TMI Blog2017 (2) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... puting income in its hands. It is not disputed that the assessee had received the discount on loan amount, which was utilized for the purpose of investment in assets. Only because it was credited as other income in the Profit & Loss Account, would not justify its taxability in the hands of assessee. The nature of receipt has to be seen and where it is relatable to acquisition of capital asset i.e. the loan raised by the assessee was admittedly, used for purchase of capital asset, then the discount, if any, received by the assessee is capital receipt in the hands of assessee and hence, the same is not assessable to tax. Thus we hold that discount received by the assessee is capital receipt and hence, is not to be included in the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 28,70,126/- holding the same to be capital receipt. 4. Briefly, in the facts of the case, the assessee for the year under consideration had filed the return of income declaring total income at ₹ 3,64,98,370/-. The assessee was engaged in the business of manufacture of forgings Automobile Auto parts Industry and also was engaged in the business of finance, leasing and dealing in securities. The Assessing Officer noted that in the computation of income, the assessee had reduced sum of ₹ 28,70,126/- on account of discount on Term Loan. The assessee was asked to furnish details in this regard and in reply, the assessee stated as under:- Since the discount received on account of settlement / payment thereof toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 24,39,607/- was upheld in the hands of assessee. 7. The assessee is in appeal against the order of CIT(A). 8. The learned Authorized Representative for the assessee pointed out that the assessee had raised loan from DBS Bank which was foreign currency loan for capital investment. The terms of the loan were 30 months moratorium and 6 monthly installments spread over five years. The loan was raised in assessment year 2008-09 but in the later year, YEN became stronger than Indian Rupee and the loan of ₹ 20,89,00,000/- was converted to loan in Indian Rupee of ₹ 24,99,00,000/-. The surplus of the loan was capitalized over the cost of assets. He also pointed out that after the assets were put to use, the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability 9. The learned Departmental Representative for the Revenue placed reliance on the orders of Assessing Officer and CIT(A). 10. We have heard the rival contentions and perused the record. The first issue which arises in the present case is vis- -vis addition made to the income of assessee of ₹ 28,70,126/-. The assessee had raised loan in installments as per Certificate of Forward Inward Remittance as detailed below:- Date Agreement No. JPY INR Received at disbursal of loan INR after swap into INR INR after discount 24.1.2008 25405431 243,900,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 149,992,964 140,425,878 9,567,086 12. The interest was to be paid on the principal amount outstanding and was not to be effected by the settlement agreement and the discount, if any. The principal was to be repaid after moratorium of 30 months in three installments of 30%, 30% and 40% as per original agreement. However, as per amended agreement, it was provided that in case the first installment falling due in the financial year is paid in time, then there would be discount in respect of second installment. The total discount due to the assessee was ₹ 28,70,126/- for the year. 13. The issue which arises in the present appeal is the treatmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 14. The Hon ble Bombay High Court in CIT Vs. Xylon Holdings Pvt. Ltd. (supra) had held that where the loan was capital receipt and was never claimed as deduction from taxable income in the earlier years and was thus, not taxable under section 41(1) of the Act and also section 28(iv) of the Act would apply only when benefit of perquisite was received in kind and had no application where the benefit is received in cash or money. Hence, the Hon ble Bombay High Court held that cessation of liability to repay loan liability was not taxable either under section 41(1) or 28(iv) of the Act. The decision of the Hon ble Bombay High Court in Solid Containers Ltd. Vs. DCIT (supra) was held to be on completely on different facts, where the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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