Wasan Exports (P) Ltd., New Delhi V. ITO, New Delhi

ITA 1630/DEL/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6841 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Valuation report; Capital receipt; Set aside
• Section: 36 (1) (iii); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES D: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA.NO.1586/DEL./2012 ASSESSMENT YEAR 2008-2009 THE INCOME TAX OFFICER, WARD-18(2), ROOM NO.247, C.R. BUILDING, NEW DELHI. VS., M/S. WASAN EXPORTS (P) LTD., 5-ARADHNA ENCLAVE, R.K. PURAM, NEW DELHI-66. PAN AAACW0159P (APPELLANT) (RESPONDENT) ITA.NO.1630/DEL./2012 ASSESSMENT YEAR 2008-2009 M/S. WASAN EXPORTS (P) LTD., 5-ARADHNA ENCLAVE, R.K. PURAM, NEW DELHI-66. PAN AAACW0159P VS., THE INCOME TAX OFFICER, WARD-18(2), ROOM NO.247, C.R. BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. NAINA SOIN KAPIL, SR. D.R. FOR ASSESSEE : SHRI KAPIL GOEL, ADVOCATE DATE OF HEARING : 08.04.2019 DATE OF PRONOUNCEMENT : 29.04.2019 ORDER PER BHAVNESH SAINI, J.M. BOTH THE CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-XXI, NEW DELHI, DATED 25.01.2012, FOR THE A.Y. 2008-2009. 2 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BOTH THE APPEALS ARE DECIDED AS UNDER : ITA.NO.1586/DEL./2012 (DEPARTMENTAL APPEAL) : 3. THE REVENUE IN THE DEPARTMENTAL APPEAL CHALLENGED THE DELETION OF ADDITION OF RS.67,83,571/- MADE BY THE ASSESSING OFFICER AND ACCOUNT OF REDUCED VALUE OF STOCK. THE ASSESSING OFFICER IN HIS FINDINGS NOTED THAT ON PERUSAL OF THE QUANTITATIVE DETAILS, IT WAS FOUND THAT VALUE OF THE CHEMICALS HAVE BEEN SHOWN IN THE CLOSING STOCK, WHEREAS, THESE ITEMS ARE PERISHABLE IN NATURE. IF THESE ITEMS ARE KEPT FOR A LONGER PERIOD OR DUE TO CLIMATICALLY CHANGE OVER A PERIOD IN YEARS, THESE ITEMS BECOME WASTE AND HAD NO VALUE AT ALL. BUT, IN THE PRESENT CASE, THE ASSESSEE- COMPANY HAS SHOWN ITS VALUE IN THE CLOSING STOCK. THE ITEMS WHICH ARE NOT PERISHABLE IS NATURE LIKE INTER LINING SUCH AS BUKRAM, DRILL CLOTH, SYNTHETIC LINING BYLON THREAD SUCH AS N.W.P. TAPE, VELCROW TAPE, COTTON TAPE, METALLIC FITTING SUCH AS EYELETS, HOOK, BUCKLE, WASHER, D. RING ETC., THE ASSESSEE-COMPANY HAS SHOWN THE VALUE OF THESE ITEMS AT 3 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. NIL. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN FOLLOWING THE METHOD OF VALUING THE CLOSING STOCK AT COST OR MARKET VALUE, WHICHEVER IS LESS. DURING THE YEAR UNDER CONSIDERATION, NO NEW PURCHASES HAVE BEEN MADE. THE ASSESSEE IS IN THE BUSINESS OF LEATHER, LEATHER SHOES, LEATHER SHOE-UPPERS ETC., IN RESPECT OF WHICH THE ASSESSEE HAD A CLOSING STOCK OF RAW MATERIAL AND FINISHED GOODS AS STATED ABOVE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN KEEPING THE STOCK OF THESE ITEMS SINCE LAST SO MANY YEARS. THE ASSESSEE HAS FURNISHED THE DETAILS OF WORKING OF OPENING AS WELL AS CLOSING STOCK. BUT NO COGENT REASONS HAVE BEEN GIVEN IN RESPECT OF THE STOCKS WHICH ARE VALUED AT NIL. EVEN THE ASSESSEE-COMPANY FAILED TO PRODUCE ANY VALUATION REPORT IN RESPECT OF STOCK WHOSE VALUE HAS BEEN TAKEN AT NIL. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF ASSESSEE-COMPANY AND THE VALUE OF THE STOCK TAKEN AT NIL, WAS TAKEN AT RS.67,83,579/- AND ADDITION WAS MADE TO THE INCOME OF THE ASSESSEE. 3.1. THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT SIMILAR ISSUE PERTAIN TO ASSESSMENT YEAR 2005-2006 ALSO 4 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. WHICH IS CONFIRMED BY THE LD. CIT(A) FOR WANT OF VALUATION REPORT, BUT, THE TRIBUNAL DELETED THE SIMILAR ADDITION VIDE ORDER DATED 20 TH OCTOBER, 2010. THE ORDER OF THE TRIBUNAL IS RE-PRODUCED IN THE APPELLATE ORDER, IN WHICH, THE TRIBUNAL HAS OBSERVED THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE ITEMS WHICH ARE VALUED AT A PARTICULAR AMOUNT WERE SOLD IMMEDIATELY THEREAFTER AT A PRICE HIGHER THAN THE PRICE TAKEN BY ASSESSEE IN THE CLOSING STOCK. THE ASSESSEE MAINTAINED SIMILAR METHOD OF ACCOUNTING FOR VALUATION OF THE CLOSING STOCK, THEREFORE, ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A), WAS DELETED. THE LD. CIT(A) ALSO CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER AND ASSESSEE ALSO FILED REJOINDER IN WHICH THE ASSESSEE EXPLAINED THAT ASSESSEE PRODUCED ALL THE DETAILS BEFORE ASSESSING OFFICER IN THE REMAND PROCEEDINGS, BUT, NOTHING HAVE BEEN DONE IN THE MATTER. 3.2. THE LD. CIT(A) NOTED THAT ASSESSEE FILED THE SUBMISSIONS BEFORE ASSESSING OFFICER DURING REMAND PROCEEDINGS ALONG WITH THE DOCUMENTS WHICH WERE FORWARDED TO THE ASSESSING OFFICER FOR NECESSARY COMMENTS 5 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. WITH REGARD TO VALUATION OF THE CLOSING STOCK, IN WHICH, ASSESSEE ALSO FILED STOCK VALUATION REPORT AS ON 31 ST MARCH, 2008, WHICH IS SUPPORTED BY SALE BILLS ETC. THE LD. CIT(A) FOUND THAT ALL THE BILLS HAVE BEEN VERIFIED BY THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS, BUT, HAD NOT MADE ANY SPECIFIC COMMENTS AGAINST THE DOCUMENTS. THE LD. CIT(A) ALSO FOUND THAT SIMILAR ADDITION HAVE BEEN DELETED BY ITAT IN ASSESSMENT YEAR 2005-2006. THE LD. CIT(A), THEREFORE, DELETED THE ENTIRE ADDITION. 4. THE LD. D.R. RELIED UPON ARE THE ORDER OF THE ASSESSING OFFICER AND ALSO FILED THE WRITTEN SUBMISSIONS. THE LD. D.R. REFERRING TO THE WRITTEN SUBMISSIONS SUBMITTED THAT NO REASON HAVE BEEN EXPLAINED IN RESPECT OF THE STOCK WHICH IS VALUED AT NIL. THE STOCK HAVE BEEN KEPT FOR MANY YEARS AND ASSESSEE DID NOT PROVIDE COMPLETE INVENTORY. THE ASSESSEE SOLD THE PART OF THE STOCK TO TWO PARTIES VIZ., M/S. DEEPAK IMPEX, AGRA AND M/S. SIDDHARTHA EXPORTS, NOIDA. THE LD. D.R. SUBMITTED THAT SINCE THE ASSESSEE IS VALUING THE CLOSING STOCK AT COST OR MARKET VALUE WHICHEVER IS LOWER YEAR AFTER YEAR, THEN HOW THE GOODS WERE SOLD @ 10% TO 30% 6 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. OF THE VALUE OF THE GOODS SHOWN AS OPENING STOCK. IT WAS OBSERVED THAT ONE OF THE PURCHASER OF THE GOODS M/S. DEEPAK IMPEX, AGRA HAVE PARTNERS SHRI PRADIP WASAN AND SHRI JATINDER WASAN WHO ARE ALSO THE DIRECTORS OF THE ASSESSEE-COMPANY. NO SPECIFIC DETAILS HAVE BEEN GIVEN WITH REGARD TO VALUATION OF THE CLOSING STOCK IN RESPECT OF THE BILLS RAISED TO OTHER PURCHASER I.E., M/S. SIDDHARTHA EXPORTS, NOIDA. THE SAME DO NOT CONTAIN FULL DETAILS. THE LD. D.R. SUBMITTED THAT LD. CIT(A) HAS FAILED TO APPRECIATE THAT ASSESSEE WAS REDUCING THE VALUE OF THE STOCK YEAR AFTER YEAR, THEREFORE, ADDITION WAS WRONGLY DELETED BY THE LD. CIT(A). 5. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE HAVE BEEN DECIDED BY ITAT, DELHI BENCH IN THE CASE OF THE SAME ASSESSEE FOR THE ASSESSMENT YEAR 2005-2006 DATED 20 TH AUGUST, 2010, COPY OF THE ORDER IS PLACED ON RECORD. HE HAS, THEREFORE, SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. HE HAS REFERRED TO REPLIES FILED BY ASSESSEE BEFORE THE AUTHORITIES BELOW. COPIES OF WHICH. ARE FILED AT PAGES-4, 18 AND 19 OF THE PAPER BOOK, IN WHICH, ASSESSEE FILED 7 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. COMPLETE DETAILS BEFORE ASSESSING OFFICER, SUPPORTED BY BILLS AND DETAILS OF THE VALUATION OF THE STOCK AND STOCK VALUATION REPORT IS ALSO FILED. PB-62 IS LETTER OF THE ASSESSING OFFICER AT REMAND PROCEEDINGS, IN WHICH, ASSESSING OFFICER ASKED THE ASSESSEE TO FILE COPIES OF THE SALE BILLS OF THE STOCK, WHICH WERE SOLD DURING THE YEAR ALONG WITH NAME AND ADDRESSES OF THE PARTIES, TO WHOM STOCK HAVE BEEN SOLD, DETAILS OF PAYMENT RECEIVED, BANK ENTRIES, TO SUPPORT THE SAME. HE HAS SUBMITTED THAT ASSESSEE FILED COMPLETE DETAILS BEFORE ASSESSING OFFICER AS REQUIRED AT THE REMAND PROCEEDINGS. THE ASSESSING OFFICER, HOWEVER, DID NOT MAKE ANY ADVERSE COMMENTS UPON THE SAME IN THE REMAND REPORT, COPY OF THE REMAND REPORT IS FILED AT PAGE-59 OF THE PB. HE HAS, THEREFORE, SUBMITTED THAT SINCE NOTHING ADVERSE WAS FOUND AGAINST THE ASSESSEE, THEREFORE, LD. CIT(A) CORRECTLY DELETED THE ADDITION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT ASSESSING OFFICER CALLED FOR THE EXPLANATION OF ASSESSEE AT THE REMAND PROCEEDINGS BY CALLING THE COPIES OF THE BILLS, BANK 8 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. STATEMENTS AND DETAILS OF THE PARTIES TO WHOM SALES HAVE BEEN MADE. THE ASSESSEE ADMITTEDLY FURNISHED COMPLETE DETAILS BEFORE ASSESSING OFFICER AT THE REMAND PROCEEDINGS. THE ASSESSING OFFICER FILED THE REMAND REPORT BEFORE LD. CIT(A), BUT, NO ADVERSE COMMENTS HAVE BEEN MADE ON THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE. THUS, IN THE REMAND REPORT, ASSESSING OFFICER CONCEDED THE CLAIM OF THE ASSESSEE. THE ASSESSEE ALSO FILED VALUATION REPORT OF THE STOCK BEFORE LD. CIT(A), WHICH HAVE NOT BEEN ADVERSELY COMMENTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER THOUGH VERIFIED ALL THE DOCUMENTS ON RECORD, BUT, CHOSE TO REMAIN SILENT AS TO WHY THE CLAIM OF ASSESSEE IS NOT ACCEPTABLE. IT IS NOT IN DISPUTE THAT ASSESSEE-COMPANY HAS BEEN FOLLOWING THE METHOD OF VALUATION OF CLOSING STOCK AT COST OR MARKET VALUE, WHICHEVER IS LESS. THE ASSESSEE DID NOT MAKE ANY PURCHASES IN THE YEAR AND CONSIDERING THE NATURE OF ITEM USED IN THE BUSINESS, IT IS CLEAR THAT THE ITEMS DAY TO-DAY REDUCE IN THEIR VALUE. THUS, THE ASSESSEE WAS JUSTIFIED IN SELLING THE GOODS AT A LOWER VALUE YEAR AFTER YEAR. WHEN SIMILAR METHOD OF ACCOUNTING HAVE BEEN EMPLOYED BY 9 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. ASSESSEE IN EARLIER YEAR AND SIMILAR ADDITION HAVE BEEN DELETED BY THE TRIBUNAL IN ASSESSMENT YEAR 2005-2006, THERE WAS NOTHING WRONG IN THE FINDINGS OF THE LD. CIT(A) TO HAVE DELETED SIMILAR ADDITION. IN THE ABSENCE OF ANY MATERIAL ON RECORD IN FAVOUR OF THE REVENUE, NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE REVENUE IN THE GROUND OF APPEAL ALSO STATED THAT IN ASSESSMENT YEAR 2005-2006, REVENUE HAS NOT FILED ANY APPEAL BEFORE THE JURISDICTIONAL HIGH COURT BECAUSE OF THE CBDT CIRCULAR. IT, THEREFORE, STANDS PROVED THAT FINDING OF FACT IN THE IMPUGNED YEAR HAVE REACHED FINALITY. IN THE ABSENCE OF ANY CONTRARY MATERIAL ON RECORD, NO INTERFERENCE IS CALLED FOR. THE DEPARTMENTAL APPEAL, THEREFORE, STANDS DISMISSED. 7. IN THE RESULT, APPEAL OF THE DEPARTMENT DISMISSED. ITA.NO.1630/DEL./2012 (ASSESSEES APPEAL) : 8. GROUND NO.1 IN ASSESSEES APPEAL IS GENERAL IN NATURE AND THEREFORE, NEEDS NO ADJUDICATION. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO.2, ON 10 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. WHICH, ASSESSEE AGITATED ADDITION OF RS.6,91,274/- ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF. GROUND NO.2 IS, ACCORDINGLY DISMISSED AS NOT PRESSED. 9. ON GROUND NO.3, ASSESSEE CHALLENGED THE ADDITION ON ACCOUNT OF SUSTAINING THE ADDITION OF RS.1,64,57,835/-, BEING REMISSION OF LIABILITY, WHICH IS CAPITAL IN NATURE. 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, VIDE QUESTIONNAIRE, ASSESSEE-COMPANY WAS ASKED ON THE COMMENTS ON POINT-11 OF ANNEXURE TO THE AUDITOR'S REPORT. AS PER COMMENTS OF THE AUDITOR ON THE BALANCE SHEET IN POINT-11, THE AUDITOR HAS STATED THAT COMPANY HAS DEFAULTED IN REPAYMENT OF RS.3,62,20,020/- DUE TO STATE BANK OF BIKANER & JAIPUR. FURTHER, IT WAS OBSERVED FROM THE NOTES OF ACCOUNT POINT-1 THAT DURING THE YEAR SETTLEMENT WITH THE STATE BANK OF BIKANER AND JAIPUR WAS MATERIALIZED AND THE ASSESSEE COMPANY HAS FINALLY MADE TO PAY RS.1,97,62,195/- ACCORDINGLY, BALANCE OF RS.1,64,57,825/- BEING REMISSION OF CAPITAL ACCOUNT IS TRANSFERRED TO GENERAL RESERVE. FURTHER 11 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. RS.72,44,801/- LYING IN LIABILITIES FOR EXPENSES TOWARDS THE INTEREST HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE STATED THAT ASSESSEE COMPANY HAD TAKEN WORKING CAPITAL LIMIT FROM THE STATE BANK OF BIKANER AND JAIPUR, AGRA IN TWO ACCOUNTS AS MENTIONED BELOW : (I) PACKING CREDIT LIMITED RS.1,49,99,917/- (II) OVERDRAFT FACILITY RS. 2,12,20,103/- TOTAL RS. 3,62,20,020/- 10.1. DUE TO THE DISPUTE WITH THE BANKERS, THE ASSESSEE COMPANY TRY TO SETTLING THE MATTER WITH THE STATE BANK OF BIKANER & JAIPUR WITH ITS COMPROMISE PROPOSAL UNDER ONE TIME SETTLEMENT SCHEME OF RESERVE BANK OF INDIA FOR FULL AND FINAL SETTLEMENT. THE ASSESSEE COMPANY HAD PAID RS.1,97,62,195/- IN INSTALLMENTS AND THE AMOUNT OF REMAINING LIABILITY OF RS.1,64,57,825/- WERE CREDITED TO GENERAL RESERVES AND SURPLUSES. IT WAS SUBMITTED THAT AFTER ONE TIME SETTLEMENT INTEREST WAS NOT PAYABLE. THE ASSESSING OFFICER ASKED THE EXPLANATION OF ASSESSEE THAT WHY THE AMOUNT OF RS.1,64,57,825/- SHOULD NOT BE TAXED IN THE YEAR 12 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. UNDER CONSIDERATION UNDER SECTION 41(1)OF THE INCOME TAX ACT AS CESSATION OF LIABILITY. THE ASSESSEE CONTENDED THAT THESE TYPE OF ISSUES DEALS IN EITHER SECTION 28(IV) OR SECTION 41(1)OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER, HOWEVER, NOTED THAT DUE TO DISPUTE OR ON ACCOUNT OF ANY SETTLEMENT, THE DIFFERENCE BETWEEN THE PAID AMOUNT AND THE AMOUNT OF THE LIABILITY IS AN INCOME OF THE ASSESSEE. THE ASSESSING OFFICER RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION AND ULTIMATELY ASSESSED THE AFORESAID SUM UNDER SECTION 41(1) AND 28(IV) OF THE INCOME-TAX ACT, 1961 AND ADDED THE SAME UNDER SECTION 41(1) OF THE INCOME-TAX ACT, 1961 AS CESSATION OF LIABILITY OR NO MORE LIABILITY REMAINS IN EXISTENCE. 11. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A), ON WHICH, REMAND REPORT OF THE ASSESSING OFFICER WAS CALLED FOR. THE ASSESSEE IN THE REJOINDER ALSO CONTENDED THAT SECTION 41(1) IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE IT DEALS ONLY WITH THE TRADING LIABILITY. IF IT WAS THE INTENTION OF THE LEGISLATURE TO COVER FOR ALL LIABILITY, THEN, IT WOULD NOT HAVE BEEN MENTIONED TRADING LIABILITY. IN OTHERWORDS, IN 13 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. ORDER TO COVER ALL LIABILITIES UNDER SECTION 41(1), THE LEGISLATURE WOULD HAVE MENTIONED THE WORD LIABILITY ONLY. THE ASSESSING OFFICER HAS RELIED UPON JUDGMENT IN THE CASE OF KESARI TEA COMPANY LTD., (SUPRA), WHICH DEALS WITH THE ISSUE OF REVERSAL OF PURCHASE TAX LIABILITY, UNDER WHICH, COMPANY SUM REVERSED THE LIABILITY AND WITHOUT APPROVAL OF THE CONCERNED REVENUE DEPARTMENT. HOWEVER, IN THE CASE OF THE ASSESSEE COMPANY, IT HAS TAKEN LOAN FROM BANKER WHICH ASSESSEE COMPANY WAS UNABLE TO PAY BACK AND UNDER ONE TIME SETTLEMENT, THE AMOUNT WAS SETTLED AND EXCESS AMOUNT WAS TRANSFERRED TO GENERAL RESERVE, THEREFORE, NO ADDITION COULD BE MADE. THE ASSESSEE RELIED UPON DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JINDAL EQUIPMENTS LEASING AND CONSULTANCY LTD., (2010) 325 ITR 87 IN WHICH IT WAS HELD AS UNDER : THAT ONE THE PRE-REQUISITES FOR ATTRACTING THE PROVISIONS OF SECTION 28(IV) IS THAT THE SUM IN QUESTION SHOULD BE A BENEFIT OR PERQUISITE ARISING IN THE COURSE OF BUSINESS IS OF NATURE, OTHER THAN CASH OR MONEY. THE TRIBUNAL HAD HELD THAT THE SUM WRITTEN OFF BY J 14 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. DID NOT CONSTITUTE INCOME IN THE HANDS OF THE ASSESSEE. ON THE FACTS OF THIS CASE AND PARTICULARLY HAVING REGARD TO THE NATURE OF BUSINESS ONLY, IT WOULD CONSTITUTE A CAPITAL RECEIPT. THE SUM COULD NOT BE TAXED.' 11.1. THE ASSESSING OFFICER FURTHER NOTED THAT AFORESAID JUDGMENT IS DISTINGUISHED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ROLLATAINERS LTD., VS., CIT 339 ITR 54 (DEL.) IN WHICH DELHI HIGH COURT ALSO HELD THAT EVEN IF SECTION 28(IV) OF THE ACT IS NOT APPLICABLE, SECTION 41(1) OF THE ACT IS CLEARLY APPLICABLE. THE LD. CIT(A) IN THE INSTANT CASE FOUND THAT THOUGH IT IS NOT CASE OF APPLYING SECTION 28(IV) OF THE INCOME TAX ACT, BUT, THIS IS A CASE, WHEREIN, LOAN HAS BEEN WRITTEN OFF. THEREFORE, PROVISIONS OF SECTION 41(1) OF THE ACT ARE CLEARLY APPLICABLE. THE LD. CIT(A) RELIED UPON JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ROLLATAINERS LTD., VS., CIT (SUPRA) AND CONFIRMED THE ADDITION UNDER SECTION 41(1) OF THE INCOME TAX ACT, 1961. 15 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. 12. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT IT IS A SIMPLICITOR CASE ON WAIVER OF LOAN. THEREFORE, ISSUE IS COVERED BY RECENT JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAHINDRA AND MAHINDRA LIMITED IN CIVIL APPEAL NO.6949-6950 OF 2004, DATED APRIL 24, 2018 IN WHICH IN PARAS 10 TO 18, IT HAS BEEN HELD AS UNDER : 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 16 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. WAIVER I.E., 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 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, X X X 17 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION; X X X 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 18 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. 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,- (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 19 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. 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 X X X 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 20 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. 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. 16. MOREOVER, THE PURCHASE EFFECTED FROM THE KAISER JEEP CORPORATION IS IN RESPECT OF PLANT, 21 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. 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. 22 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. (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) (III) OF THE IT ACT QUA THE PAYMENT OF INTEREST IN ANY PREVIOUS YEAR. 18. IN VIEW OF ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THESE APPEALS ARE DEVOID OF MERITS AND DESERVE TO BE DISMISSED. ACCORDINGLY, THE APPEALS ARE DISMISSED. ALL THE OTHER CONNECTED APPEALS ARE DISPOSED OFF ACCORDINGLY, LEAVING PARTIES TO BEAR THEIR OWN COST. 12.1. HE HAS SUBMITTED THAT ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF INTEREST ETC., IN EARLIER YEARS AND IT IS NOT A CASE OF TRADING LIABILITY. HE HAS, THEREFORE, SUBMITTED THAT MATTER MAY BE SENT BACK TO THE ASSESSING OFFICER FOR RECONSIDERATION OF THE ISSUE, IN THE LIGHT OF ABOVE DECISION, AFTER VERIFYING THE FACTS THEREON WHETHER THE LOAN AMOUNT HAD BEEN UTILISED EITHER FOR THE PURPOSE OF ACQUIRING A 23 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. CAPITAL ASSET OR FOR THE PURPOSE OF BUSINESS ACTIVITIES OR TRADING ACTIVITIES. 13. ON THE OTHER HAND, LD. D.R. RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT PURPOSE OF THE LOAN SHALL HAVE TO BE SEEN BEFORE APPLYING SECTION 41(1) OF THE INCOME TAX ACT, 1961. THE LD. D.R. SUBMITTED THAT LOAN WAS ADMITTEDLY GIVEN FOR (I) PACKING CREDIT LTD., AND (II) OVERDRAFT FACILITY, WHICH IS CONNECTED WITH THE DAY-TO-DAY BUSINESS ACTIVITY OF THE ASSESSEE. INTEREST IS, THEREFORE, RELATED TO THE BUSINESS ACTIVITY AND IS A TRADING LIABILITY OF THE ASSESSEE. THE LD. D.R. RELIED UPON JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF LOGITRONICS P. LTD., VS. CIT (2011) 333 ITR 386 (DEL.) IN WHICH IT WAS HELD THAT WAIVER OF LOAN TAKEN BY ASSESSEE FOR BUSINESS ACTIVITY IS ASSESSABLE AS BUSINESS INCOME UNDER SECTION 41(1) OF THE INCOME TAX ACT, 1961 AND THAT WHEN NO DEDUCTION CLAIMED IN RESPECT OF LOAN, IT IS NOT INCOME OF ASSESSEE. THE LD. D.R, THEREFORE, SUBMITTED THAT IN VIEW OF THE ABOVE IT IS SEEN THAT NATURE OF LIABILITY WHICH CEASES TO EXIST WAS A TRADING 24 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. LIABILITY, THEREFORE, ORDERS OF THE AUTHORITIES BELOW MAY BE CONFIRMED. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SECTION 41(1) OF THE INCOME TAX ACT, 1961 PROVIDES WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS EXPENDITURE OR TRADING LIABILITY INCURRED BY ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR (-) THE (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 THE BENEFIT ACCRUING IT 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 AMOUNTS OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF 25 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. MAHINDRA AND MAHINDRA LTD., (SUPRA) IN WHICH THE INCOME TAX OFFICER AFTER PERUSAL OF THE RETURN CONCLUDED THAT WITH THE WAIVER OF THE LOAN AMOUNT, THE CREDIT REPRESENTED THE INCOME AND NOT LIABILITY. THE ASSESSING OFFICER, THEREFORE, HELD THAT A SUM OF RS.57,74,064/- WAS TAXABLE UNDER SECTION 28 OF THE INCOME TAX ACT. THE POINT FOR CONSIDERATION BEFORE THE HONBLE SUPREME COURT WAS THAT WHETHER IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, THE SUM OF RS.57,74,064/- DUE BY THE RESPONDENT TO KEISER JEEP CORPORATION WHICH LATER ON WAIVED-OFF BY THE LENDER CONSTITUTE TAXABLE INCOME OF THE RESPONDENT OR NOT ?. THE HONBLE SUPREME COURT AFTER CONSIDERING THE ISSUE IN DETAIL HELD THAT IN SUCH CIRCUMSTANCES, SECTION 28(IV) OF THE INCOME TAX ACT IS NOT APPLICABLE. THE LD. CIT(A) ALSO IN THE PRESENT CASE HELD THAT SECTION 28(IV) IS NOT ATTRACTED IN THE PRESENT CASE . THE HONBLE SUPREME COURT IN THE CASE OF MAHINDRA AND MAHINDRA LTD., (SUPRA) ALSO HELD THAT SECTION 41(1) OF THE INCOME TAX ACT DOES NOT APPLY SINCE WAIVER OF LOAN DOES NOT AMOUNT TO CESSATION OF TRADING LIABILITY. IT IS A MATTER ON RECORD THAT THE RESPONDENT HAS NOT CLAIMED ANY DEDUCTION 26 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT QUA THE PAYMENT OF INTEREST IN ANY PREVIOUS YEAR. IN THE PRESENT CASE, THE AUTHORITIES BELOW HAVE NOT GIVEN ANY FINDING OF FACT WHETHER THE WHOLE AMOUNT OF LOAN HAD BEEN UTILISED EITHER FOR THE PURPOSE OF ACQUIRING A CAPITAL ASSET OR FOR THE PURPOSE OF BUSINESS ACTIVITY OR TRADING ACTIVITY. THERE IS ALSO NO FINDING OF FACT WHETHER ASSESSEE HAD CLAIMED ANY DEDUCTION IN RESPECT OF INTEREST ON LOAN IN EARLIER YEARS. THIS MATTER REQUIRES FINDING OF FACT IN THE LIGHT OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MAHINDRA AND MAHINDRA LTD., (SUPRA). LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, RIGHTLY CONTENDED THAT MATTER MAY BE REMITTED BACK TO THE FILE OF ASSESSING OFFICER FOR RECONSIDERATION OF THE ISSUE AS PER LAW. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE MATTER IN ISSUE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO RE-DECIDE THE ISSUE STRICTLY IN ACCORDANCE WITH LAW, BY GIVING REASONABLE, SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 27 ITA.NO.1586 & 1630/DEL./2012 M/S. WASAN EXPORTS (P) LTD., NEW DELHI. 15. IN THE RESULT APPEAL OF ASSESSEE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. TO SUM-UP, APPEAL OF THE DEPARTMENT IS DISMISSED AND APPEAL OF ASSESSEE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRASHANT MAHARISHI) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 29 TH APRIL, 2019 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT D BENCH 6. GUARD FILE //BY ORDER// ASST. REGISTRAR : ITAT : DELHI BENCHES : DELHI.