TMI Blog2015 (1) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... versy is as to whether such a cessation has the effect of transforming the loan amount, into income. It is too primary to refer to Section 14 of the Act to identify the sources or categories of income. However, the necessity is felt only as a step in the elimination process. The amount received as a loan for revival of a sick company does not fall into any of the categories of income under Section 14 of the Act. It safely becomes part of the capital. The Act does not provide for levy of tax on capital. A loan advanced to a Company as part of a scheme framed by B.I.F.R for its revival, can, by no stretch of imagination, be treated as its trade receipt. It has already been mentioned that, at the most, it can be treated as part of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved by the Board for Industrial and Financial Reconstruction (for short the B.I.F.R), one of the promoters, a Swedish Company, advanced a loan of about ₹ 70,00,000/-. Thereafter, the Company has been amalgamated with another under the Scheme. In the financial year, which is previous to the assessment year 1994-95, the Swedish Company waived the loan stating to be as part of discharge of obligations under the Scheme. The respondent filed its returns for the assessment year 1994- 95, declaring income of ₹ 1,36,73,777/-. The Assessing Officer initially gave an intimation of prima facie adjustment under Section 143 (1) (a) of the Act and thereafter passed an order under Section 143 (3) of the Act on 29.03.1996, assessing the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on that account, the amount deserves to be treated as income and that the Tribunal was not correct in reversing the order passed by the Commissioner. She contends that the observation of the Tribunal regarding exercise of power under Section 263 of the Act cannot be sustained in law. It is also her plea that the ratio of the judgment of the Supreme Court in T.V.Sundaram Iyengars case squarely applies to the facts of the present case and the effort made by the Tribunal to distinguish the same by referring to some other cases cannot be sustained in law. Mr. Ch.Pushyam Kiran, learned counsel for the respondent, on the other hand, submits that the very occasion to invoke Section 263 of the Act to the facts of the case did not exist and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount is not received in the course of trade, for all practical purposes, it tends to become part of capital. The agency, which advanced the loan, has written-off the same. The fact that the writing-off the loan was as part of the obligation under the Scheme framed under B.I.F.R, would certainly become important, for keeping the entire amount outside the purview of the trade activity. The waiver of loan has only resulted in cessation of the liability on the part of the respondent to repay it. The entire controversy is as to whether such a cessation has the effect of transforming the loan amount, into income. It is too primary to refer to Section 14 of the Act to identify the sources or categories of income. However, the necessity is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year (The remaining part of the Section is omitted as not necessary for the purpose of this case). From a perusal of this, it becomes clear that where the amount, regarding which allowances or deduction has been claimed in an assessment year in respect of loss, expenditure or trading liability, the said amount is liable to be treated as income, if the liability in relation thereto, ceased in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id of any obligation to repay; and naturally tax is to be paid thereon, since it has been received in the course of trade. A loan advanced to a Company as part of a scheme framed by B.I.F.R for its revival, can, by no stretch of imagination, be treated as its trade receipt. It has already been mentioned that, at the most, it can be treated as part of the capital. The writing-off such loan would, if at all, result in the fluctuation of the value of the capital assets. Though in a remote sense, the situation can be compared to the one of the increase in the market value of a land owned by a company/assesee. For example, if the assessee purchased the land for the purpose of its business activity for a sum of ₹ 10,00,000/- and over th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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