THE DCIT, 1(1), Indore V. M/s. RITSPIN SYNTHETICS LTD., Pithampur

ITA 409/IND/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6036 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Assessee Lawyers: P D NAGAR
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE , , BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER . . /. I.T.A. NO. 409 /IND/2016 [[ / ASSESSMENT YEAR : 2009 - 10 DY. CIT 1(1), INDORE. VS. M/S. RIT SPIN SYNTHETICS LIMITED, PLOT NO.2, KHEDA, INDUSTGRIAL GROWTH CENTRE, PITHAMPUR. / APPELLANT / RESPONDENT . . ./ PAN: AAACR - 8303E / APPELLANT BY : SHRI LAL CHAND, CIT DR / RESPONDENT BY : SHRI P.D.NAGAR, CA / DATE OF HEARING : 25 .0 4 .2018. / DATE OF PRONOUNCEMENT : 01 . 5 . 2018 M/S.RITSPIN SYNTHETICS LTD. - : 2 : - / O R D E R PER KUL BHARAT , J.M. : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 22, INDORE, (IN SHORT CIT(A)), DATED 17.02.2016 PERTAINING TO A.Y. 2009 - 10. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: (I) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.17,39,01,253/ - AS WAIVER OF PRINCIPAL AMOUNT OF IFCI LOAN WHEN THE ADDITION WAS SUPPORTED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ROLLATAINERS LTD. VS. CIT, ITA 27 OF 2011. (II) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.17,39,01,253/ - AS WAIVER OF PRINCIPLE AMOUNT OF IFCI LOAN WHEREAS THE WORKING CAPITAL LOAN BY STATE BANK OF BIKANER AND JAIPUR HAS BEEN CONFIRMED BY HIM IN SAME ORDER IN THE CASE OF VERY SAME ASSESSEE. (III) WHETHER IN THE ERRED IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.5,00,000/ - MADE ON ACCOUNT OF STORES & SPARE PARTS, AS THE M/S.RITSPIN SYNTHETICS LTD. - : 3 : - ASSESSEE H AS NOT MAINTAINED PROPER RECORD OF THIS EXPENSE NOT ESTABLISHED CO - RELATION WITH PRODUCTION. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREI NAFTER CALLED REFERRED AS THE ACT) WAS FRAMED VIDE ORDER DATED 27 TH DECEMBER, 2011. THEREBY THE ASSESSING OFFICER MADE ADDITION BY MAKING PROVISION U/S 41(1) ON ACCOUNT OF WAIVER OF PRINCIPAL & INTEREST BY THE FINANCIAL INSTITUTION OF RS.20,46,52,522/ - A ND ALSO MADE OTHER DISALLOWANCE NAMELY LEASE RENT AND MAINTENANCE CHARGES OF RS.9,77,988/ - , DISALLOWANCE OF TOTAL REVENUE EXPENSES OF RS.6,20,113/ - , DISALLOWANCE OF CAPITAL WORK IN PROGRESS OF RS.3,50,282/ - , DISALLOWANCE OF MEMBERSHIP FEE OF RS.2,10,974/ - , DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES OF RS.1,00,000/ - , DISALLOWANCE OF OUT OF DEPRECIATION ON ELECTRIC INSTALLATION OF RS.170,478/ - AND DISALLOWANCE OUT OF STORES AND SPARE PARTS OF RS.5,00,000/ - . 3. AGAINST THIS THE ASSESSEE PREFERRED AN APPEAL BE FORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPEAL. THEREBY, THE LD. CIT(A) DELETED THE ADDITION MADE ON M/S.RITSPIN SYNTHETICS LTD. - : 4 : - ACCOUNT OF WAIVER OF LIABILITY BY FINANCIAL INSTITUTION RESTRICTED THE ADDITION IN RESPECT OF DISALLOWANCE, MEMBERSHIP TO THREE CLUBS TO THE EXTENT OF RS. 1,08,000/ - AND DELETED THE DISALLOWANCE OF RS.5,00,000/ - AFTER STORES AND SPARE PARTS EXPENSES. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. GROUND NOS. (I) & (II) ARE COMMON. THE LD. DR POINT ING OUT THE ORDER OF THE AO SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. LD. DR SUBMITTED THAT THE ASSESSEE HAS AVAILED BENEFIT OF WAIVER OF LOAN ON WORKING CAPITAL. THE LD. DR SUBMITTED THAT THE AO HAS RIGHTLY FOLLOWED THE J UDGEMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF ROLLATAINERS LIMITED VS. CIT, INCOME - TAX ACT, 1961. 127 OF 2011 AND ALSO THE JUDGEMENT IN THE CASE OF LOGITRONICS PVT.LTD., (2011) 333 ITR 386. HE SUBMITTED THAT IN VIEW OF THESE DECISIONS, THE LD. CIT(A ) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 5. ADMITTEDLY, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(A). THE WRITTEN SYNOPSIS OF THE LD. COUNSEL FOR THE ASSESSEE ARE REPRODUCED AS UNDER : - M/S.RITSPIN SYNTHETICS LTD. - : 5 : - A) RE : REMISSION OF TERM LOAN ASSESSED U / S 41(1) : - THE COMPANY WAS INCORPORATED ON 07.12.1994 AND HAD SET UP AN INDUSTRIAL UNIT (SPINNING PLANT) FOR MANUFACTURING OF SYNTHETIC YARN AT PITHAMPUR. TERM LOAN OF RS.45 CRORES WAS SANCTIONED AND DISBURSED BY IFCI. SINCE ITS INCEPTION, THE COMPANY COULD NOT DO WELL BECAUSE IT COULD NOT CARRYON MANUFACTURING OF POLESTARLVISCOSE YARN AT OPTIMUM CAPACITY. ENTIRE SHARE CAPITAL OF RS.47.92 CRORES WAS GRADUALLY ERODED YEAR AFTER YEAR HENC E IT WAS REGISTERED AS SICK UNIT WITH BIFR. ACCUMULATED LOSSES AT THE COMMENCEMENT OF THE YEAR WERE RS.143.94 CRORES AND DURING THE YEAR IT INCURRED NET LOSS OF RS. 20.12 CRORES. FOREIGN CURRENCY TERM LOAN OF RS.35 CRORES WAS AVAILED FOR ACQUISITION OF PLANT AND MACHINERY AND OTHER FIXED ASSETS FROM IFCI BESIDES RUPEE LOAN OF RS.10 CRORES AGAINST FIRST MORTGAGE OF ALL IMMOVABLE PROPERTIES BOTH PRESENT AND FUTURE. COPY OF AGREEMENT DATED 01.11.1995 IS ANNEXED (PAGE 1 TO 19 OF P.B). AS PER DETAILS OF DISBURSEMENT TERM LOANS, IT WAS DISBURSED BY IFCI DURING ASSESSMENT YEARS 1997 - 98 AND 1998 - 99. AT THE COMMENCEMENT OF THE YEAR, PRINCIPAL AMOUNT OF TERM LOAN DUE WAS RS.37.39 CRORES BES IDES OVERDUE INTEREST OF OVER RS.56.36 CRORES. ONE TIME SETTLEMENT SCHEME(OTS) WAS APPROVED AND THE LIABILITY OF PRINCIPAL AMOUNT OF TERM LOAN WAS SETTLED BY IFCI AT RS.20 CRORES, BESIDES WAIVER OF INTEREST IN FULL. M/S.RITSPIN SYNTHETICS LTD. - : 6 : - IT WAS CLAIMED THAT WAIVER OF TERM LOA N WAS CAPITAL RECEIPT NOT LIABLE TO TAX AND PROVISIONS OF SECTION 41(1) OF THE ACT CANNOT BE INVOKED BECAUSE THE REQUISITE CONDITION I.E. NO DEDUCTION OR BENEFIT OF ALLOWANCE IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE WAS ALLOWED IN ANY OF THE PREVIOUS YEAR TOWARDS TERM LOAN AVAILED IN FOREIGN CURRENCY OR RUPEE LOAN, OF WHICH REMISSION OR CESSATION HAS BEEN ALLOWED DURING THE YEAR. THE REMISSION OF THE PRINCIPAL AMOUNT OF TERM LOAN OBTAINED FROM THE FINANCIAL INSTITUTION OR THE BANK HAD NEVER BEEN CLAIMED AS LOSS OR EXPENDITURE IN ANY OF THE EARLIER YEARS BY THE APPELLANT NOR IT WAS USED FOR ACQUIRING WORKING CAPITAL. AS REGARDS WA IVER OF INTEREST ON TERM LOAN DEDUCTION FROM TOTAL INCOME WAS CLAIMED IN ASSESSMENT YEAR 2002 - 03 AND 2003 - 04 AND THEREAFTER, BY VIRTUE OF APPLICABILITY OF SECTION 43(B) OF THE ACT, SUCH DEDUCTION OF INTEREST WAS NOT CLAIMED IN ANY YEAR. THEREFORE, WAIVER O F INTEREST TO THE EXTENT OF RS.13.90 CRORES WAS OFFERED FOR TAX WHILE COMPUTING THE TOTAL INCOME AND ASSESSED TO TAX U / S 41(1) OF THE ACT, WHICH HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. THE AO ASSESSED THE AMOUNT OF TERM LOAN AND WORKING CAPITAL L OAN WAIVED U / S 41(1) OF THE ACT VIDE PARA. 3.1.3 AND 3.1.4 OF THE ASSESSMENT ORDER AS UNDER: - M/S.RITSPIN SYNTHETICS LTD. - : 7 : - I ) PRINCIPAL AMOUNT OF TERM LOAN OF RS. 37,39,01,253/ - SETTLED BY THE IFCI L LTD. FOR RS. 20 CRORES HENCE RS. 17,39,01,253/ - II ) PRINCIPAL AMOUNT OF WORKING CAPITAL OF RS. 4,07,51,269/ - SETTLED BY THE STATE BANK OF BIKANER & JAIPUR FOR RS. ONE CRORE RS. 3,07,51,269/ - TOTAL RS. 20,46,52,522/ - VIDE PARA 3.1.3 OF THE ORDER THE ASSESSING AUTHORITY AGREED THAT, ' IT IS HELD BY THE HON'BLE SUPREME COURT AND HIGH COURT THAT THE WAIVER OF PRINCIPLE AMOUNT IN THE NATURE OF CAPITAL RECEIPT IS NOT TAXABLE BECAUSE THERE IS NO CESSATION OF TRADING LIABILIT IES AND THOSE LOANS ARE NOT ROOTED THROUGH P&L ACCOUNT BECAUSE THEY ARE TAKEN FOR THE PURPOSE OF ACQUIRING CAPITAL ASSETS'. HOWEVER, VIDE PARA 3.1.2 OF THE ORDER, SHE MISINTERPRETED AND OBSERVED THAT 'THE ASSESSEE HAS TAKEN TERM LOAN FROM FINANCIAL INSTITU TION FOR SECURING WORKING CAPITAL REQUIREMENT AS PER NOTE NO. 1 IN THE SCHEDULE OF THE BALANCE SHEET. (PAGE 26 OF P.B). ACCORDING TO HER, BECAUSE COLLATERAL SECURITY OF STOCK IN TRADE AND OTHER MOVABLE ASSETS WAS ALSO OFFERED AGAINST TERM LOAN, AS STATED I N NOTES AND ACCOUNTS, ITS WAIVER WAS TAXABLE U/S 41(1) OF THE ACT. TERM LOAN WAS SANCTIONED BY IFCI WHICH WAS SECURED BY 1 ST CHARGE ON ENTIRE FIXED ASSETS, SUCH AS PLANT AND MACHINERIES AND BUILDING AND 2 ND CHARGE ON THE STOCK AND STORES BECAUSE 1ST CHARG E ON MOVABLE ASSETS WAS IN FAVOUR OF BANKERS AGAINST M/S.RITSPIN SYNTHETICS LTD. - : 8 : - WORKING CAPITAL. JUST BECAUSE AGAINST TERM LOAN, COLLATERAL SECURITY OF MOVABLES WAS ALSO OFFERED BY WAY OF SECOND CHARGE, THE AO MISINTERPRETED SAID NOTE GIVEN IN THE AUDITED ACCOUNTS AND CONSIDERED THA T THE REMISSION AGAINST TERM LOAN WAS TAXABLE U/ S 41(1) OF THE ACT. THUS, THE REMISSION OF TERM LOAN HAS BEEN ASSESSED TO TAX AND CLAIM OF THE APPELLANT THAT SUCH AMOUNT IS CAPITAL RECEIPT NOT LIABLE TO TAX WAS REJECTED BY THE AO BY MIS INTERPRETING THE NATURE OF LOAN. SHE RELIED UPON THE JUDGMENT IN THE CASE OF MIS. ROLLATAINERS LTD VS. CIT (2011) 339 ITR 54 (DELHI) WHEREIN IT WAS HELD 'THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT WAIVER OF WORKING CAPITAL LOAN (CASH CREDIT) WAS CHARG EABLE TO TAX U/S 41(1) EVEN IF PROVISION OF SECTION 28(IV) WAS NOT APPLICABLE'. IN THAT CASE LOAN WAS TAKEN BY THE ASSESSEE ON CASH CREDIT ACCOUNT AS WORKING CAPITAL AND IT WAS NOT IN THE NATURE OF TERM LOAN FOR PURCHASE OF CAPITAL ASSET. THEREFORE, AFORES AID JUDGMENT WAS DISTINGUISHABLE ON FACTS YET APPLIED BY THE AO. IT IS SUBMITTED THAT WAIVER OF PRINCIPAL AMOUNT OF TERM LOAN AVAILED FOR ACQUIRING FIXED ASSETS I.E. PLANT AND MACHINERY, BUILDING ETC., WHICH WAS SETTLED UNDER OTS SCHEME FOR RS.20 CRORES, WAS CAPITAL RECEIPT IN THE HANDS OF COMPANY WHICH CANNOT BE SUBJECTED TO TAX. FOLLOWING JUDGMENTS WERE RELIED UPON BEFORE CIT(A) WHO HAD DELETED THE ADDITION MADE BY AO IN RESPECT OF WAIVER OF TERM LOAN ONLY: - M/S.RITSPIN SYNTHETICS LTD. - : 9 : - I) POLYFLEX (INDIA) PVT LTD VS. CIT (2002) 257 ITR 343 (SC) THEIR LORDSHIPS OBSERVED THAT SECTION 41 (1) APPLIES IF THE FOLLOWING CONDITIONS AND CIRCUMSTANCES ARE SATISFIED : - 'FOR THE RELEVANT YEAR AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN RESPECT OF ANY LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE. THIS IS THE FIRST STEP, CORNING TO THE NEXT STEP, THE ASSESSEE MUST HAVE SUBSEQUENTLY (I) OBTAINED ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR (II) OBTAINED ANY BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. IN CASE EITHER OF THESE EVENTS HAPPEN, THE DEEMING PROVISION ENACTED IN THE CLOSING PART OF SUB - SECTION (1) C OMES INTO PLAY. III ) ACCELERATED FREEZ & DRYING CO. LTD. VS. DCIT (2009) 28 CCH 0274 (COCHIN) HELD THAT 'THERE WAS NO DOUBT THAT THE TERM LOANS AVAILED BY THE ASSESSEE FROM THREE BANKS WERE NOT IN NATURE OF TRADING LIABILITY BUT WERE IN NATURE OF CAPITAL LIA BILITY. THEREFORE, WAIVER OF LOAN LIABILITY WAS NOT WAIVER OF ANY TRADING LIABILITY. THE WAIVER OF CAPITAL LIABILITY WOULD NOT BECOME INCOME UNDER SECTION 41(1) OF EH ACT ON THE GROUND OF REMISSION OR CESSION THEREOF [PARA31]. 'THE TERM LOANS AVAILED BY T HE ASSESSEE ON CAPITAL ACCOUNT WERE ALSO NOT IN THE NATURE OF ANY LOSS OR EXPENDITURE. THERE WAS NO DOUBT IN THE INSTANT CASE THAT THE ASSESSEE NEVER HAD THE BENEFIT M/S.RITSPIN SYNTHETICS LTD. - : 10 : - OF DEDUCTION OF THE TERM LOANS AVAILED BY IT FROM THE BANKS ON CAPITAL ACCOUNT. THEREFORE, SECTION 41(1) HAD NO APPLICABLE TO THE FACTS OF THE INSTANT CASE'. [PARA 32]. IV ) CIT VS. DHOLGIRI INDUSTRIES (P) LTD (2014) 266 CTR 111 (MP) HELD 'THAT THE ASSESSING OFFICER HAS COMMITTED ERROR IN TREATING THE AMOUNT WAIVED BY THE BANK TO BE THE AMOUNT EARNED BY THE ASSESSEE. THE PRINCIPAL AMOUNT OF LOAN BEING NEVER CLAIMED BY THE ASSESSEE AS ITS EXPENDITURE, ITS WAIVER WILL NOT AMOUNT TO INCOM E OF THE ASSESSEE AND AS SUCH, IN OUR CONSIDERED VIEW, THERE IS NO INFIRMITY IN THE ORDER PASSED BY TRIBUNAL AFFIRMING THE ORDER OF CIT(A).' IV) M/S. LOGITRONICS P .. LTD. VS. CIT (2011) 333 ITR 386 (DELHI) HELD THAT 'IF A LOAN WAS TAKEN FOR ACQUIRING A CAPITAL ASSET, WAIVER THEREOF WOULD NOT AMOUNT TO ANY INCOME EXIGIBLE TO TAX. ON THE OTHER HAND, IF THE LOAN WAS FOR TRADING PURCHASE AND WAS TREATED AS SUCH FROM THE VERY BEGINNING IN THE BOOKS OF ACCOUNT THE WAIVER THEREOF MAY RESULT IN INCOME MORE SO W HEN IT WAS TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT'. V ) CIT VS. TOSHA INTERNATIONAL LTD. (2011) 331 ITR 440 (DELHI) IN THIS CASE UNDER A ONE TIME SETTLEMENT SCHEME, THE FINANCIAL INSTITUTIONS AND BANKS WAIVED THE PRINCIPAL AMOUNT OF RS.10,47,93,857/ - WHICH WAS CREDITED BY THE ASSESSEE TO ITS CAPITAL RESERVE ACCOUNT. THE TRIBUNAL HELD THAT THE ASSESSEE HAD NOT GOT ANY DE DUCTION ON ACCOUNT OF ACQUISITION OF CAPITAL M/S.RITSPIN SYNTHETICS LTD. - : 11 : - ASSETS AS THE SAME HAD BEEN REFLECTED IN THE BALANCE SHEET AND NOT IN THE PROFIT AND LOSS ACCOUNT, AND ALSO THE REMISSION OF THE PRINCIPAL AMOUNT OF LOAN SO OBTAINED FROM THE BANK AND FINANCIAL INSTITUTIONS HAD NOT BEEN CLAIMED AS EXPENDITURE OR TRADING LIABILITY IN ANY OF THE EARLIER PREVIOUS YEARS HENCE SUCH WAIVER WAS NOT TAXABLE. ON APPEAL THE HIGH COURT, DISMISSED THE APPEAL AND HELD THAT THE AMOUNT OFRS.10.47 CRORES WAS NOT ASSESSABLE. VI) MAHINDRA & MAHIN DRA LTD VS. CIT (2003) 261 ITR 501 (BORN.) & CIT VS. V.S. DEM PO & CO. LTD (2015) 66(1) ITCL 337 (BORN.) - HELD THAT NO DISALLOWANCE OR DEDUCTION HAVING BEEN ALLOWED IN RESPECT OF LOAN TAKEN BY THE ASSESSEE FOR PURCHASE OF CAPITAL ASSETS, SECTION 41(1) WAS N OT ATTRACTED TO REMISSION OF PRINCIPAL AMOUNT OF LOAN. VII) ISKRAERNECO REGENT LTD. VS. CIT (2011) 331 ITR 317 (MADRAS) HELD THAT 'EVERY RECEIPT IN CONNECTION WITH BUSINESS IS NOT A TRADING RECEIPT BANK LOAN TAKEN BY THE ASSESSEE FOR PURCHASE OF CAPITA L ASSET WAIVER OF PRINCIPAL AND INTEREST BY BANK UNDER ONE TIME SETTLEMENT - PRINCIPAL WAIVED NOT A TRADING RECEIPT'. VII) K ING PRAWNS L TD VS. ITO I TAT, MUMBAI (ITA NO.60/MUM/2010 ORDER DATED 14.12.2010). RELYING ON SIGNIFICANT JUDGMENTS OF BOMBAY HIGH COURT AND IT A T COCHIN, THAT THE BANK LOAN LIABILITY IS CAPITAL LIABILITY AND WAIVER M/S.RITSPIN SYNTHETICS LTD. - : 12 : - THEREOF DON'T CONSTITUTE CESSATION OR REMISSION OF TRADING LIABILITY, HENCE NOT TAXABLE U / S 41(1) OF THE ACT. VIII) CIT VS. SANTOGEN SILK MILLS LTD (2015) TAX PUB. (DT) 1477 (BORN. HC) - HELD 'THAT THE TRIBUNAL'S ORDER AND IT HAS HELD THAT ON PERUSAL OF THE LOAN AGREEMENT IN SO FAR AS LOAN FROM ICICI BANK IS CONCERNED (SUBJECT MATTER AND PART OF THI S APPEAL) THAT WAS FOR PURCHASING MACHINERY AND AVAILED BY THE ASSESSEE. FURTHER HELD THAT THIS COURT HAS CONSISTENTLY TAKEN A VIEW THAT THE LOAN AMOUNT WRITTEN OFF WOULD NOT COME WITHIN THE PURVIEW OF SECTION 28(IV) OF THE INCOME TAX ACT. THE VIEW TAKEN BY THIS COURT IN THE CASE OF MAHINDRA & MAHINDRA VS. CIT (2003) 261 ITR 501 AND SOLID CONTAINERS LTD. VS. DY. CIT (2009) 308 ITR 417 WOULD ENABLE THE TRIBUNAL AND EQUALLY US TO CONCLUDE THAT THE LOAN WRITTEN OFF WOULD NOT BE TAXABLE U/S 28(IV) OF THE ACT. IN VIEW OF ABOVE FACTS AND JUDICIAL PRONOUNCEMENTS, WE SUBMIT THAT THAT TH E TERM LOAN AVAILED TO ACQUIRE CAPITAL ASSET AND WAIVED BY IFCI UNDER OTS WAS NEITHER CLAIMED NOR ALLOWED AS DEDUCTION HENCE ADDITIONS MADE BY INVOKING PROVISIONS OF SECTION 41(1) OF THE ACT WAS BAD IN LAW AND ITS DELETION BY CIT(A) MAY PLEASE BE CONFIRMED . 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSED THE M/S.RITSPIN SYNTHETICS LTD. - : 13 : - MATERIAL PLACED BEFORE US. THE LD. CIT(A) HAS GIVEN FINDING OF FACT BY OBSERVING THAT AS REGARDS THE WAIVER OF PRINCIPAL AMOUNT, THE SAME IS NOT TAXABLE, AS THE TERM LOAN WAS IN RESPECT OF CA PITAL ASSETS. THE REVENUE HAS NOT REBUTTED THE FINDING OF THE LD. CIT(A) BY PLACING ANY CONTRARY MATERIAL ON RECORD. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DHOLGIRI INDUSTRIES (P) LIMITED, (2014) 266 CTR 111(MP), HAS HELD AS UNDER : - HAVING CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED SENIOR COUNSEL, FOR THE APPELLANT AND AFTER GOING THROUGH THE ORDERS OF THE ASSESSING OFFICER, CIT (A) AND THE TRIBUNAL \ , WE ARE OF THE VIEW THAT THE AO HAS COMMITTED ERROR IN TREATING THE AMOUNT WAIV ED BY THE BANK TO BE THE AMOUNT EARNED BY THE ASSESSEE. THE PRINCIPAL AMOUNT OF LOAN BEING NEVER CLAIMED BY THE ASSESSEE AS ITS EXPENDITURE, ITS WAIVER WILL NOT AMOUNT TO INCOME OF THE ASSESSEE AS SUCH, IN OUR CONSIDERED VIEW, THERE IS NO INFIRMITY IN THE ORDER PASSED BY TRIBUNAL AFFIRMING THE ORDER OF CIT(A). FURTHER THE RELIANCE WAS PLACED BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. TOSHA INTERNATIONAL LIMITED, (23011) 331 ITR 440 (DEL). AFTER CONSIDERING THE FACT, THE HON'BLE M/S.RITSPIN SYNTHETICS LTD. - : 14 : - COURT DID NOT INTERFERE WITH THE CONCLUSION OF THE TRIBUNAL. THE HON'BLE HIGH COURT HELD THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA AND MAHINDRA LIMITED VS. CIT, (2003) 261 ITR 501 (BOM). IN VIEW OF THE FACT THAT THE REVENUE HAS NOT PLACED AN Y MATERIAL SUGGESTING THAT THE LOAN WAS FOR THE PURPOSE OF WORKING CAPITAL, BUT ON THE CONTRARY, THE LD. CIT(A) HAS GIVEN A FINDING THAT THE PRINCIPAL AMOUNT RELATED TO TERM LOAN. UNDER THESE FACTS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE FINDING O F THE DECISION ARRIVED BY THE LD. CIT(A) AND THE SAME IS HEREBY AFFIRMED. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. APROPOS GROUND NO. (III), THE LD. DR SUPPORTED THE ORDER OF THE CIT(A). ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSESSEE REITERATE D THE WRITTEN SUBMISSION AND SUBMITTED THAT THE ADDITION IS MADE MERELY ON THE BASIS OF CONJECTURES AND SURMISES. 8. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE DISALLOWANCES ARE MADE ON ESTIMATION BASIS. THE AO HAS NOT GIVEN ANY BASIS FOR ARRIVING AT SUCH ESTIMATION. THEREFORE, THE FINDING OF THE LD. CIT(A) IS NOT INTERFERED WITH. M/S.RITSPIN SYNTHETICS LTD. - : 15 : - 9. IN THE RESULT, THE APPEAL OF THE REVENUES IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 0 1 .0 5 .2018. S D / - ( ) (MANISH BORAD) ACCOUNTANT MEMBER S D / - ( ) (KUL BHARAT) JUDICIAL MEMBER INDORE; DATED : 0 1 /0 5 /2018 CPU/SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUARD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE