TMI Blog2007 (7) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... and financial institution had not been claimed as expenditure or trading liability in any of the earlier previous year. So far as waiver of interest is concerned, the assessee company itself has treated the same either as income or has not claimed the same as expenditure in the computation of income filed before the lower authorities. The provision of s. 28(iv) applies to the value of benefit or perquisites whether convertible into money or not, arising from business, but does not apply for benefit received in cash or money; as held in Mahindra Mahindra Ltd.[ 2003 (1) TMI 71 - BOMBAY HIGH COURT] , the waiver of principal amount of loan also does not come under the definition of income as contained u/s 2(24) of the Act. The definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns arising on account of cessation of liabilities as the assessee has gained from the waiver of principal amount. 2. Rival contentions have been heard and record perused. Facts in brief are that the assessee was engaged in manufacturing of black and while picture tube. Due to depression in the market and colour picture tube taking over the black and white picture tube demand was considerably reduced. Accordingly, the assessee company was running in huge losses and was also having accumulated losses exceeding its capital and reserve. It has become a sick company and was registered with BIFR. The assessee after it being declared a sick unit sorted out its repayments position with the financial institution and the bank. Under one time sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing results of the company. The assessee definitely gained in the trading activity on the basis of these loans. Secondly, the assessee when bought assets consisting of plant and machinery, buildings other assets, it derived a benefit on the head of depreciation. It clearly indicates that the assessee has been deriving benefit on the basis of either depreciation or utilizing the working capital, which would have been a part of the earlier year's income, and returns filed, accordingly. Now these loans have ceased to exist and assessee has credited the receipts of these monies to the capital reserve account. It means that when the assessee will sell the stocks for which he had borrowed these monies, he would be gaining indirectly. On the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the waiver of principal amount, the assessee has directly credited the same to capital reserve account. The AO has no dispute with regard to waiver of interest, however, he has treated the waiver of principal amount as income of the assessee, after discussing the provisions of s. 4l(1)/28(iv)/2(24) of the IT Act, 1961. As per our considered view, for attracting the provisions of s. 41(1), the first requisite condition to be satisfied is that the assessee should have got deduction or benefit of allowance in respect of loss, expenditure or trading liability incurred by it and subsequently during any previous year, the assessee should have received any amount in respect of such loss, expenditure or trading liability by way of remission or cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be included under the definition of income. It includes profits and gains, dividend, voluntary contribution received by a trust, value of any perquisite or profit in lieu of salary, special allowance or benefit granted to the assessee to meet his personal expenses, benefit or perquisite of directors, any sum chargeable under cls. (iiia), (iiib), (iiic), (iv) and (v) of section 28, capital gains under s. 45, profit and gains of business in accordance with s. 44, winnings from lotteries, races, etc., and any sum received by the assessee from his employee as contribution to any provident fund so set up. Waiver of principal amount of tax by no stretch of imagination can be treated as income within the meaning of s. 2(24) of the Act. 5. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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