DCIT, Corporate Circle 6(2), Chennai V. Spark Environmental Technology, Chennai

ITA 201/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3172 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-10-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 15-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HOMI RAJ VAMSH IRS
• Assessee Lawyers: R SIVARAMAN
• Keywords: Capital asset; Business income; Depreciation; Capital receipt; TDS
• Section: 14A; 36 (1) (iii); 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.201/CHNY/2018 / ASSESSMENT YEAR : 2014-2015 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2) CHENNAI 600 034 VS. M/S. SPARK ENVIRONMENTAL TECHNOLOGY LTD, 18/03, SIGAPI AACHI BUILDING, RUKMANI LAKSHMIPATI ROAD, EGMORE, CHENNAI 600 008. [PAN AARCS 0693P ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI. HOMI RAJ VAMSH, IRS, CIT. /RESPONDENT BY : SHRI. R. SIVARAMAN, ADVOCATE /DATE OF HEARING : 12-02-2019 /DATE OF PRONOUNCEMENT : 25-02-2019 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED A GAINST AN ORDER DATED 29.09.2017 OF LD. CIT(A)-15, CHENNAI DE LETING AN ADDITION OF RS.1,31,68,56,500/- MADE BY THE LD. ASSESSING OF FICER UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA NO. 201/CHNY/2018. :- 2 -: 2. FACTS APROPOS ARE THAT ASSESSEE A COMPANY ENGAGED I N THE BUSINESS OF POWER GENERATION HAD FILED ITS RETU RN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARING A LOSS OF RS.157 ,93,73,728/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WA S NOTED BY THE LD. AO THAT A SUM OF RS.131,68,56,500/- BEING THE DIFFE RENCE BETWEEN FACE VALUE OF RS.256,76,56,500/- OF DEBENTURES ISSU ED BY THE ASSESSEE TO ONE SHRIRAM EPC LTD AND ITS REDEMPTION VALUE OF RS.125,08,00,000/- WAS NOT CREDITED TO ITS PROFIT AND LOSS ACCOUNT. EXPLANATION OF THE ASSESSEE WAS SOUGHT ON THIS. AS SESSEE REPLIED THAT IT HAD INVESTED RS.256,45,56,450/- IN EQUITY SHARES OF ONE SREE JAYAJOTHI CEMENTS LTD WHICH WAS LATER SOLD FOR A SU M OF RS.124,71,26,360/-. AS PER THE ASSESSEE, THIS TRAN SACTION HAD RESULTED IN A LOSS OF RS.131,74,30,090/-. CONTENTION OF TH E ASSESSEE WAS THAT THE SURPLUS ARISING OUT OF REDEMPTION OF ITS DEBENT URES AT A VALUE LOWER THAN ITS FACE VALUE WAS SET OFF AGAINST THE LOSS AR ISING FROM THE SALE OF THE SHARES. AS PER THE ASSESSEE NET OF THESE TWO AM OUNTS WHICH WORKED OUT RS.5,73,590/- WAS DEBITED IN THE PROFI T AND LOSS ACCOUNT UNDER THE HEAD OTHER ITEMS. HOWEVER, LD. AO WA S OF THE OPINION THAT DIFFERENCE BETWEEN THE FACE VALUE AND REDEMPT ION VALUE OF THE DEBENTURES ISSUED BY ASSESSEE TO SHRIRAM EPC LTD WAS A REVENUE RECEIPT. ASSESSEE WAS PUT ON NOTICE ON THIS. REPL Y OF THE ASSESSEE TO THE SAID NOTICE WAS AS UNDER:- ITA NO. 201/CHNY/2018. :- 3 -: WE HAD NOT DONE ANY BUSINESS DURING THE YEAR UNDE R CONSIDERATION AND ALSO IN THE EARLIER YEAR. AS REQ UIRED BY YOU, WE ENCLOSED FINANCIAL STATEMENT FOR THE END YEAR ENDED 30 TH JUNE, 2013 AND 31 ST MARCH, 2014. AT THE BOARD MEETING HELD ON 19 TH APRIL, 2012, COMPANY ALLOTTED 2,56,76,565 OPTIONALL Y CONVERTIBLE TO RS.2,56,76,56,500/- AND THE DEBENTURES OF THE FACE VALUE OF RS.100 EACH TO M/S. SHRIRAM EPC LTD ( SEPC) AGGREGA TING TO RS.2,56,76,56,500/- AND THE DEBENTURES CARRY AN INT EREST RATE OF 12% PER ANNUM. XEROX COPY OF DEBENTURES CERTIFICAT E IS ENCLOSED. WE ALSO ENCLSOEED A COPY OF AXIX BANK LT D STATEMENT FOR RECEIPT OF AMOUNT FROM M/S. SHRIRAM EPC LTD TOW ARDS DEBENTURES. THE PROCEEDS OF DEBENTURES WERE INVEST ED IN EQUITY SHARES OF SREE JAYAJOTHI CEMENTS LTDS. THE COMPANY HAD NOT DONE ANY BUSINESS AND HENCE NEI THER EARNED ANY BUSINESS INCOME NOR ANY OTHER INCOME. H ENCE, WE HAD REQUESTED SEPC TO WAIVE THE INTEREST PAYABLE ON DEBENTURES. AS THEY AGREED TO OUR REQUESTED WE HAD NOT PROVIDED ANY INTEREST EXPENDITURE IN OUR BOOKS. AS REQUIRE BY YOU WE FUR NISH BELOW A NOTE . NOTE REGARDING THE TREATMENT OF RS.131,68,56,500/- AS CAPITAL RECEIPT. M/S. SHRIRAM EPC SUBSCRIBED TO OUR DEBENTURES. THE DEBENTURES PROCEEDS WERE INVESTED BY US IN ACQUISITION OF SHAR ES. WE DO NOT TRADE IN SHARES AND SECURITIES INCLUDING DEBENTURES . SHARES ARE OUR CAPITAL ASSES. THE DEBENTURE SUBSCRIBED MONEY W HICH IS IN THE NATURE OF A LOAN ON CAPITAL ACCOUNT WAS INVESTED IN CAPITAL ASSETS VIZ SHARES. IN VIEW OF THIS FACT AND IN THE LIGHT O F SECTION 14A EVEN THE INTEREST ON DEBENTURES DOES NOT ENTER THE COMPU TATION OF PROFIT AND LOSS. WHEN EVEN INTEREST WHICH IS AN ADJ UNCT OF DEBT DOES NOT COME INTO RECKONING OF PROFIT AND LOSS, TH E DEBENTURES WERE REDEEMED BY PAYING A LESSER AMOUNT THAN THE FA CE VALUE THE PRINCIPAL DEBIT IN OUR CASW CANNOT ENTER INTO THE R ECKONING OF PROFIT AND LOSS. IN VIEW OF THE FACT THAT THE DEBE NTURE SUBSCRIPTION AS SUCH AND THE INVESTMENT OF THAT MON EY WERE ON CAPITAL ACCOUNT, THE REDEMPTION AND THE RESULTING S URPLUS OR DEFICIT, IF ANY, WILL HAVE TO BE TREATED AS IN CAPI TAL FILED. THUS, THE AMOUNT OF RS.131,68,56,500 WHICH AROSE ON ACCOUNT O F SHORT PAYMENT OF DEBENTURE VALUE ON REDEMPTION IS A CAPIT AL RECEIPT IN OUR CASE. ITA NO. 201/CHNY/2018. :- 4 -: LD. AO AFTER CONSIDERING THE ABOVE REPLY OF THE ASS ESSEE CONCLUDED THAT RS.131,68,56,500/- DUE ON THE DEBENTURES WAS N OT REPAID BY THE ASSESSEE TO SHRIRAM EPC LTD AND HENCE ASSESSEE HAD BECOME RICHER BY THIS AMOUNT. FURTHER, AS PER THE LD. AO, ASSESSE E ITSELF HAD CONSIDERED THIS AMOUNT IN ITS PROFIT AND LOSS ACCO UNT AND COULD NOT SAY THAT NO BENEFIT AROSE TO IT. RELYING ON THE JUDGM ENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS LTD (1996) 222 ITR 344 , LD. AO HELD THAT EVEN IF THE AMOUNT WHEN IT WAS ORIGINALLY RECEIVED WAS NOT IN THE NATURE OF INCOME , ONCE IT REMAINED WITH THE ASSESSEE UNCLAIMED FOR A LONG PERIOD, SUC H AMOUNTS ATTAINED A DIFFERENT QUALITY AND BECAME ASSESSEES OWN MONEY . RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. RAMANIYAM HOMES P. LTD, 384 ITR 530 . AN ADDITION OF RS.131,68,56,500/- WAS MADE UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. ASSESSEES APPEAL BEFORE LD. CIT(A) WAS SUCCESSFUL. LD. CIT(A) HELD THAT BOOK KEEPING ENTRIES BY ITSELF WO ULD NOT RESULT IN ANY TAXABLE INCOME. AS PER THE LD. CIT(A) THE DEBENTUR E AMOUNT ORIGINALLY RECEIVED WAS IN THE NATURE OF CAPITAL RECEIPT AND T HE REDUCTION OF SUCH LIABILITY WAS ALSO ON CAPITAL ACCOUNT, RESULTING I N NO TAXABLE INCOME. AS PER THE LD. CIT(A), JUDGMENT OF HONBLE APEX COU RT IN THE CASE OF T .V. SUNDARAM IYENGAR AND SONS LTD (SUPRA) AND ALSO THAT OF HONBLE ITA NO. 201/CHNY/2018. :- 5 -: JURISDICTIONAL HIGH COURT IN THE CASE OF RAMANIYAM HOMES P. LTD, (SUPRA) WERE ON SQUARING OFF OF LIABILITIES WHICH AROSE FR OM TRADING TRANSACTIONS WITH OUT CORRESPONDING RECEIPT. ACCOR DING TO HIM, DEBENTURE LOAN WAS NOT TRADING RECEIPT. THUS, ACCO RDING TO HIM, LOAN WAIVER COULD NOT BE CONSIDERED AS INCOME CHARGEAB LE TO TAX AS PER SECTION 2(24) OF THE ACT NOR IT COULD BE CONSIDERED AS CESSATION OF LIABILITY. HE DELETED THE ADDITION MADE BY THE LD. AO . 4. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STRO NGLY ASSAILING THE ORDER OF THE LD. CIT(A) SUBMITTED THA T ASSESSEE HAD DERIVED A BENEFIT BY REDEMPTION OF DEBENTURES THAN THE SUM FOR WHICH IT WAS ISSUED. AS PER THE LD. DR, THIS WAS CONSID ERED BY THE ASSESSEE AS INCOME IN ITS PROFIT AND LOSS ACCOUNT. EVEN IF DEBENTURES AS SUCH WAS ON A CAPITAL ACCOUNT ENTRY, STILL ACCORDING TO THE LD. DR, IT WOULD TAKE THE COLOUR OF REVENUE RECEIPT DUE TO A FLUX OF TIME. ACCORDING TO HIM, LD. CIT(A) FELL IN ERROR IN DISTINGUISHING THE JUDGMENTS OF HONBLE APEX COURT IN THE CASE OF T .V. SUNDARAM IYENGAR AND SONS LTD (SUPRA) AND THAT OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF RAMANIYAM HOMES P. LTD, (SUPRA). 5. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTING THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) SUBMITTED THAT THE JUDGMENT OF HONBLE APEX COURT IN THE CAS E OF COMMISSIONER OF INCOME TAX VS. MAHINDRA AND MAHINDRA LTD, 400 I TR 0001 , HAD ITA NO. 201/CHNY/2018. :- 6 -: CLEARLY ADDRESSED THE ISSUE REGARDING WAIVER OF LO AN TAKEN IN THE CAPITAL FIELD. ACCORDING TO HIM, THEIR LORDSHIPS H AD HELD THAT NEITHER SECTION 28(V) NOR SECTION 41(1) OF THE ACT, HAD A PPLICATION WHERE LOAN WAS IN A CAPITAL FIELD. FURTHER ACCORDING TO HIM, THERE WAS NO RECEIPT IN THE NATURE OF INCOME DEFINED UNDER SECTI ON 2(24) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUT ED THAT THE SUM OF RS.256,76,56,500/- WAS ORIGINALLY RECEIVED BY ASSE SSEE THROUGH ISSUE OF ITS DEBENTURES TO SHRIRAM EPC LTD. SUCH DEBENT URES CARRIED ON INTEREST OF 12%. CLAIM OF THE ASSESSEE WAS THAT FU NDS RECEIVED ON DEBENTURES ISSUE WAS PART OF THE CAPITAL AND DID NO T PARTAKE THE NATURE OF INCOME AS DEFINED IN SECTION 2(24) OF THE ACT NOR COULD SECTION 28(IV) OF THE ACT COULD APPLY. IT MAY BE TRUE THAT ASESSEE HAD NOT PROVIDED ANY INTEREST EXPENDITURE IN ITS BOOK O N SUCH DEBENTURES. HOWEVER, LEGALLY ASSESSEE WAS BOUND TO PAY INTEREST @12% ON SUCH DEBENTURES. THUS ON ACCOUNT OF THE ISSUE OF DEBENT URES, ASSESSEE HAD RECEIVED SOME BENEFIT, BOTH BY WAY OF REDUCTION IN LIABILITY AND BY WAY OF NON PAYMENT OF DUE INTEREST. THE QUESTION WHETH ER FUNDS RAISED THROUGH THE DEBENTURES WERE USED FOR FUNDING ITS DA Y-TO-DAY BUSINESS ACTIVITIES OR FOR ACQUIRING ANY ASSETS WAS NEVER AD DRESSED BY THE LOWER AUTHORITIES. LD. AO HAD RELIED ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ITA NO. 201/CHNY/2018. :- 7 -: RAMANIYAM HOMES P. LTD, (SUPRA) WHERE THE AMOUNT WAIVED BY THE BANK INCLUDED BOTH INTEREST AND PRINCIPAL. THEIR L ORDSHIPS HELD THAT THE WAIVER OF THE LOAN AMOUNT WENT TO INCREASE THE CAPI TAL AND THEREFORE COULD BE CONSIDERED AS INCOME UNDER SECTION 28(IV) OF THE ACT. HONBLE APEX COURT IN THE CASE OF T.V. SUNDARAM IYENGAR AND SONS LTD (SUPRA) HAD HELD THAT COMPLEXION OF RECEIPTS WHICH WERE ORI GINALLY NOT IN THE NATURE OF INCOME COULD CHARGE ON LAPSE OF TIME. CO MING TO THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MAHINDRA AND MAHINDRA LTD (SUPRA), STRONGLY RELIED ON BY THE LD. AR, THE CONCERNED ASS ESEE HAD RECEIVED WAIVER OF OUTSTANDING LOAN ON TOOLING AND EQUIPMENT . WHAT WAS HELD BY THEIR LORDSHIPS AT PARAS 12 TO 17 OF THE JUDGMENT IS REPRODUCED HEREUNDER:- 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, WHETHE R CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION; 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 PROV ISION, THE INCOME WHICH CAN BE TAXED SHALL ARISE FROM THE BUSINESS OR PROFESSIO N. 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 O F MONEY. IN THE PRESENT CASE, IT IS A MATTER OF RECORD THAT THE AMOUNT OF R S. 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 SA YS ANY BENEFIT OR PERQUISITE ARISING FROM THE BUSINESS SHALL BE IN THE FORM OF B ENEFIT 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. ITA NO. 201/CHNY/2018. :- 8 -: 14) ANOTHER IMPORTANT ISSUE WHICH ARISES IS THE AP PLICABILITY OF THE SECTION 41 (1) OF THE IT ACT. THE SAID PROVISION IS RE-PROD UCED AS UNDER 41. PROFITS CHARGEABLE TO TAX.- (1) WHERE AN ALLO WANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RES PECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE AS SESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBS EQUENTLY DURING ANY PREVIOUS YEAR,- (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF S UCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEME D TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHA RGEABLE TO INCOME- TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER TH E BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DED UCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR 15) ON A PERUSAL OF THE SAID PROVISION, IT IS EVIDE NT THAT IT IS A SINE QUA NON THAT THERE SHOULD BE AN ALLOWANCE OR DEDUCTION CLAI MED BY THE ASSESSEE IN ANY ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXP ENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE. THEN, SUBSEQUEN TLY, DURING ANY PREVIOUS YEAR, IF THE CREDITOR REMITS OR WAIVES ANY SUCH LIA BILITY, THEN THE ASSESSEE IS LIABLE TO PAY TAX UNDER SECTION 41 OF THE IT ACT. T HE OBJECTIVE BEHIND THIS SECTION IS SIMPLE. IT IS MADE TO ENSURE THAT THE AS SESSEE 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 Y EAR WITH REFERENCE TO DEDUCTION ALLOWED EARLIER IN CASE OF REMISSION OF S UCH 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 ASSESS EE 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 SECTI ON 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 AL LOCATING THE COST OF AN ASSET OVER A PERIOD OF TIME, HENCE, IT IS NOTHING E LSE THAN DEPRECIATION. DEPRECIATION IS A REDUCTION IN THE VALUE OF AN ASSE T OVER TIME, IN PARTICULAR, TO WEAR AND TEAR. THEREFORE, THE DEDUCTION CLAIMED BY THE RESPONDENT IN PREVIOUS ASSESSMENT YEARS WAS DUE TO THE DEPRECATIO N 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, 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 PROPE R TO MENTION THAT THERE IS DIFFERENCE BETWEEN TRADING LIABILITY AND OTHER L IABILITY. 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 CESS ATION OF LIABILITY OTHER THAN ITA NO. 201/CHNY/2018. :- 9 -: TRADING LIABILITY. HENCE, WE FIND NO FORCE IN THE A RGUMENT 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 WIT H THE JUDGMENT AND ORDER PASSED BY THE HIGH COURT IN VIEW OF THE FOLLOWING R EASONS: (A) SECTION 28(IV) OF THE IT ACT DOES NOT APPLY ON THE PRESENT CASE SI NCE 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 AM OUNT TO CESSATION OF TRADING LIABILITY. IT IS A MATTER OF RECORD THAT TH E RESPONDENT HAS NOT CLAIMED ANY DEDUCTION UNDER SECTION 36 (1) (III) OF THE IT ACT QUA THE PAYMENT OF INTEREST IN ANY PREVIOUS YEAR. A READING OF THE ABOVE JUDGMENT CLEARLY SHOW THAT T HE DEBT ON ACCOUNT OF LOAN RAISED FOR FUNDING TOOLS AND EQUIPM ENT WAS WAIVED PURSUANT TO A TAKEOVER OF A COMPANY BY ANOTHER AND AS A PART OF SUCH TAKEOVER. AS AGAINST THIS, THERE IS NO CASE FOR THE ASSESSEE HERE THAT THERE WAS ANY TAKEOVER OF ITS BUSINESS BY ANY OTHER PERSON. HERE THE ARGUMENT OF THE ASSESSE BEFORE THE LD ASSESSING OFF ICER WAS THAT IT HAD NOT DONE ANY BUSINESS DURING THE RELEVANT PREVI OUS YEAR AND THE BENEFIT ACCRUING TO IT ON ACCOUNT OF REDEMPTION OF DEBENTURES AT A PRICE LOWER THAN ITS FACE VALUE COULD NOT BE TREATE D AS INCOME UNDER SECTION 56(1) OF THE ACT. HOWEVER NEITHER LD. AO N OR LD. CIT(A) HAD GONE DEEPLY INTO THE ASPECT WHETHER THE BENEFIT DE RIVED BY THE ASSESSEE COULD BE TREATED AS INCOME UNDER SECTION 2 (24) OF THE ACT, THOUGH THERE MIGHT NOT BE AN OCCASION FOR APPLYING SECTIONS 28(IV) AND SECTION 41(1) OF THE ACT. ESPECIALLY SO SINCE INCOM E IS DEFINED IN SECTION2(24) OF THE ACT IN AN INCLUSIVE MANNER. THE PURPOSE FOR WHICH THE DEBENTURE FUNDS WERE USED BY THE ASSESSEE WAS N OT LOOKED INTO BY THE LOWER AUTHORITIES. IF IT CAN BE CONCLUDED THAT THE NATURE OF BENEFIT ITA NO. 201/CHNY/2018. :- 10 -: DERIVED BY THE ASSESSEE CAME WITHIN THE DEFINITION OF INCOME UNDER SECTION 2(24) OF THE ACT, THE ASSESSING OFFICER, IN OUR OPINION, CAN CERTAINLY TAX THE VALUE THEREOF UNDER SECTION 56(1) OF THE ACT. CONSIDERING THE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ISSUE REQUIRES A FRESH LOOK BY THE LD. AO. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE BACK T O THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH, AS PER LAW. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MONDAY, THE 25TH DAY OF FEB RUARY, 2019, AT CHENNAI. SD/- SD/- (N.R.S. GANESAN) / JUDICIAL MEMBER (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 25TH FEBRUARY, 2019. KV $%&& '(&)( / COPY TO: & 1 . / APPELLANT 3. & *&+, / CIT(A) 5. (-.& / / DR 2. / RESPONDENT 4. & * / CIT 6. .0&1 / GF ITA NO. 201/CHNY/2018. :- 11 -: