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Commissioner of Income Tax-8 Versus M/s. Santogen Silk Mills Ltd.

2015 (4) TMI 225 - BOMBAY HIGH COURT

Loan waived by the banks in favour of the respondent assessee in one time settlement - whether the principal amounts of loans retained by the assessee on account of one time settlement, constituted its income as per section 28(iv) though not under Section 41(1) - Tribunal deleted the addition - tribunal's order held that on perusal of the loan agreement insofar as loan from ICICI Bank is concerned was for purchasing machinery and availed by the assessee - Held that:- This Court has consisten .....

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. That issue specifically came up for consideration in the matter of Mahindra and Mahindra and it was held that the said provision would apply only when a benefit or perquisite is received in kind and has no application where benefit is received in cash or money. Following this decision in the case of Commissioner of Income Tax Vs. Xylon Holdings Pvt. Ltd. [2012 (9) TMI 449 - BOMBAY HIGH COURT] this Court held that the waiver would not come within the purview of Section 28(iv) of the Income Tax .....

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, therefore, the banks waived loan as well as interest component due from the assessee. Equally, the loan sanctioned by ADCB and subsequently waived off has also been offered to tax. It is only in the ICICI bank's case that the tribunal took the above view and which we do not find as perverse or vitiated by a error of law apparent on the face of record. - Decided in favour of assessee. - Income Tax Appeal No. 814 of 2013 - Dated:- 25-3-2015 - S. C. Dharmadhikari And A. K. Menon,JJ. For the A .....

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d before us relate to deletion of addition made on account of loan waived by the banks in favour of the respondent assessee in one time settlement amounting to ₹ 4,40,22,653/-. 4. The argument was that the Commissioner erred in not appreciating the fact that the principal amounts of loans retained by the assessee on account of one time settlement, constituted its income as per section 28(iv) of the Income Tax Act, 1961 though not under Section 41(1) of the said Act. 5. Before us, however, .....

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hat fact of the waiver accrued as a taxable benefit in the hands of the firm? 3. Whether in law and on the facts of the instant case, was the Tribunal right in ignoring the fact that the loan used to purchase assets on which depreciation was claimed, thereby this waiver represented an allowance or deduction as per the provisions of Section 41(1)?" 6. Mr.Pinto invites our attention to section 28(iv) of the Income Tax Act and submits that this section enumerates the income which shall be char .....

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DCB), there, the amount is taxable as it was advanced by the bank for stock in trade. In the present case, the amount may have been advanced for purchasing machinery but that amount was eventually waived off. In the circumstances, it would not be treated as capital receipt. He, therefore, contends that the tribunal's approach raises above questions of law and which are substantial in nature. 7. On the other hand Mr.Jhaveri appearing on behalf of the assessee submits that the tribunal has in .....

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der section 28(iv) of the Income Tax Act. It is this consistent view of this Court which is followed and applied in the given facts and circumstances. Hence, the appeal does not raise any substantial question of law and should be dismissed. 8. We have heard both sides and with their assistance perused the paperbook. It is not the argument of Mr.Pinto that the ground as noted in paragraph 1 of the tribunal's order and particularly at Page 40 ground no.5 was not the one which was forming part .....

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n and consideration in the background facts. 9. The only argument then remains is that return of income and which was filed on 31st October, 2007 by the company which is in the business of manufacturing cloth and textile declared the loss of ₹ 9.87 crores after claiming set-off of brought forward losses of earlier years to the tune of ₹ 20.03 crores and claiming allowance of interest and disallowed in earlier years (Rs.14.8 crores). This return was processed initially under section 1 .....

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this income arose on account of one time settlement with two banks from which it had taken loans. The said amount was shown in the Profit and Loss Account as an extra ordinary income. In the revised return of income, it was claimed that amount waived by the banks consisted of interest component of ₹ 20.79 crores and principal amount of ₹ 4.40 crores. The argument is that throughout the waived principal amount did not result in income. The Assessing Officer did not accept this argumen .....

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tribunal's order and it has held that on perusal of the loan agreement insofar as loan from ICICI Bank is concerned (subject matter and part of this appeal) that was for purchasing machinery and availed by the assessee. As far as loan from ADCB is concerned, it was conceded that the same was against hypothecation of stock and not a term loan. We are not concerned with that part of the order of the tribunal, however, it is material to note that the tribunal disallowed the claim made by the as .....

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