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2019 (7) TMI 788 - AT - Income TaxAddition towards loans waived off - loans were taken from the shareholders / directors - failure to prove source of loan taken from shareholder / director - Whether loans waived were not taken for the purpose of acquisition of capital assets and waiver of principal portion of loan is not taxable - Assessing Officer found that the outgoing shareholders had taken over some of the assets and liabilities of the company to effect the takeover of the Company by the existing Directors. - set off the accumulated loss of the company against their loan outstanding HELD THAT:- Following the decision Solid Containers Ltd. vs. DCIT [2008 (8) TMI 156 - BOMBAY HIGH COURT] where the principle enunciated 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 - 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 in the case of Mahindra & Mahindra Ltd. vs CIT [2018 (5) TMI 358 - SUPREME COURT] and CIT vs. Tosha International Ltd [2008 (9) TMI 31 - HIGH COURT DELHI] either under section 41(1) or 28(iv) or 2(24). In the instant case, it would be the duty of the assessee to prove and establish that the amount of loan taken from the Directors/shareholders was utilized for the purpose of business. If on an enquiry and verification, it transpires that the assessee had utilized the loan for the purpose of its business activity or trading activity, the amount of loan to the extent it has been waived by the Directors/shareholders shall be deemed to be the assessee’s income chargeable to tax as per the decision in the case of Solid Containers Ltd. vs DCIT (supra) where the principle laid down by the Supreme Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons Ltd.(supra) has been applied and followed. It was found that there was no details furnished by the assessee as to how the loan amount was utilized or applied or for the purpose for which the loan was raised. Hence, we remit this issue to the file of the Assessing Officer for fresh consideration.- Appeal filed by the revenue is treated to be allowed for statistical purposes.
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