TMI Blog2012 (2) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... During the course of assessment proceeding, the AO observed that the assessee has credited to profit and loss account an amount of ₹ 2,87,35,673/- under the head other income which includes excess liability/ provisions written back of ₹ 5,35,34,287/-. However, in the computation the assessee reduced an amount of ₹ 2,28,36,132/- being interest provisions, disallowed in the assessment years 2002-03 and 2003-04. However, the assessee reduced its income by an amount of ₹ 2,87,35,673/- being term loan and working capital term loan . The assessee was asked to show as to why both the amounts should not be added to the total income of the assessee. In response, the assessee submitted that the assessee has taken term lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him it has been held that waiver of principal amount of term loan is chargeable to tax under the head Income from other sources added the amount of ₹ 2,87,35,673/- to the income of the assessee. 3. On appeal, the ld. CIT(A) observed that the decision relied on by the AO in S.G. Mercantile Corporation (P.) Ltd. (supra) appears to be misdirected. The ld. CIT(A) while relying on certain decisions further observed that there is no dispute that the provisions of sec. 41(1) is not applicable to the appellant s case. Further there is no other provision under which the waiver of loan can be considered as income received, receivable or accrued as has been held by the AO and accordingly deleted the addition made by the AO. 4. Being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for this proposition the reliance was also placed on the decision of the Hon ble Supreme Court in CIT V/s D.P.Sandu Bros.Chembur (P.) Ltd. (2005) 142 Taxman 713 (SC) wherein it has been held that in view of the finding that section 45 could not be applied, it was not open to department to impose tax on capital receipt under any other section. In this regard the reliance was also placed on the decision of the Hon ble Bombay High Court in Cadell Wvg. Mill Co. (P.) Ltd. V/s CIT (2001) 116 Taxman 77 (Bom.), wherein it has been held (para 16 ) that there is no merit in the contention of the department that capital gains which arise in cases of transfer of assets whose cost of acquisition cannot be computed would fall under section 56. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat capital gains which arise in cases of transfer of assets whose cost of acquisition cannot be computed would fall under section 56, we are of the view that the addition made by the AO under the head income from other sources is not sustainable in law. 8. As regards the decision relied on by the ld. DR in Logitronics (P.)Ltd. (supra), it has been held in paragraphs 23 of the decision as under : 23. In the context of waiver of loan amount, what follows from the reading of the aforesaid judgment is that the answer would depend upon the purpose for which the said loan was taken. If the loan was taken for acquiring the capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if this loan was for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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