waived amounts have not been carried out. Considering the peculiar facts and circumstances of the case, we are of the opinion that the matter needs further verification . Therefore, in the interest of justice, matter is being restored back to the file of the AO to decide the issue afresh after considering the loan sanctioning and the loan waiver documents.
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