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2015 (5) TMI 1056 - ITAT CHENNAI

2015 (5) TMI 1056 - ITAT CHENNAI - TMI - Addition towards interest waived by the financial institution - AO disallowed the claim of the assessee on the ground that there was no actual payment of interest - Held that:- CIT(Appeals) found that the above sum which was debited in the Profit & Loss account in the assessment years 1994-95 to 2002-03, was disallowed and the same was taken as income of the assessee. Therefore, there is no question of any disallowance once again during the year under con .....

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loan borrowed is capital purpose, therefore, when the loan was waived by the financial institution, it will remain as capital in nature. It cannot be treated as benefit arising in the course of business under Section 28(iv) of the Act. In the case before us, it is not known whether the loan was borrowed for the purpose of investing in the capital asset or for the purpose of meeting the revenue expenditure. In the absence of any details on record, this Tribunal is of the considered opinion that .....

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.R.S. GANESAN, JUDICIAL MEMBER AND A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER Appellant by : Sh. Pathlavath Peerya, CIT Respondent by : Sh. A.S. Sriraman, Advocate O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: The appeal of the Revenue and the cross-objection of the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-V, Chennai, dated 31.05.2012 and pertain to assessment year 2006-07. 2. The first grou .....

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elates to interest due to IDBI bank for the period relating to assessment years 2003-04 to 2005- 06. The IDBI agreed to the proposal for payment of one-time settlement, and accordingly, waived the interest to the extent of ₹ 6,63,48,983/-. However, for the year under consideration, the assessee claimed the interest of ₹ 6,63,48,983/- as deduction under Section 43B of the Act. The Ld. D.R. contended that under Section 43B of the Act, interest would be allowed in the case where the sam .....

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to the period of assessment years 2003-04 to 2005-06. During those years, the assessee disallowed the interest under Section 43B of the Act, since it was not actually paid. Therefore, for earlier years, the assessee itself has treated the above said amount of ₹ 6,63,48,983/- as its income. During the year under consideration, the IDBI Bank has waived the entire interest of ₹ 6,63,48,983/-. Since the interest which was waived by the IDBI Bank was already taken as income fo .....

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he Act, while computing the taxable income for the assessment years 2003-04 to 2005-06. In other words, the interest, which is otherwise to be allowable under mercantile system of accounting, was taken as income in view of Section 43B of the Act. During the year under consideration, the IDBI Bank waived the entire interest portion to the extent of ₹ 6,63,48,983/-. The assessee claimed this amount as deduction while computing the total income. The Assessing Officer dis .....

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to waiver of interest was taken as income in the earlier assessment years by disallowing the claim of the assessee under Section 40A(3) of the Act. Therefore, as rightly pointed out by the CIT(Appeals), there is no need for disallowing the very same amount once again. Accordingly, this Tribunal do not find any infirmity in the order of the CIT(Appeals) and accordingly, the same is confirmed. 6. Next ground of appeal is with regard to the addition of ₹ 1,98,92,271/- being the pri .....

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essee. Therefore, according to the Ld. counsel, the disallowance made by the Assessing Officer under Section 43B is erroneous. 8. The Ld.counsel further submitted that on identical circumstances, the Madras High Court had an occasion to consider the issue in Iskraemeco Regent Ltd. v. CIT (2011) 331 ITR 317 and found that the grant of bank loan cannot be treated as trading transaction. Therefore, borrowal of loan for the purpose of investing in the capital asset when the part of the lo .....

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. Pathlavath Peerya, the Ld. D.R. submitted that it is not known from the assessment order whether the assessee borrowed loan for investing the same in capital asset or for revenue expenditure/working expenditure. Referring to judgment of Delhi High Court in Rollatainers Ltd. v. CIT (2011) 339 ITR 54, the Ld. D.R. submitted that remission or cessation of trading liability has to be taken as income of the assessee. The Ld. D.R. also placed reliance on the judgment of Apex Court in the case of CIT .....

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urt in Iskraemeco Regend Ltd. (supra), found that the principal amount, which is not claimed as deduction, cannot be disallowed on its waiver by the financial institution. We have carefully gone through the judgment of Madras High Court in Iskraemeco Regend Ltd. (supra). In the case before the Madras High Court, the assessee borrowed loan and invested the same in capital asset. A part of loan amount alongwith its interest was waived by the financial institution. The Madras High Court .....

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at it cannot be treated as benefit arising in the course of business under Section 28(iv) of the Act. In the case before us, it is not known whether the loan was borrowed for the purpose of investing in the capital asset or for the purpose of meeting the revenue expenditure. In the absence of any details on record, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. The Assessing Officer also shall examine the purpose for which the loan wa .....

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