9911796707
TMI Blog2021 (3) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No.32/2018-19/Cir.4(1), VSKP/CIT(A)-2, VSKP/18- 19 dated 20.02.2019 for the Assessment Year (A.Y.) 2015-16. Cross objections are also filed by the assessee supporting the order of the Ld.CIT(A). 2. Brief facts of the case are that the assessee is a company engaged in the business of manufacturing of cylinders, availed loans from a consortium of three banks, viz, State Bank of India, State Bank of Hyderabad and Punjab National Bank in F.Y.2006-07 for its business activities. The company stated to be ran into losses and entered into one Time Settlement with the consortium of banks for settlement of outstanding loans and accordingly received the waiver of loan amount of Rs. 32,88,97,775/- which is claimed to be consisting of Rs. 1,81,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 133(6) of the Income Tax Act, 1961 (in short 'Act') and found that the entire loan taken by the assessee was for the purpose of working capital and viewed that both the principal and interest constitute income. Accordingly, the AO placing reliance on the decision of T.V.Sundaram Iyengar and Sons Ltd. (1996) 222 ITR 344 (SC) and Rollatainers Ltd. Vs. CIT, Delhi High Court and the decision of Hon'ble Madras High Court in the case of M/s Ramaniyam Homes Pvt. Ltd. (Order No.278 of 2014 dated 22.04.2016) held that the entire amount i.e. interest as well as principal waived by the banks as a result of One Time Settlement is liable to tax u/s 41(1) of the Act, accordingly, made the addition of Rs. 31,07,14,975/- representing the principal amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm loan of Rs. 22,03,47,150/-. During the appeal hearing, the Ld.AR argued that the assessee has debited the interest to the Profit & Loss account and rightly offered the waiver of interest component as income and taken the principal amount directly to the balance sheet as capital reserve. The Ld. AR and submitted that the waiver principal does not constitute income, since it was never claimed as deduction or expenditure in the earlier years therefore, argued that the Ld. CIT(A) ought to have deleted the entire addition of Rs. 31,07,14,975/-, instead of partly allowing the appeal. The Ld.AR relied on the decision of ITAT, Visakhapatnam in the case of Sri Vasavi Polymers Private Ltd. in I.T.A.No.606/Viz/2018 dated 05.06.2020. 5. Per contra, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters were also given by other consortium banks, thus, there was no bifurcation of principal and interest component in the sanction of banks. Against the outstanding loan of Rs. 71,07,14,973/-including up-to-date interest, compromise was reached for one time settlement at Rs. 40.00 crores and the Banks have waived the balance sum. The assessee had arrived at the interest waiver of Rs. 1,81,82,800/- and the basis was not given. On perusal of the financial statements filed by the assessee, we find that the financial cost for the Financial Year 2014-15 was Rs. 39,21,699/- and for the F.Y. 2013-14 was Rs. 7,52,78,348/-,thus, prima facie, it appears that the interest component worked out by the assessee appears to be incorrect. In our considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee in respect of the principal and the interest amount appears to be incorrect. Therefore, the correctness of interest component as well as the principal component, required to be verified. In our considered opinion, the issue needs to be remitted back to the file of the AO to ascertain the correct amount of interest debited to the profit and loss account on term loan as well as working capital loan from the date of loan till redemption. Accordingly, we set aside the orders of the Ld. CIT(A) and remit the matter back to the file of the AO to verify the correct amount of interest which required to be taxed u/s 41(1) of the Act and decide the issue on merits. The AO is directed to give sufficient opportunity to the assessee before ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
