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2023 (9) TMI 1016 - AT - Income TaxAdditions u/s 41 r.w.s 28(i) - Deemed income - waiver of loan - Floating Rate Notes - To be treated as loan for business purpose or for purchase of capital asset - AO held that the amount of waiver of loan was taxable under section 28(i) and 28(iv) and 41(1) - Whether Commissioner of income-tax (Appeals) has erred is not appreciating that floating Rates notes is a loan raised by the assessee for trading purpose and waiver thereof is taxable? - HELD THAT:- The facts of the present case are identical to the facts in the case of CIT Vs. Mahindra & Mahindra [2018 (5) TMI 358 - SUPREME COURT]. In the case under consideration, the assessee had issued FRN. The FRNs are debt instruments carrying interest as mentioned in the subscription agreement. However, these FRN’s were redeemed at a value less than the Face Value. Thus, what assessee had done by issuing the FRN was that it had raised a loan. Since these FRNs were cash receipts it is held that the amount is not taxable u/s 28(iv) and 41(1) - AO has also invoked section 28(i) to tax the amount - However, assessee is not in the business of lending and borrowing. Assessee is in the business of construction, therefore, waiver of loan amount is not business income of the assessee. AO has mentioned in the assessment order that since the Loan was utilized to purchase the land, waiver of loan is business income. We do not agree with this proposition of the AO. We ask simple question to ourselves, is the repayment of loan allowed as business deduction? the answer is obvious no, similarly the waiver of Loan is also not business income taxable u/s 28(i) of the Act. Hence, it is not taxable under section 28(i) of the Act. Grounds of appeal raised by the Revenue are dismissed.
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