25. Principal CIT vs. SICOM Ltd. [2020] 116 taxmann.com 410 (Bom.) Date of order: 21st January, 2020 A.Y.: 2003-04
Deemed income – Section 41(1) of ITA, 1961 – Section 41(1) will not
apply to waiver of loan as waiver of loan does not amount to cessation of
trading liability; A.Y.: 2003-04
In the
assessment proceedings for the A.Y. 2003-04, the A.O. considered the issue of
waiver of loan by the Government of Maharashtra and held that an amount of Rs.
114.98 crores covered by the loan given by the Government of Maharashtra is
taxable under sections 28(iv) and 41(1) of the Income-tax Act, 1961.
Accordingly, the said amount was treated as income of the assessee for the year
under consideration and added back to its total income.
The CIT(A)
and the Tribunal allowed the assessee’s claim and deleted the addition.
On appeal by
the Revenue, the Bombay High Court upheld the decision of the Tribunal and held
as under:
‘i) The first appellate authority had followed
the decision of this Court in Mahindra & Mahindra Ltd. (Supra)
in deleting the addition made by the A.O. on account of remission of loan. The
decision of this Court in Mahindra & Mahindra (Supra) was
contested by the Revenue before the Supreme Court in Commissioner vs.
Mahindra & Mahindra Ltd. [2018] 404 ITR 1. The issue before the
Supreme Court was whether waiver of loan by the creditor is taxable as
perquisite u/s 28(iv) of the Act or taxable as remission of liability u/s 41(1)
of the Act. The Supreme Court held as under:
(a) Section 28(iv) of the IT Act does not apply
in the present case since the receipts of Rs 57,74,064 are in the nature of
cash or money.
(b) Section 41(1) of the IT Act does not apply
since waiver of loan does not amount to cessation of trading liability.
ii) On careful examination of the matter, we are
of the considered opinion that the decision of the Supreme Court is squarely
applicable to the facts of the present case.
iii) Consequently, we do not find any merit in
the appeal to warrant admission. Appeal is accordingly dismissed.’
