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2019 (7) TMI 167 - AT - Income TaxGain on Assignment of Loan Obligation - whether constitutes ''income" chargeable to lax in the hands of appellant? - u/s 28(iv) or u/s 41(1) - HELD THAT:- Surplus arising from assignment of loan is not covered by the provisions of section 41(1) and consequently can not be brought to tax either u/s 28(iv) or u/s 41(1) - the surplus has resulted from the assignment of liability as the assessee has entered into tripartite agreement under which the loan was to be repaid by the third party in consideration of payment of net present value (NPV) of future liability. Thus surplus resulting from assignment of loan at present value of future liability is not cessation or extinguishment of liability as the loan is to be repaid by the third party and therefore can not be brought to tax in the hands of the assessee. Similar issue has been decided by the special bench, Mumbai in the case Sulzer India Ltd Vs JCIT [2010 (11) TMI 728 - ITAT, MUMBAI] which has upheld by Bombay High Court in the case of CIT Vs Sulzer India Ltd [2014 (12) TMI 267 - BOMBAY HIGH COURT] The view taken by the Bombay High Court has been affirmed by CIT Vs Balkrishan Industries Ltd [2017 (11) TMI 1626 - SUPREME COURT] wherein it has been surplus resulting from the payment of net present value of future liability is cessation/extinguishment of liability and therefore can not be taxed as trading receipt. The said decision was rendered in the context of surplus made by the assessee when it chose to pay the net present value of the liability which was to be discharged after seven years is paid at present value of future liability under a scheme floated by the State Govt. Under the scheme the sales tax collected under deferred scheme to incentivize the industry was to be paid after certain years but the Govt came with another scheme offering the industry to pay the present value of that sales tax liability to be discharged in future. Applying the same analogy to the assessee case, we hold that the assessee has assigned the loan by paying the present value of future liability and the surplus is not taxable as it is not cessation or extinguishment of liability. The decisions relied by the ld DR are also perused and found to be not applicable to the present case. We direct the AO to delete the addition. - Decided in favour of assessee.
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