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TMI Blog2011 (8) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... truction (BIFR) for being declared as a sick company in terms of provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). In pursuance thereof, the appellant company was declared sick by BIFR under the said Act. Due to adverse financial position, the company also approached the Corporate Debt Restructuring Cell (CDR Cell) for settlement of outstanding dues of various financial Institutions/Banks. The CDR Cell approved the reworked Restructuring Package, pursuant to which different financial institutions and Banks waived off the part of their respective outstandings, comprising of principal and interest dues. 3. According to the appellant, during the course of assessment proceedings, the appellant realized that it had wrongly credited the total waiver received from banks/financial institutions, to the profit and loss account, under the head 'miscellaneous income'. Therefore, in order to arrive at the correct taxable income, revised the original wrong claim by making a request before the assessing officer for revision of the computation of income originally filed, by reduction of principal amount of loans (term loans as well as working capital loans) waived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt. This benefit was in the revenue field as the money had been borrowed for day to day affairs and not for the purchase of machinery. Thus, the loans were for the circulating capital and not the fixed capital. 7. In this appeal filed by the assessee, we are concerned with the waiver of the loan in respect of cash credit which is stated income in revenue field by the Tribunal and the appeal has been admitted on this question of law. Mr. Vohra, learned counsel appearing for the appellant/assessee fairly stated that the issue is answered against the assessee by a decision of this Court in the case of Logitronics (P.) Ltd. v. CIT [2011] 197 Taxman 394/9 taxmann.com 302. He, however, made a benevolent plea that the said decision required reconsideration as it was in conflict with the earlier decision rendered by this Court. 8. Before we consider the submissions of Mr. Vohra on this aspect, it would be apposite to discuss the judgment of this Court in Logitronics (P.) Ltd.'s case (supra). That was also a case where certain amount of loan and interest was waived by the financial institution as it had become Non Performing Asset (NPA) for the bank in view of the guidelines of the Reser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on this aspect and observed that under section 4 of the Act, the charging Section, the charge of income tax is upon the "total income of the previous year". The term 'income' is defined under Section 2(24) of the Act. In general, all receipts of revenue nature, unless specifically exempted are chargeable to tax. Loan taken is not normally a kind of receipt which will be treated as income. However, when a part of that loan is waived by the creditor, some benefit accrues to the assessee. Question is what would be the character of waiver of part of loan at the hands of the assessee? Waiver definitely gives some benefit to the assessee. Whether it is to be treated as capital receipt? If it is so, then only capital gain tax would be chargeable under Section 45 of the Act. Or else, whether remission of loan is no income at all? 11. In this context, Section 41(1) read with Section 59 of the Act would become relevant and these provisions have been brought within the sweep of taxation even the remission of debt/liability as income of the order in remission or such waiver amounts to provide or gains of business or provision liable to be taxed under Section 28 of the Act. The Court thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit received in cash would, at the threshold do not constitute income under Section 28(iv) of the Act and for that reason, it was not necessary to go into the purpose for which the loan was utilized. Further, in order that Section 28(iv) of the Act is attracted, the benefit must be arising from business and not in the course of business. The said section is intended to bring to tax the benefit in the kind of 'arising from business' and not any and every benefit which arises in the course of carrying on business. The appellant is engaged in the business of manufacturing and trading of packing materials. The appellant cannot be said to be in the business of borrowing money. The moneys borrowed constitute source of funds from which the business of the appellant is carried on. The waiver of loan outstanding did not arise from the business of the appellant. Consequently, since the business carried on by the appellant was not the source of alleged benefit, Section 28(iv) of the Act has no application. He also argues that the judgment of Supreme Court in CIT v. T.V. Sundaram Iyengar & Sons Ltd. [1996] 222 ITR 344/88 Taxman 429 was not applicable. Likewise, the decision of Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er waiver of the principal amount of amount Rs. 10.48 crore, credited to the capital reserve account, constituted income? The Court came to the conclusion that the amount is not covered by the provision contained in Section 41(1). It was also mentioned that the principles enunciated in the case of Mahindra & Mahindra Ltd. v. CIT [2003] 261 ITR 501/128 Taxman 394 (Bom.) are fully applicable. Again, it was a case where the loan was on capital account and not for trading purposes. Even in the instant case, as far as term loans are concerned, waiver thereof by the financial institutions has not been treated as income at the hands of the assessee. It is only the writing off loans on cash credit account which was received for carrying out the day to day operations of the assessee which is treated as "income" in the hands of the assessee. The judgment of the Bombay High Court in Solid Containers Ltd.'s case (supra) and that of Madras High Court in Aries Advertising (P.) Ltd.'s case (supra) are directly on this issue. The Tribunal has rightly applied the said judgments wherein the view taken is the same as taken by this Court in Logitronics (P.) Ltd.'s case (supra). 17. Insofar as the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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