9911796707
TMI Blog2008 (8) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, did not represent income under section 41(1) and, thus, sustained the addition of Rs.6,86,071. The Assessing Officer had made the addition on the ground that the credit balance returned back is the income of the Assessee in view of the fact that it is again directly arising out of the business activity and the same was liable to be taxed under section 28 of the Act. The learned counsel appearing for the appellant argued that the impugned order suffers from error of law as well as of appreciation of facts. While relying upon the judgment of this court in the case of Mahindra & Mahindra v. Commissioner of Income tax, [2003] 261 ITR 501, it was contended that in relation to the transaction in question, section 28(iv) was not attracted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner. The Tribunal held as under: "8. We have carefully considered the submissions made by the rival parties. The assessee company had taken certain loan from M/s. P.S. Jain Motors. This amount was payable to them with interest of Rs.2,83,819. The party filed a suit for recovery and thereafter the assessee company filed counterclaims and the matter was settled out of the court whereby the assessee company was not to pay any amount. The assessee company credited to the profit and loss account the interest amount and offered the same for taxation. With regard to the addition of Rs.6,86,071, the assessee company directly credited the amount to the reserves account considering the same as capital receipt. It was claimed by the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tkinson, J. applies in full force to the facts of this case. If a common sense view of the matter is taken, the assessee, because of the trading operation, had become richer by the amount which it transferred to its profit and loss account. The moneys had arisen out of ordinary trading transactions. Although the amounts received originally were not of income nature, the amounts remained with the assessee for a long period unclaimed by the trade parties. By lapse of time, the claim of the deposit became time barred and the amount attained a totally different quality. It became a definite trade surplus. Atkinson, J. pointed out that in Tattersall case no trading asset was created. Mere change of method of bookkeeping had taken place. But, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the case of Mahindra & Mahindra Ltd. v. CIT [2003] 261 ITR 501 (Bom). As in that case, a clear finding was recorded that the Assessee continued to pay interest at the rate of 6% for a period of 10 years and the agreement for purchase of toolings was entered into much prior to the approval of loan arrangement given by the reserve Bank of India. Therefore, the loan agreement, in its entirety, was not obliterated by such waiver. Secondly, the purchase consideration related to capital assets. The toolings were in the nature of dies and the Assessee was a manufacturer of heavy vehicles. The import was that of plant and machinery and the waiver could not constitute business. The facts of the present case are entirely different in as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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