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2021 (10) TMI 736 - AT - Income TaxTaxability of write back of 'Non-Plan Government Loans' claiming the same to be capital receipts not chargeable to income-tax - reference to the relevant section to make such addition - CIT(A) rejected the contention of the assessee and held the same to be taxable in the hands of the assessee - loans were earlier granted by Government of India to assessee from time to time from 1993 to 2006 for meeting regular and normal business expenses towards Salary, PF, Gratuity, VRS etc. and to recoup cash losses incurred by assessee in the regular course of business, which now stood waived/written off by Government of India in order to revive and rehabilitate the assessee as it was continuously incurring losses and was referred to BIFR as a sick company - Whether Commissioner of Income Tax (Appeals) has erred in law and on facts to confirm the impugned addition without making any reference to the relevant section of the Income Tax Act, 1961 under which he has made such addition which is a mandatory practice for making any such disallowances or additions? - HELD THAT:- AO has categorically held the said waiving off of Non Plan Government Loan by Government of India, which loans were earlier granted by GOI in favour of assessee to meet regular business expenses, as an income in the hands of the assessee as the said loans were granted for trading purposes and not for acquiring capital assets, and the AO held that the assessee has rightly credited the same to Profit and Loss Account which is to be brought to tax as the assessee did not offer the same for taxation in the return of income filed with Revenue. AO has followed the ratio of judgment in the case of T.V. Sundaram Iyenger and Sons Limited [1996 (9) TMI 1 - SUPREME COURT] and case of Solid Containers Limited [2008 (8) TMI 156 - BOMBAY HIGH COURT] while bringing to tax the said waiver of Non Plan Government Loan as income from business of the assessee being a revenue receipts. Thus, we do not find fault with the assessment order passed by the AO that merely because relevant provision of the 1961 statute is not mentioned in assessment order, will take otherwise taxable receipt out of taxation purview merely on the ground that relevant Section is not mentioned by the AO. Thus, this contention raised by assessee lacks merit and deserves to be rejected. Thus, Ground No. 1 is adjudicated against the assessee Whether such writebacks are not ordinary trading transactions or revenue receipts either? - Loan was obtained by the assessee from Government of India on revenue field to meet day to day business expenses, its working capital requirements and to recoup cash losses, and its waiver in our considered view will be chargeable to tax within the provisions of Section 28(iv) and 41(1) of the 1961 Act, as the assessee availed deduction of interest expenses on these loans from its income as well normal business expenditure were incurred by assessee from the proceeds of these loans which were claimed as deduction as business expenditure while computing income chargeable to tax. The unabsorbed expenditure were carried forward to subsequent years for being set off against the income of the subsequent years within the provisions of Section 72 of the Act. Thus, it could not be said that the assessee has not obtained or derived benefit from the waiver of these loans which were earlier obtained on revenue field by assessee from GOI from time to time as now the assessee will not be required to repay these loans to GOI and infact it has become its own money which in our considered view is chargeable to tax, and hence the assessee is definitely hit by provisions of Section 28(iv) and 41(1) of the 1961 Act - thus we hold that the waiver of Non Plan Government Loan to the tune of ₹ 72.9272 crores is an income of the assessee for the impugned assessment year chargeable to tax and we decide Ground No. 2 and 3 against the assessee and in favour of Revenue.
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