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2015 (4) TMI 1109 - BOMBAY HIGH COURT

2015 (4) TMI 1109 - BOMBAY HIGH COURT - TMI - Additions u/s 41(1) - Amounts received as a loan - loan was written off by the lender - Nature of receipt - revenue or capital receipt - Held that:- The loan was taken by the respondent from M/s. Eisenberg Inc. Japan when the Act did not apply to the State of Goa. It is also not disputed that the loan was for purchase of machinery and that there was a cessation of liability to repay the amount. Section 41 (1) of the Act would have no application in t .....

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for purchase of capital amount was on capital account and therefore no occasion to apply Section 41 (1) of the Act in respect of that could arise. The issue in fact stands concluded in favour of the respondent by the decision of this Court in Mahindra and Mahindra Ltd (2003 (1) TMI 71 - BOMBAY High Court ) and M/s. Xylon Holding (2012 (9) TMI 449 - BOMBAY HIGH COURT) in the context of the submission made by the revenue before us. It needs to be recorded that the Revenue has made no submission t .....

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unal (ITAT) in respect of Assessment Year 1987-1988. 2. This appeal was admitted on 27/11/2006 on the following substantial question of law: (A) Whether on the facts and in the circumstances of the case the ITAT was justified in law in holding that the nature of the amount of ₹ 50,96,000/- received by the assessee was capital in nature and not revenue? 3. For the assessment year 1987-1988, the respondent filed a return of income on 30/7/1987 declaring a total income of ₹ 50.02 lakhs. .....

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hinery by its subsidiary M/s Dempo Mining Corporation. It was also contended that the loan was taken for capital purposes at a time when the Act did not apply to the State of Goa. This was not accepted by the the Assessing Officer on account of the fact that in the assessment year 1967- 1968, the liability on the loan was increased by ₹ 19.07 on account of variation in the Exchange rate and this was allowed as revenue expenditure. Thus by an order dated 28 February 1990 under section 143 ( .....

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sequent increase of its liability on account of change in rate of exchange was claimed as revenue expenditure was not being contested. The respondent accepted that the amounts allowed as revenue expenditure on account of variation in the rate of exchange should be added to its income under section 41 (1) of the Act. 6. The Tribunal by the impugned order only considered the original loan taken by the respondent. On consideration, the impugned order records that the amount was to be utilized by th .....

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loan taken in view of the difference in the rate of exchange, the same was allowed as revenue expenditure or added as income. It is on the above basis it is submitted that non obligation to return that loan would results in income to the respondent and stands covered by section 41(1) of the Act and is chargeable to tax. Thus, it is submitted that the substantial question of law as framed is to be answered in favour of the revenue by holding that the amount of ₹ 50.96 lakhs is revenue in na .....

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ry, continue to be on capital account and cannot be charged to income tax. It is further submitted that Section 41 (1) of the Act would have no application as held by this Court in Mahindra and Mahindra Ltd. Vs. Commissioner of Income Tax and Commissioner of Income Tax Vs. Mahindra and Mahindra Ltd. reported in (2003) 261 ITR 501 (Bom.) and the decision in Income Tax Appeal no.3704 of 2010 in the case of The Commissioner of Income Tax-3 Vs. M/s. Xylon Holdings P. Ltd. , rendered in 13/9/2012, wh .....

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