TMI Blog2018 (5) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... T DR Respondent by : Shri P.D.Nagar, CA ORDER Per Kul Bharat, J. M. This appeal by the Revenue is directed against the order of Ld. Commissioner of Income Tax (Appeals)-22, Indore, (in short CIT(A) ), dated 17.02.2016 pertaining to A.Y. 2009-10. The Revenue has raised following grounds of appeal: (i) Whether in the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting addition of ₹ 17,39,01,253/- as waiver of principal amount of IFCI Loan when the addition was supported by the decision of Hon'ble Delhi High Court in the case of Rollatainers Ltd. vs. CIT, ITA 27 of 2011. (ii) Whether in the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting addition of ₹ 17,39,01,253/- as waiver of principle amount of IFCI loan whereas the working capital loan by State Bank of Bikaner and Jaipur has been confirmed by him in same order in the case of very same assessee. (iii) Whether in the erred in the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of ₹ 5,00,000/- made on account of stores spare parts, as the assessee has not maintained proper record of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 41(1) :- The Company was incorporated on 07.12.1994 and had set up an Industrial unit (spinning plant) for manufacturing of synthetic yarn at Pithampur. Term loan of ₹ 45 crores was sanctioned and disbursed by IFCI. Since its inception, the Company could not do well because it could not carryon manufacturing of polestarlviscose yarn at optimum capacity. Entire share capital of ₹ 47.92 crores was gradually eroded year after year hence it was registered as sick unit with BIFR. Accumulated losses at the commencement of the year were ₹ 143.94 crores and during the year it incurred net loss of ₹ 20.12 crores. Foreign currency Term loan of ₹ 35 crores was availed for acquisition of plant and machinery and other fixed assets from IFCI besides Rupee loan of ₹ 10 crores against first mortgage of all immovable properties both present and future. Copy of agreement dated 01.11.1995 is annexed (page 1 to 19 of P.B). As per details of disbursement Term loans, it was disbursed by IFCI during Assessment years 1997-98 and 1998-99. At the commencement of the year, principal amount of term loan due was ₹ 37.39 crores besides overdue inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are taken for the purpose of acquiring capital assets . However, vide Para 3.1.2 of the order, she misinterpreted and observed that The assessee has taken term loan from Financial Institution for securing working capital requirement as per note no. 1 in the Schedule of the Balance sheet. (Page 26 of P.B). According to her, because collateral security of stock in trade and other movable assets was also offered against term loan, as stated in notes and accounts, its waiver was taxable u/s 41(1) of the Act. Term loan was sanctioned by IFCI which was secured by 1st charge on entire fixed assets, such as plant and machineries and building AND 2ndcharge on the stock and stores because 1st charge on movable assets was in favour of Bankers against working capital. Just because against term loan, collateral security of movables was also offered by way of second charge, the AO misinterpreted said note given in the audited accounts and considered that the remission against term loan was taxable u/s 41(1) of the Act. Thus, the remission of term loan has been assessed to tax and claim of the appellant that such amount is capital receipt not liable to tax was rejected by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f deduction of the term loans availed by it from the banks on capital account. Therefore, section 41(1) had no applicable to the facts of the instant case . [para 32]. iv) CIT vs. Dholgiri Industries (P) Ltd (2014) 266 CTR 111 (MP) Held that the assessing officer has committed error in treating the amount waived by the bank to be the amount earned by the assessee. The principal amount of loan being never claimed by the assessee as its expenditure, its waiver will not amount to income of the assessee and as such, in our considered view, there is no infirmity in the order passed by Tribunal affirming the order of CIT(A). iv) M/s. Logitronics P .. Ltd. vs. CIT (2011) 333 ITR 386 (Delhi) Held that If a loan was taken for acquiring a capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if the loan was for trading purchase and was treated as such from the very beginning in the books of account the waiver thereof may result in income more so when it was transferred to the profit and loss account . v) CIT vs. Tosha International Ltd. (2011) 331 ITR 440 (Delhi) In this case under a one time settlement schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually us to conclude that the loan written off would not be taxable U/S 28(iv) of the Act. In view of above facts and judicial pronouncements, we submit that that the term loan availed to acquire capital asset and waived by IFCI under OTS was neither claimed nor allowed as deduction hence additions made by invoking provisions of section 41(1) of the Act was bad in law and its deletion by CIT(A) may please be confirmed. 6. We have heard the rival contentions and have perused the material placed before us. The ld. CIT(A) has given finding of fact by observing that as regards the waiver of principal amount, the same is not taxable, as the term loan was in respect of capital assets. The Revenue has not rebutted the finding of the ld. CIT(A) by placing any contrary material on record. The Hon'ble Jurisdictional High Court in the case of CIT vs. Dholgiri Industries (P) Limited, (2014) 266 CTR 111(MP), has held as under :- Having considered the submissions made by the learned Senior Counsel, for the appellant and after going through the orders of the Assessing Officer, CIT (A) and the Tribunal \, we are of the view that the AO has committed error in treating the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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