ACIT CENTRAL CIRCLE 7 (2), MUMBAI V. PATANJALI FOODS LIMITED, MUMBAI

ITA 5708/MUM/2024

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which allowed the assessee's claim that the waiver of a working capital loan, as part of a resolution plan approved by the NCLT, should be treated as a capital receipt and not taxable. The Revenue challenged the CIT(A)'s decision on several grounds, including the admission of additional claims not originally filed in the return of income. The Tribunal examined the legal provisions and precedents, particularly focusing on sections 28(iv) and 41(1) of the Income Tax Act, and the applicability of various Supreme Court and High Court judgments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473414 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Other Referred Cases: Mahindra & Mahindra vs. CIT, National Thermal Power Co. Ltd. vs. CIT, Solid Containers Ltd. vs. Dy. CIT, Graham Firth Steel Products Pvt. Ltd. vs. CIT, Essar Shipping Ltd. vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.A. DHYANI
• Assessee Lawyers: S.S. NAGAR
• Keywords: Business income; Difference of opinion; Change of opinion; Capital asset; Revised return; Revenue expenditure; Depreciation; Capital receipt; Capital expenditure
• Section: 143(3); 192; 153; 22; 13; 37; 12; 28; 36 (1) (iii); 119(2)(b); 20; 101

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.5708/Mum/2024 (Assessment Year :2020-21) ACIT, Central Circle- 7(2) Room No.637, 6th Floor Aayakar Bhavan Maharashtra-400 020 Vs. M/s. Patanjali Foods Limited 616, Tulsiani Chambers Nariman Point Mumbai-400 021 PAN/GIR No.AAACR2892L (Appellant) .. (Respondent) CO No.279/Mum/2024 (Arising Out of ITA No.5708/Mum/2024) (Assessment Year :2020-21) M/s. Patanjali Foods Limited 616, Tulsiani Chambers Nariman Point Mumbai-400 021 Vs. ACIT, Central Circle-7(2) Room No.637, 6th Floor Aayakar Bhavan Maharashtra-400 020 PAN/GIR No.AAACR2892L (Appellant) .. (Respondent) Assessee by Shri S.S. Nagar Revenue by Shri R.A. Dhyani Date of Hearing 31/12/2024 Date of Pronouncement 03/01/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 2 The aforesaid appeal has been filed by the Revenue and Cross Objection by the assessee against order dated 03/09/2024 passed by CIT(A)-49, Mumbai in relation to the adjustment made u/s.143(1) for the A.Y.2020-21. 2. In the grounds of appeal the Revenue has raised following grounds:- 1.On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in admitting the additional claim of deduction for adjudication as additional ground of appeal which was not claimed in the return of income by the assessee.\" 2.On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in admitting additional claim for exemption from taxation w.r.t the amount of waived working capital loan by bank which was offered as income chargeable to tax in the Return of Income ignoring the provisions of section 119(2)(b) of the Act wherein the CIT(A) has been specifically barred from entertaining or admitting any relief under the Act which was not claimed in the valid return of income.\" 3.\"On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in admitting the additional claim of exemption of assessee without requiring and having sufficient 3 cause of genuine hardship on the part of the assessee in following the procedure laid down in section 119(2)(b) of the Act where the powers have been authorized by the Board to various Income Tax Authorities except to the CIT(A).\" 4. \"On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the benefit earned by assessee from waiver of working capital loan, as a result of resolution passed by NCLT under IBC, out of purview of taxation by treating the same as capital receipt ignoring the ratio laid down by jurisdictional High Court in the case of Solid Containers Ltd.\" 5. On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing waiver of working capital loan ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 3 written by the assessee as a capital receipt inspite of the Provisions of section 28(iv) of the Income Tax Act which covers under its ambit the value of any benefit arising from business of the assessee.\" 6. \"On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing waiver of working capital loan written by the assessee as a capital receipt inspite of the Provisions of section 28(iv) of the Income Tax Act which covers under its ambit the value of any benefit arising from business of the assessee.\" 7.\"On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of waiver of working 6 capital loan written back by the assessee when such claim was not made in the return of income filed by the assessee for the year under consideration.\" 8.\"On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in applying the ratio of judgement of Mahindra & Mahindra vs. CIT for waiver of working capital loan also whereas, the case of Mahindra & Mahindra is distinguishable to present case which is related to the issue of waiver of loan taken for acquisition of capital asset.\" 9.\"On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in deciding that the cessation of liability of working capital loan taken for business would not amount to income within the meaning of section 41(1) of the Act ignoring the fact that the working capital loan was used essentially for business and the expenses incurred out of working capital loans were essentially routed through P&L account as business expense.\" 3. Whereas assessee in his cross objection has raised the following grounds:- “1.0 That on the facts and circumstances of the case, the Ld. CIT- (A) has passed the order as per the provision of the Act and hence the appeal filed by the department is not maintainable. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 4 2.0 That on the fact and circumstances of the case, necessary direction may kindly be issued to the Ld. AO to allow carry forward and set off of losses arising on giving effect to the order of CIT(A) for the Assessment Year under consideration against the income determined in subsequent assessment years. 2.1 That on the facts and circumstances of the case, the Ld. AO has erred in not mentioning that the claim of loss as determined in giving effect to the order of CIT(A) shall be carried forward to future assessment years and hence proper direction may kindly be given to carry forward and set off of the said losses in subsequent assessment years. 4. Thus, the Revenue in its various grounds of appeal has challenged, firstly, (vide ground nos. 1 to 3) the ld. CIT (A) has erred in law in admitting the additional claim of non-taxability of receipts by way of additional ground raised before the ld. CIT (A) in respect of amount of waiver of working capital loan by the bank which was offered to income chargeable to tax in the return of income and therefore, ld. CIT(A) could not have entertained or admitted the ground which was not claimed in the return. Secondly, from ground Nos.4 to 9, the department has challenged that the ld. CIT (A) has erred in treating the benefit received by the assessee from waiver of working capital loan of Rs. 3,55,240/- lakhs (Rs. 35.52 crores), as a result of resolution passed by NCLT under IBC out of purview taxation by treating the same as capital receipt. 5. Since these are the only two issues involved in the Revenue’s appeal, therefore, the brief facts qua the issue are that pursuant to the resolution plan approved by the Hon'ble NCLT, the assessee during the year under consideration has written back ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 5 certain amount of Rs. 7,44,763/- lakhs and included the same under the head 'Exceptional Item' in the Statement of Profit & Loss Account. In the said amount Rs. 3,55,240/- lakhs pertains to written back of working capital loan and the assessee at the time of filing of return of income has treated the write back of working capital loan as revenue in nature and by an inadvertent error has offered the said amount to tax. The written back amount has been included in the total income of the assessee and thus has been charged to tax. Here in this case, the Corporate Insolvency Resolution Process (CIRP) was initiated in respect of the assessee under the provision of Insolvency and Bankruptcy Code, 2016 by order of the Hon'ble National Company Law Tribunal (NCLT) dated 8th December, 2017 read with order 15th December, 2017. Subsequently, the resolution plan submitted by Consortium led by Patanjali Ayurved Limited (\"PAL\") was approved by NCLT and therefore CIRP was completed vide NCLT order dated 24th July, 2019 read with order 4th September, 2019. 5.1 Pursuant to the resolution plan, the resolution applicant was required to infuse in aggregate amount of Rs.4,35,000/- lacs in Patanjali Consortium. Out of the sum infused, Rs. 4,23,500/- lacs was to be utilized towards settlement of claims of operational and financial creditors and Rs. 11,500/- lacs to be utilized for improving the operations of the appellant company. 5.2. Further, in terms of de-recognition of operational and financial creditors, difference amounting to Rs.7,52,560/- lacs ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 6 between the carrying amount of financial liabilities extinguished and consideration paid was recognized in statement of profit or loss account in accordance with \"Ind AS-109\" on \"Financial Instruments\" prescribed under section 133 of the Companies Act, 2013 and accounting policies consistently followed by the Company and disclosed as an \"Exceptional items\" in Note - 30 of Balance sheet for financial year 2019-20. 6. Additionally it has been stated that assessee has recorded a loan write-back totaling Rs 4,59,334/-lakhs (inclusive of interest), classifying it as an \"Exceptional Item” in the Statement of Profit & Loss Account. Among the total written- back loans, Rs. 27,409/- lakhs corresponds to the write-off of a term loan, Rs.3,55,240/- lakhs pertains to the write-off of a working capital loan, and the remaining balance of Rs. 76,684/- lakhs relates to the write-off of interest on term and working capital loans. Apart from that it was submitted before the ld. CIT (A) that in relation to the written-back of working capital loan totaling Rs.3,55,240/- lakhs, the assessee, due to inadvertent error, has included the same in total income and offered to tax the said amount while filing the return of Income. In this regard, it was stated that the assessee has not claimed the said amount in any preceding years as deduction and hence the same is not chargeable to tax. Thus, it was submitted that provision of Section 41(1) will not be applicable, because in the present case it is an admitted fact that assessee has not claimed any deduction in respect of principal amount of loan. The working loan write back could not have been treated as income of the year. In support reliance was ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 7 placed on the judgment of the Hon’ble Supreme Court in the case of Mahindra & Mahindra Ltd. vs. CIT reported in (2018) 404 ITR 1 (SC). Further, reliance was placed on various judgments which have been quoted in the appellate order. 7. Since, this claim of working capital of write-back as capital receipt was raised before the ld. CIT (A) because there was no such order passed u/s. 143(3) but various adjustments were made u/s. 143(1), therefore, in view of the CBDT notification No.33 of 2023 dated 29/05/2023, the additional ground was sent to the ld. AO for his comment. 8. In response, ld. AO vide letter dated 24/04/2024 had submitted his report which has been incorporated from pages 38 to 42 of the appellate order. In sum and substance, ld. AO’s contention has been that assessee should have made a claim by way of filing of return of income or by filing the revised return and therefore, the additional claim made before the ld. CIT(A) is not maintainable. 9. In so far as interest of Rs.76.84 Crores which was on working capital loan write-back, ld. AO in his remand report admitted that assessee has already claimed deduction as expenditure in the computation of earlier years therefore, write- back of such interest expenses in the current assessment year which has been offered for taxation in the computation of income does not warrant any interference. Thus, to this extent, the waiver of interest which was added back as an income has been accepted by the ld. AO. However, with regard to write back of ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 8 Rs.35.52 Crores working capital loan, he made his following observations:- 6.2.3. As regard the write back of Rs.3552.40 Cr of working capital loan is concerned, the assessee has credited the same as income in the audited P&L accounts and offered for tax in the return of income filed for A.Y. 2020-21. The assessee has relied upon various case laws to substantiate its additional grounds of appeal, however, the same are not considerable as the assessee has not made this claim in the return of income filed for the year and also incorporated as its income in the audited books of accounts for the year. Since an amount has been waived off by the banks, it actually amounts to income at the hands of the assessee for the year of waiver in the sense that an amount which ought to be paid by it is now not required to be paid 6.2.4 Moreover, it is important to note that the assessee has got its books of accounts audited from a qualified chartered accountant, it had verified the books of accounts as well as financials of the assessee after due verification and after satisfying the correctness of accounts, it had filed its return of income, Hence, the additional claim before you is nothing but change of opinion. 6.2.5 Further, in order to claim the waiver of working capital loan as capital receipt as per the ratio laid down by various judgements, the assessee should have claimed it by way of filing return or revised return, whereas the assessee has not claimed it in original return nor has it filed any revised return to claim such exemption. It is also pertinent to mention here that the Hon'ble Apex court in the case of Goetze (India) Limited vs. CIT (2006) 157 taxman 1 held that before the assessing officer the assessee cannot make a claim for deduction otherwise than by filing a return or revised return. And, in this case, the income offered for taxation is not subject to any deduction as per provision of the Act. 7. In view of the above, additional grounds raised by the assessee may not be admitted and should be rejected.” ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 9 10. In response, assessee had also filed detailed rejoinder with regard to admissibility of the additional ground citing various judgments and also on merits stating that this issue now stands covered by series of judgments of the Hon’ble Supreme Court and Hon’ble High Court. The ld. CIT (A) admitted the additional ground after relying upon the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd., reported in 349 ITR 336; Sesa Goa Ltd. v. Jt. CIT [2020] 117 taxmann.com 96; Balmukund Acharya vs. DCIT [2009] 310 ITR 310 (BOM); and finally judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383. 11. On merits, Ld. CIT (A) discussed the issue in detail after analysing the facts and held that, neither Section 41(1) nor Section 28(iv) applies to the facts of the present case and this issue is squarely covered by the judgment of the Hon’ble Supreme Court in the case of Mahindra & Mahindra Ltd. vs. CIT(supra), his relevant conclusion reads as under:- 29.6 To sum up, the case of the appellant is not covered in the either section in view of the following reasons: a) Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the appellant has not claimed any deduction in any previous year. b) Section 28(iv) of the IT Act does not apply on the present case since the waiver of Rs. 3,55,240/-lacs is in the nature of cash or money. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 10 29.7 The appellant has claimed the waiver of loan as capital receipt relying upon the judicial pronouncement. In this regard, It is pertinent to note that so far as the waiver of loan is concerned, it was held by the Hon'ble Supreme Court in the case of Mahindra & Mahindra Ltd. -vs.- CIT [2018] 404 ITR 1 (SC) that in case of loan waiver, since benefit is received in cash or in the shape of money, therefore the provisions of section 28(iv) would not apply. Also, its cannot be taxed a remission of liability under section 41(1) as waiver of loan does not amount to cessation of trading liability. It was specifically stated that \"Waiver of loan for acquiring capital assets cannot be taxed as perquisite under section 28(iv) receipt in hands of as debtor/assessee are in form of cash/money and it also cannot be taxed as a remission of liability under section 41(1) as waiver of loan does not amount to cessation of trading liability\" 29.8 Thus, Hon'ble Supreme Court held that for invoking the provision of section 41(1), it is sine-qua-non that allowance of deduction should be claimed by the Assessee in any assessment for any year, in respect of loss, expenditure or trading liability incurred by the Assessee and then subsequently, if the financial creditor remits or waives any such liability then assessee liable to pay tax u/s. 41 of the Act. Objective behind this section is to ensure that assessee does not get way with the double benefit. Here in this case the loan taken by the assessee was neither an expenditure waiver of such loan which otherwise nor trading liability and therefore waiver was capital in nature, the provision of section 41 (1) cannot be invoked. Further, as held by the Hon'ble by the Supreme Court, section 28 (iv) also does not apply, as benefit on waiver of loan was not in the kind of money. i.e., cash receipt. 29.9 Similar view has been expressed by the Hon'ble Gujarat High Court in the case of PCIT-vs.- Gujarat State Financial ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 11 Corporation [2020] 122 taxmann.com 101 (Guj) wherein it was held that neither section 28(iv) of the Act nor section 41(1) of the Act would be applicable so as to tax the amount of waiver of loan. It relevant portion in the judgement as follows: “………In that view of the matter the dictum in case of Mahindra& Mahindra Ltd. (supra) would be applicable and as such neither section 28(iv) of the Act nor Section 41(1)of the Act would be applicable so as to tax the amount of waiver of loan comprising of principal amount in the ends of the assessee.” Subsequently, the Hon'ble Supreme Court has dismissed the SLP of Department against the judgment of High Court. 29.10 Further it is noted that this issue is squarely covered in favor of appellant by the decision of Hon'ble jurisdictional ITAT in the case of DCIT -vs.- Ramani Export [2023] 153 taxmann.com 465 (Mum-Trib) wherein tribunal has reiterated the decision of Hon'ble Apex court and held that loan amount taken by assessee was never claimed as expenditure nor as trading liability in any previous year. Therefore, waiver of such loan would not attract provisions of section 41(1) or section 28(iv). 11.1 He further referred to the judgment of the Hon’ble Bombay High Court in the case of Graham Firth Steel Products Pvt. Ltd., reported in 85 taxmann.com 110, wherein the Hon’ble High Court had observed and held as under:- “20. Even on the above surviving questions, the Tribunal has rightly concluded that there was a waiver of the principal amount of loan of Rs.8.36,99,463/- Mr. Mistri heavily relied on the Judgment of the Rajasthan High Court which held that treatment of such waiver by the assessee in his books of account does not alter the effect of the order of the BIFR. No remission or cessation of liability results as far as interest nor the assessee became entitled to waiver of interest and ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 12 therefore, Section 41(1) was not attracted, is the only view which one can take. The Section 41(1) has been interpreted in that Judgment to mean that remission can only be by an act of creditor and cessation of liability can come by agreement on by law The p principal amount of loan in this case has been waived. The liability may have been reduced under the scheme of the BIFR. The assessee has not enjoyed any actual benefit or remission of the liability. In such circumstances, Mr. Mistri, relying upon the Judgment of the Division Bench of this Court in Mahindra & Mahindra would submit that Mr. Pinto's reliance on another Judgment of a Division Bench of this Court is not well- placed. Mr. Pinto had relied upon the Judgment in the case of Solid Containers Ltd. v. Dy. CIT [2009] 308 ITR 417/178 Taxman 192 (Bom.). 21. The Section 28(iv) of the I.T. Act reads as under- 28. Profits and gains of business or profession. The following income shall be chargeable to income tax under the head \"Profits and gains of business or profession\"- (1) to (iii) (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. Thus, a plain reading of the said section would reveal that the income and which has been sel out in the clauses shall be chargeable to income tax under the head, profits and gains of business or profession. Clause (iv) deals with the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. 22. Then, Section 41(1) was relied upon and it is a common ground that Section 41 deals with profits chargeable to tax. The sub-section (1), Clause (a) thereof reads as under- 41. Profits chargeable to tax. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 13 (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first- mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has not obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not;\" 23. A bare perusal of the same would indicate that where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability Incurred by the assessee and subsequently during any previous year if the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year 24. On the own showing of the Revenue, in this case, the liability towards payment of interest and on which the assessee derived no benefit, has rightly been brought to tax. It is only waiver of the principal amount of loan of Rs. 8,36,99,463/- and increase in value of land hived off that the issue survived. 25. It is a common ground that before the Assessing Officer as well, the assessee had argued that these two provisions are not attracted. The Assessing Officer gave his reasoning. The Assessing Officer came to the conclusion that these liabilities were shown in the books of account as payable to Banks. If the ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 14 loans were written off by the Banks as a reason of one time settlement, it undoubtedly amounts to benefit derived by the assessee as a result of extinguishment of liability to repay the loan and this benefit has certainly arisen from business and not from anywhere else. 26. In the case of Mahindra & Mahindra (supra), the Division Bench of this Court was concerned with somewhat identical demand. There, Mahindra and Mahindra was proceeded against on the facts which have been noted. The facts were that, whether a sum of Rs.57,74,064/- due by the assessee- Mahindra and Mahindra to one Kaiser Jeep Corporation of America and written off by the lender constituted taxable income of the assessee? and whether, on the facts and circumstances of the case, the assessee having obtained deduction of a certain sum by way of depreciation on the cost of machinery and toolings, was taxable under Section 41(1) of the I.T. Act as the cost of the machinery/toolings being forgone by Kaiser Jeep Corporation during the Assessment Year 1976-77? Then the related questions to these were questions 3 and 4. 27. The facts were noted in detail by the Division Bench on pages 504 to 506 and the arguments from pages 507 to 509. Then the findings, as far as Section 28(iv) are concerned, were rendered. After referring to the Agreement, which was executed between the parties, it was held that the Agreement for purchase of tooling was entered into and that Agreement in its entirety was not obliterated by the waiver. The Division Bench held that Section 28(iv) was not attracted. 28. In the present case as well we find that when Section 28(iv) was pressed into service on the basis that the assessee argued that the benefit received by the assessee in the form of extinguishment of the liability by entering into an agreement of one time settlement does not attract Section 28(iv), the Assessing Officer held that due to remission of principal amount payable by the assessee, which was utilised, during the conduct of business, interest on the funds so borrowed were also paid and debited to the profit and loss account in the earlier years, the assessee has derived a benefit as a result of ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 15 extinguishment of the liability. This benefit is undoubtedly arising out of the conduct of business. 29. The Division Bench in Mahindra & Mahindra held that the assessee has not received any benefit or perquisite in kind which could be valued and in any event such benefit should be in the nature of income. The Division Bench noted that the loan was advanced to the assessee Mahindra and Mahindra, the assessee paid interest at 6% per annum for ten years being the period of contract, and it never got deductions for payment of interest under Section 36(1) (iii) or under Section 37 of the Act. The Division Bench held that there was a waiver of the principal amount and not the interest. In that case also the Assessing Officer held that when there was a waiver of the loan, the credits became part of business Income and that prior to such waiver, they represented liability. Here also these are the findings and overlooking the aspect of payment of interest which has not been waived and in regard to which no relief was claimed. The loan agreement, in its entirety, was not obliterated in the present case as well. Therefore, we are of the opinion that in the present case Section 28(iv) was not attracted. 30. As far as Section 41(1) is concerned, the Division Bench in Mahindra & Mahindra came to the conclusion that the same circumstances and admitted position would enable it to hold that it was a remission. The remission is not income and in order to get over such Judgments rendered earlier, Section 41 came to be enacted. The Division Bench held that the most fundamental fact that is to be borne in mind is that no deduction was given in the earlier years and, therefore, the loan waived could not be included as income under Section 41(1) of the I.T. Act. 31. In the case at hand, the only observation of the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals) is that writing off of the loans payable by the assessee due to one time settlement with Banks and financial institutions amounts to benefits obtained by the assessee arising out of business. Therefore, such benefit becomes the income of the assessee. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 16 32. Mr. Pinto would rely upon the Judgment of the Division Bench of this Court in the case of Solid Containers (supra) Solid Containers involved the facts of addition made on the ground that the credit balance written back is the income of the assessee in view of the fact that it is a gain directly arising out of the business activity and the same was liable to tax under Section 28. Reliance was placed on Mahindra and Mahindra. However, the Division Bench, in Solid Containers, noted that a loan of Rs.6,86,071/- was taken during the previous year for business purposes. This was written back, as a result of the Consent Terms arrived at between M/s. PS. Jain Motors on the one hand and the assessee on the other. The assessee claimed that the said loan was the capital was the capital receipt and has not been claimed as deduction from the taxable income as expenses and, therefore, did not fall within the purview of Section 41(1). The Division Bench, deciding Solid Containers, referred to the finding in the previous orders. The Tribunal in that case held that the assessee company had obtained certain loans from M/s. P.S. Jain Motors. This amount was payable to them with interest of Rs.2,83,819/- That party filed a Suit for recovery and the assessee filed counter-claim. The matter was settled out 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. The Division Bench found that the Tribunal should have relied on the Judgment of the Hon'ble Supreme Court in the case of the CIT v. T.V. Sundaiam Iyengar & Sons Ltd. [1996] 222 ITR 344/88 Taxman 429. The Division Bench found that the Judgment in Mahindra & Mahindra was distinguishable. The amount which initially did not fall within the scope of the provision rendering it liable to tax, subsequently becomes the assessee's income, being part of trading of the assessee. This was a clearly distinguishing factor and which prevailed upon the Division Bench in Solid Containers to dismiss the assessee's appeal. Before us, the Tribunal relied on the Division Bench Judgment of the Rajasthan High Court in Shree Pipes Ltd. There, on identical facts, the assessee was a sick industrial company and ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 17 proceedings were pending before the BIFR. Under the scheme of its rehabilitation, interest liability in respect of certain debts of the assessee due to Banks and financial institutions stood waived. With the waiver of the interest liability of the assessee under the scheme, it was also ordered that the assessee would be entitled to exemption from the operation of Section 41(1) of the I.T. Act. The assessee had written off in its books of account its liability towards interest and the payment of commission, expenses incurred and allowed as deduction in the earlier years. The Assessing Officer considered this unilateral action as remission or cessation of its liability and made additions for the assessment year concerned, including under Section 41(1). As in our case, the Tribunal deleted the addition. The Revenue was in appeal before the Rajasthan High Court. The Division Bench held that the act of remission was attributable to the creditor and it could not be unilaterally attributed to the debtor himself declaring that he would not pay. There was no material which suggested any act or omission on the part of the creditor which resulted in extinguishment of the liability of the assessee on its account. Writing off such liability in the books of account by the debtor only conveyed the intention of the assessee not to pay. The Revenue relied on the circumstances stated by the Income Tax Officer that claims had not been filed before the Board by Creditors However, as rightly observed by the Division Bench of the Rajasthan High Court that, there is no provision in the Sick Industrial Companies (Special Provisions) Act 1985 permitting lodging or raising of claims by the creditor before the BIFR Before us as well, the BIFR issued notices to those whose debts are secured and equally those whose stakes are involved. As far as the company is concerned, the BIFR could have recommended winding up but it took on record a scheme of rehabilitation and revival of the company In that process, the arrangements as carved out have been made. Therefore, as held by the Tribunal, in the present case the ingredients of sub- section (1) of Section 41 are not attracted. The liability remains and because under the scheme of the BIFR the principal sum was waived, the assessee has not enjoyed any actual benefit of remission of liability in the nature of trading. It is in these circumstances that the claim of deduction in respect of the waiver of loan amounting to Rs.8,36,99,463/- was granted. The Assessing Officer was directed to allow it. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 18 12. In his subsequent paragraphs he has referred to various other judgments of the Hon’ble High Court on similar issue of waiver of working capital loan wherein all the Courts have held that it is the capital receipt not chargeable to tax u/s.4 1(1) and Section 28(iv). Thus, following the principle and judgment of the Hon’ble Supreme Court in the case of Mahindra & Mahindra (supra), and other High Courts including Jurisdictional High Court, he has allowed the claim. 13. Before us one of the main contention raised by the ld. CIT- DR was that assessee has itself credited the write-back of Rs.35.52 Crores of working capital loan as income in the profit and loss account and offered to tax in the return of income. Now, assessee cannot take a plea that it is not taxable without filing the return of income u/s.139(1) or by making a claim in the revised return filed u/s.139(5). Thus, the ld. CIT (A) has erred in admitting the additional ground in violation of the judgment of the Hon’ble Supreme Court in the case of Goetze India (157 Taxman 1). Before us, ld. Counsel for the assessee drew our attention to the various judgments referred and relied upon by the ld. CIT (A) while admitting the additional ground. He further pointed out that there was another set of two separate additional grounds which were raised before the ld. CIT(A) which has been admitted and allowed by the ld. CIT(A) for which department has not filed any appeal. Thus, if for two additional grounds, department is accepting it then, for admitting the third additional ground, department cannot take different stand. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 19 14. We have heard rival submissions and perused the relevant finding given in the impugned order. As regards the grounds raised by the Revenue from 1 to 3 challenging the jurisdiction of the ld. CIT (A) to admit the additional ground, we find that the assessee has raised additional ground before the ld. CIT (A) stating that waiver of working capital loan write-back during the year in terms of resolution plan approved by the NCLT should be treated as capital receipt. The facts relating to waiver of such loan has been stated and elaborated before the ld. CIT (A) which we have discussed in the aforesaid paragraphs. On such claim made by the assessee the ld. CIT(A) in view of the notification of the CBDT vide Circular No.33 of 2023, called for the remand report and ld. AO’s comment. Thus, ld. CIT (A) had forwarded this claim to the ld. AO to re-examine the issue. This has been done in view of the procedure for appeal laid down by the CBDT in its Circular which for the sake of ready reference reads as under:- “v) the appellant may file additional grounds of appeal to the Commissioner (Appeals) through the National Faceless Appeal Centre, in such form, as may be specified by the National Faceless Appeal Centre, specifying therein the reason for omission of such ground in the appeal filed by him, (vi) where the additional ground of appeal is filed. a) the Commissioner (Appeals) shall, through the National Faceless Appeal Centre, send the additional ground of appeal to the Assessing Officer either directly or through the National Faceless Assessment Centre, as the case may be, for providing comments, if any, ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 20 (b) the Assessing Officer, either directly or through the National Faceless Assessment Centre, as the case may be, shall furnish their comments, within the date and time specified of such extended date and time as may be allowed on the basis of an application made in this behalf, to the Commissioner (Appeals) through the National Faceless Appeal Centre, (c) the National Faceless Appeal Centre, on receipt of comments from the Assessing Officer either directly or through the National Faceless Assessment Centre, as the case may be, shall send such comments to the Commissioner (Appeals), and where no such comments are furnished, inform the Commissioner (Appeals) accordingly, (d) the Commissioner (Appeals) shall, after taking into consideration the comments, if any, received from the Assessing Officer either directly or through the National Faceless Assessment Centre, as the case may be,- (A) if is satisfied that the omission of additional ground from the form of appeal was not wilful or not unreasonable, admit such ground; or (B) in any other case, not admit the additional ground, for reasons to be recorded in writing in the appeal order passed under clause (x); 15. Thus, ld. CIT (A) has duly followed the procedure while admitting the additional ground and sought comments from the AO also. Although the ld. AO has objected for admission of additional ground by relying upon the judgment of the Hon’ble Supreme Court in the case of Goetze India (supra), however, he also made his comment on merits as noted above. Thus, ld. AO was given full opportunity to examine claim of the assessee and in light of various judgments of the Hon’ble Supreme Court and Hon’ble High Courts. It is after considering the remand report of ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 21 the ld. AO and submission of the assessee, ld. CIT (A) has admitted the additional ground following the binding principles laid down by the Hon’ble Jurisdictional High Court and Hon’ble Supreme Court. 16. We find that the Hon’ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd after considering the judgment of the Hon’ble Supreme Court in the case of Goetze India vs. CIT (157 Taxman 1) and judgment of the Hon’ble Supreme Court in the case of NTPC vs. CIT (supra) and various other judgments of the Hon’ble Supreme Court, held that there is a long line of authorities to establish that assessee is entitled to raise additional ground not merely in terms of legal submissions but also additional claims not made in the return of income filed by it. The Hon’ble High Court has also dealt with the judgment of the Hon’ble Supreme Court in the case of Gotze India Ltd. in the following manner:- “21 It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax, (2006) 157 Taxman 1. We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Company Limited vs. Commissioner of Income-tax (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 22 no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Company Limited contending that it was open to the assessee to raise the points of law even before the Tribunal. 4. The decision in question is that the power of the Tribunal under section 254 of the Income tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act. 1961. There shall be no order as to costs. 22 It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254. 23. A Division Bench of the Delhi High Court dealt with a similar submission in Commissioner of Income-tax v. Jai Parabolic Springs Limited, MANU/DE/0638/2008 (2008) 306 ITR 42. The Division Bench, in paragraph 17 of the judgment held that the Supreme ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 23 Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case.” 17. Further the Hon’ble Supreme Court in the case of Wipro Finance Ltd. vs. CIT (2022) 137 taxmann.com 230, wherein fresh claim was made before the ITAT that loss arising out of forex fluctuation which was capitalised in the return of income was claimed as revenue expenses before the Tribunal. In this regard the Hon’ble Supreme Court rejecting the arguments raised by ld. ASG on behalf of the Revenue that, since assessee in its return of income has taken the conscious plea with regard to part of the claim, then it was not open for the assessee to treat for the first time before the ITAT that the entire claim must be treated as revenue expenditure. The relevant observation and the principle laid down by the Hon’ble Supreme Court reads as under:- “10. The learned ASG appearing for the department had faintly argued that since the appellant in its return had taken a conscious explicit plea with regard to the part of the claim being ascribable to capital expenditure and partly to revenue expenditure, it was not open for the appellant to plead for the first time before the ITAT that the entire claim must be treated as revenue expenditure. Further, it was not open to the ITAT to entertain such fresh claim for the first time. This submission needs to be stated ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 24 to be rejected. In the first place, the ITAT was conscious about the fact that this claim was set up by the appellant for the first time before it, and was clearly inconsistent and contrary to the stand taken in the return filed by the appellant for the concerned assessment year including the notings made by the officials of the appellant. Yet, the ITAT entertained the claim as permissible, even though for the first time before the ITAT, in appeal under section 254 of the 1961 Act, by relying on the dictum of this Court in National Thermal Power Co. Ltd. (supra). Further, the ITAT has also expressly recorded the no objection given by the representative of the department, allowing the appellant to set up the fresh claim to treat the amount declared as capital expenditure in the returns (as originally filed), as revenue expenditure. As a result, the objection now taken by the department cannot be countenanced. 11. Learned ASG had placed reliance on the decision of this Court in Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1/284 ITR 323 in support of the objection pressed before us that it is not open to entertain fresh claim before the ITAT. According to him, the decision in National Thermal Power Co. Lid (supra) merely permits raising of a new ground concerning the claim already mentioned in the returns and not an inconsistent or contrary plea or a new claim. We are not impressed by this argument. For, the observations in the decision in Goetze (India) Ltd. (supra) itself make it amply clear that such limitation would apply to the \"assessing authority\", but not impinge upon the plenary powers of the ITAT bestowed under section 254 of the Act. In other words, this decision is of no avail to the department.” [Emphasis in bold added is ours] 18. Thus, there is no infirmity in the order of the ld. CIT (A) in admitting the additional claim but also here in this case the ld. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 25 CIT(A) had duly followed the process laid down by CBDT by asking the remand report from the ld. AO to examine the claim on merits. Accordingly, the order of the ld. CIT (A) admitting the additional ground is confirmed and the ground Nos.1 to 3 raised by the Revenue are dismissed. 19. In so far as merits are concerned, as noted above here in this case in pursuance of resolution plan approved by the NCLT, assessee has written-back Rs.7,44,763/-, out which the assessee has written back the amount of Rs.3,55,240/- pertained to the write-back of the working capital loan; and in so far as waiver of interest on such working capital loan, the same has been offered for taxation u/s.41(1). 20. The issue whether the write-back of working capital loan which was included as income and offered to tax while filing the return of income can be claimed as not taxable or not. Now it is a well settled law as discussed by the Hon’ble Supreme Court in the case of NTPC vs. CIT (Surpa) and Wipro Finance Ltd (supra) and also by the Jurisdictional High Court in various judgments as has been referred in the impugned appellate order, that such a claim can always be made at the appellate stage, if the same is allowable in accordance with the law. It has not been disputed even by the ld. CIT DR that the principles laid down by the Hon’ble Supreme Court in the case of Mahindra & Mahindra Ltd., vs. CIT (supra) is squarely applicable in the case of the assessee, because here in this case the working capital loan was never debited to the trading account or to the profit and loss ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 26 account in any of the preceding assessment year. It was neither on account of trading liability or other liability. Section 41(1) clearly stipulates that only on remission of claiming liability can be subjected to tax. Here in this case admittedly, waiver of loan amount is not a trading liability and hence, assessee’s case does not fall u/s. 41(1). Secondly, in so far as applicability of Section 28(iv) of the Act, it provides that, income which can be taxed shall arise from business or profession and additionally for the applicability of Section, the value of benefits which arises from the business should be in some other form rather than in the form of money. In the present case it is a matter of record that amount of Rs.3,55,240/- having received is cash receipt due to waiver of loan. Therefore, the conditions of Section 28(iv) are not applicable. This issue has been dealt by the Hon’ble Supreme Court in the case of Mahindra & Mahindra Ltd. in the following manner: 10. The term \"loan\" generally refers to borrowing something, especially a sum of cash that is to be paid back along with the interest decided mutually by the parties. In other terms, the debtor is under a liability to pay back the principal amount along with the agreed rate of interest within a stipulated time. 11. It is a well-settled principle that creditor or his successor may exercise their \"Right of Waiver\" unilaterally to absolve the debtor from his liability to repay. After such exercise, the debtor is deemed to be absolved from the liability of repayment of loan subject to the conditions of waiver. The waiver may be a partly waiver ie., waiver of part of the principal or interest repayable, or a complete waiver of both the loan as well as interest amounts. Hence, waiver of loan by the creditor results in the debtor having extra cash in his hand. It is receipt in the hands of the ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 27 debtor/assessee. The short but cogent issue in the instant case arises whether waiver of loan by the creditor is taxable as a perquisite under section 28 (iv) of the IT Act or taxable as a remission of liability under section 41 (1) of the IT Act. 12. The first issue is the applicability of section 28 (iv) of the IT Act in the present case. Before moving further, we deem it apposite to reproduce the relevant provision herein below- 28. Profits and gains of business or profession. The following income shall be chargeable to income-tax under the head \"Profits and gains of business profession\"- (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, 13. On a plain reading of section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke the provision of section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of Rs. 57,74,064 can be taxed under the provisions of section 28 (iv) of the IT Act. 14. Another important issue which arises is the applicability of the section 41 (1) of the IT Act. The said provision is re-produced as under 41 Profits chargeable to tax (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year: ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 28 (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not, or-------. 15. On a perusal of the said provision, it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax under section 41 of the IT Act. The objective behind this Section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability. It is undisputed fact that the Respondent had been paying interest at 6% per annum to the KJC as per the contract but the assessee never claimed deduction for payment of interest under section 36 (1) (iii) of the IT Act. In the case at hand, learned CIT (A) relied upon section 41 (1) of the IT Act and held that the Respondent had received amortization benefit. Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time, hence, it is nothing else than depreciation. Depreciation is a reduction in the value of an asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the Respondent in previous assessment years was due to the deprecation of the machine and not on the interest paid by it. ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 29 16. Moreover, the purchase effected from the Kaiser Jeep Corporation is in respect of plant, machinery and tooling equipments which are capital assets of the Respondent. It is important to note that the said purchase amount had not been debited to the trading account or to the profit or loss account in any of the assessment years. Here, we deem it proper to mention that there is difference between 'trading liability and 'other liability Section 41 (1) of the IT Act particularly deals with the remission of trading liability Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability Hence, we find no force in the argument of the Revenue that the case of the Respondent would fall under section 41 (1) of the IT Act. 17. To sum up, we are not inclined to interfere with the judgment and order passed by the High court in view of the following reasons (a) Section 28(iv) of the IT Act does not apply on 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 It is a matter of record that the Respondent has not claimed any deduction under section 36(1)(ii) of the IT Act qua the payment of interest in any previous year.” 21. Further the Hon’ble Bombay High Court in the case of Essar Shipping Ltd. vs. CIT reported in 426 ITR 220 in the issue of waiver of loan whether can be brought to tax u/s.28(iv) after following the principle laid down by the Hon’ble Supreme Court in the case of Mahindra & Mahindra Ltd. (supra) had decided this issue in favour of the assessee after observing as under:- “14. As would be evident from the above. Section 28 deals with profits and gains of business or profession. It says that the incomes mentioned therein shall be chargeable to income tax ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 30 under the head \"profits and gains of business or profession\". Clause (M) refers to the value of ar benefit or perquisite whether convertible into money or not arising from business or the exercise of a profession. 15. In Mahindra & Mahindra Ltd. (supra) Supreme Court was examining whether the amount due by Mahindra & Mahindra to Kaiser Jeep Corporation which was later on waived off by the lender constituted taxable income of Mahindra & Mahindra or not. Briefly it may be stated that Mahindra & Mahindra for the purpose of expansion of its business had entered into an agreement with Kaiser Jeep Corporation whereby the later agreed to sell certain equipments to Mahindra & Mahindra. The price of the equipments was finally estimated at $ 6,50,000. Kaiser Jeep Corporation agreed to provide loan to Mahindra & Mahindra for procurement of the equipments at the rate of 6% interest repayable after 10 years in instalments. Subsequently, Kaiser Jeep Corporation was taken over by American Motor Corporation which agreed to waive off the principal loan amount advanced by Kaiser Jeep Corporation to Mahindra & Mahindra. It is in this factual background that the aforesaid provision first cropped up before the Bombay High Court and thereafter, travelled to the Supreme Court in consideration of the question as whether the loan amount which was waived off by the lender constituted taxable income of Mahindra & Mahindra. Supreme Court discussed the meaning of the term \"loan\" and also the right of the creditor to exercise its right of waiver. It was held as under :- \"The term \"loan\" generally refers to borrowing something, especially a sum of cash that is to be paid back alongwith the interest decided mutually by the parties. In other terms, the debtor is under a liability to pay back the principal amount alongwith the agreed rate of interest within a stipulated time. It is a well-settled principle that the creditor or his successor may exercise their \"right of waiver\" unilaterally to absolve the debtor from his liability to repay. After such exercise, the debtor is deemed to be absolved from the liability of repayment of loan subject to the conditions of waiver. The waiver may be a partly waiver, i.e. waiver of part of the principal or Interest repayable or a complete waiver of both the loan as well as interest ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 31 amounts. Hence, waiver of loan by the creditor results in the debtor having extra cash in his hand. It is receipt in the hands of the debtor/assessee. 16.Having discussed the above, Supreme Court posed a question as to whether waiver of loan by the creditor is taxable as perquisite under section 28(M) of the Act and in this connection referred to the provisions of section 28(iv) of the Act. Thereafter Supreme Court held as under: \"On a plain reading of section 28(iv) of the Income-tax Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to Invoke the provisions of section 28(iv) of the Income-tax Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064.00 is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of section 28(iv) of the Income-tax Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, It can be said that the amount of Rs. 57,74.064.00 can be taxed under provisions of section 28(iv) of the Income-tax Act.\" 17. From the above it is quite evident that according to the Supreme Court for applicability of section 28(M) of the Act, the Income which can be taxed has to arise from the business or profession. That apart, the benefit which is received has to be in some other form rather than in the shape of money. In the facts of that case it was found that the amount of Rs. 57,74,064.00 was received as cash receipt due to waiver of loan. Therefore, it was held that Section 28(iv) of the Act was not satisfied in as much as the prime condition of section 28(iv) that any benefit or perquisite arising from the business or profession shall be in the form of benefit or perquisite other than in the shape of money was absent. Therefore, it was held that the said amount could not be taxed under section 28(iv) of the Act in no circumstances. 18 Facts and issue in the present case are identical to that in Mahindra & Mahindra (supra) Here also loan of Rs. 2.52 cores was given by the Karnataka Government to the assessee which ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 32 was subsequently waived off. Therefore, this amount would be construed to be cash receipt in the hands of the assessee and cannot be taxed under section 28(/v). In view of the Supreme Court decision in Mahindra & Mahindra (supra), the earlier decision of this court in Protos Engineer Co. (P.) Ltd. (supra) would no longer hold good.” 22. In another judgment of the Hon’ble Bombay High Court in the case of Graham Firth Steel Products (I) Ltd., wherein as per the BIFR order only principal amount is waived off by the banks. It was held that no addition can be made on such waiver of principal loan either u/s. 41(1) or u/s.28(iv). 23. The ld. CIT (A) has referred to various other Hon’ble High Court judgments, however, looking to the fact that there are direct judgment of the Hon’ble Jurisdictional High Court and Hon’ble Supreme Court; therefore, we need not refer to other judgments of other Hon’ble High Courts. Accordingly, we hold that ld. CIT(A) was justified in allowing the additional claim that amount of Rs.3,55,240/- cannot be taxed u/s.41(1) or u/s.28(iv) as it is a capital receipt. Accordingly, the appeal of the Revenue is dismissed. 24. In the cross-objection assessee has only stated that while giving effect to the order of the ld. CIT (A) if the claim of waiver of capital loan is held to be not taxable, then there would be loss and ld. AO should be directed to allow the carry forward and set off of loss as determined. We accept such contention of the assessee and since ld. CIT (A) has deleted the additional ground and allowed the same on merits, which we have also allowed and ITA No. 5708/Mum/2024 & CO No.279/Mum/2024 M/s. Patanjali Foods Limited 33 affirmed the order of Ld. CIT (A), therefore, ld. AO is directed to allow carry forward and set off of loss determined while giving effect to this order against the income determined in the subsequent years. Accordingly, cross objection raised by the assessee is allowed. 25. In the result, appeal of the Revenue is dismissed and Cross Objection of the assessee is allowed. Order pronounced on 03rd January, 2025. Sd/- (GIRISH AGRAWAL) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 03/01/2025 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "