Appeal Details
Counselvise Citation
41724514 RSA 2012
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-01-2014
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
15-07-2013
Assessment Year
2008-2009
Appeal Filed On
01-03-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO . 367 / P N/ 20 1 2 ASSESSMENT YEAR : 200 8 - 09 NATH BIO GENES (INDIA) LTD., NATH HOUSE, PAITHAN ROAD, AURANGABAD VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1, AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. AABCN7978E ITA NO . 417/ PN/20 12 ASSESSMENT YEAR : 2008 - 09 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1, AURANGABAD VS. NATH BIO GENES (INDIA) LTD., NATH HOUSE, PAITHAN ROAD, AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. AABCN7978E A SSESSEE BY: SHRI CHETAN KARIYA RESPONDENT BY: SHRI ADARSH KUMAR MODI ORDER P ER R.S. PADVEKAR , JM : - TH ESE TWO A PPEAL S , ONE BY THE ASSESSEE AND ANOTHER BY THE REVENUE , ARE FILED CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) , AURANGABAD DATED 23 - 12 - 2011 FOR THE A.Y . 200 8 - 09 . 2. WE FIRST TAKE THE ASSESSEES APPEAL FOR DISPOSAL BEING ITA NO. 367/PN/2012. THE ASSESSEE HAS TAKE N THE FOLLOWING GROUND IN THE APPEAL: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ACTION OF ASSESSING OFFICER IN MAKING AN ADDITION OF RS.1,27,53,855/ - ON ACCOUNT OF WRITE OFF OF PRINCIPAL PORTION OF CASH CREDIT LOAN WAIVED BY BAN KS . 2 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD 3. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF SEED PRODUCTION AND PROCESSING. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2008 - 09 ON 07 - 11 - 2009 WHICH WAS AGAIN REVISED BY FIL ING THE REVISED RETURN ON 12 - 11 - 2009 , DECLARING TOTAL INCOME AT RS. NIL AFTER SETTING OFF THE INCOME FOR THE CURRENT YEAR OF RS.4,84,67,199/ - AGAINST LOSSES OF THE PRECEDING YEARS. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMP LETED U/S. 143(3) OF THE INCOME - TAX ACT. 4. SO FAR AS THE ISSUE IN RESPECT OF WRITE OFF OF PRINCIPAL PORTION OF CASH CREDIT LOAN WAIVED BY BANKS , T HE FACTS WHICH ARE REVEALED FROM THE ASSESSMENT ORDER AS UNDER. THE ASSESSE IS ENTERED INTO ONE TIME SETT LEMENT WITH THE CONSORTIUM AND ACCORDINGLY THE ASSESSEE HAS WRITTEN BACK RS.13,00,10,550/ - . THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER THAT BASED ON THE SETTLEMENT, THE APPLIED INTEREST AND THE PRINCIP AL AMOUNT WERE WRITTEN BACK BY THE ASSESSEE IN T HE BOOKS OF ACCOUNT AS UNDER: (A). THE PRINCIP AL WAIVER WRITTEN BACK OF RS.13,00,10,550/ - (B). INTEREST WAIVER WRITTEN BACK OF RS.5,81,69,874/ - 5. THE ASSESSEE FURTHER STATED BEFORE THE ASSESSING OFFICER THAT NO ALLOWANCE OR DEDUCTION WAS MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF PRINCIP AL LOAN AMOUNT AND THUS THE SAME IS NOT LIABLE TO BE INCLUDED AS INCOME. MORE SO THE SAID PRINCIP AL AMOUNT WAS NEVER DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY. THE ASSESSEE ALSO TOOK STAND THAT THE GRANT OF LOAN BY THE BANK CANNOT BE TERMED AS TRADING TRANSACTIONS AS CONSTRUED IN THE BUSINESS WORLD . EVEN IF THE PRINCIP AL AMOUNT OF THE LOAN IS W AIVED BUT THERE IS NO CHANGE OF CHARACTER OF THE SAID AMOUNT WHICH IS CAPITAL IN NATURE AND NOT A TRADING TRANSACTION. THE ASSESSING OFFICER HAS NARRATED THE FACTS OF THE CASE AND ITS BRIEF HISTORY IN THE ASSESSMENT ORDER WHICH ARE AS UNDER: 3 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD 5. I. THE PARENT COMPANY (NATH SEEDS LIMITED) WAS INCORPORATED ON 14 TH JULY, 1993 UNDER THE PROVISIONS O F COMPANIES ACT, 1956 AS SHIVNATH FARMS PVT. LTD. AND LATER ON CONVERTED INTO A LIMITED COMPANY ON 13 TH SEPTEMBER, 2000 AS SHIVNATH FARMS LTD. THEREAFTER FRESH CERTIFICATE OF INCORPORATION WAS OBTAINED ON 5 TH MARCH, 2001 IN THE NAME OF NATH BIO - GENES (IND IA) LTD. II. ORIGINALLY NATH SEEDS LTD. HAD THREE DIVISIONS - (I) CORPORATE FARM DIVISION, (II) SEEDS DIVISION AND (III) PLANTATION DIVISION. NATH SEEDS LIMITED HAD PREFERRED A SCHEME OF DEMERGER OF THE CORPORATE FARM DIVISION AND ALSO OF THE SEEDS DIVISIO N. THE SEEDS DIVISION WAS TO BE MERGED WITH THE APPLICANT COMPANY. THE CORPORATE FARM DIVISION WAS TO BE MERGED WITH AGRI - TECH (INDIA) LTD., AND THE PLANTATION DIVISION WAS TO BE RETAINED BY THE NATH SEEDS LIMITED. III. BEFORE DEMERGER M/S. NATH SEEDS L TD. HAS RAISED BANKING LIMITS FROM CONSORTIUM OF BANKS LED BY BANK OF INDIA. THE LIMITS RAISED WAS FOR TERM LOAN FOR SETTING UP OF A CORPORATE FARMING PROJECT I.E. GROWING HORTICULTURE CROPS OVER AN AREA OF AROUND 1152 ACRES WITH DRIP IRRIGATION. THE SAID LIMITS WERE SANCTIONED, WAY BACK IN THE YEAR 20 0 0 - 01. IV. THE COMPANY DEPLOYED THE FUNDS FOR SETTING UP OF THE PROJECT. HOWEVER, DUE TO VARIOUS PROBLEMS, INCLUDING NON - AVAILABILITY OF WATER FORM JAYAKWADI DAM, THE PROJECT TURNED OUT TO BE A FAILURE. HENCE, THE MONIES LENT BY THE BANK, INCLUDING MARGIN DEPLOYED BY THE PROMOTERS, COULD NOT MAKE THE PROJECT VIABLE AND THE PROJECT RAN INTO LOSSES. THIS RESULTED IN THE ACCOUNT BECOMING SUBSTANDARD WITH THE BANKS. V. SUBSEQUENTLY DEMERGER SCHEME OF NATH SEEDS LIM ITED SCHEME CAME UP FOR APPROVAL BEFORE THE HON'BLE HIGH COURT AT BOMBAY ON 27/08/2003. THE HON'BLE HIGH COURT AT BOMBAY HAS SANCTIONED THE SAID SCHEME ON 27/08/2003. BY VIRTUE OF THE SAID DE - MERGER, THE ENTIRE ASSETS AND LIABILITIES OF THE SEEDS DIVISION OF NATH SEEDS LTD. NOW VESTS IN THE APPLICANT COMPANY. THE APPLICANT COMPANY FROM THE EFFECTIVE DATE IS BOUND AND LIABLE FOR PAYMENT OF 4 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD ALL DEBTS, LIABILITIES, CONTINGENT LIABILITIES, DUTIES AND OBLIGATIONS OF EVERY KIND AND DESCRIPTION, PERTAINING TO THE SEEDS DIVISION OF NATH SEEDS LTD. AS PER THE PROVISIONS OF THE SAID SCHEME. VI. BY VIRTUE OF THE SAID SCHEME, THE SECURED CREDITORS OF THE SEEDS DIVISION HAVE BECOME THE SECURED CREDITORS OF THE APPLICANT COMPANY. VII. THE APPLICANT COMPANY HAS FACILITIES FOR RESEARCH, BREEDING, PRODUCTION, PROCESSING AND MARKETING OF HYBRID SEEDS OF DIFFERENT CROPS AT AURANGABAD, MAHARASHTRA AND VARIOUS OTHER LOCATIONS. VIII. THE APPLICANT COMPANY BY VIRTUE OF THIS SCHEME IS ENTERING INTO AN ARRANGEMENT WITH THE SECURED CR EDITORS INCLUDING DEBENTURE HOLDERS. THE BOARD OF DIRECTORS OF THE APPLICANT COMPANY HAS APPROVED THE SCHEME AT THEIR MEETING HELD ON 30 TH JANUARY, 2009 AND RECOMMENDED THE SAME FOR THE APPROVAL OF THE EQUITY SHAREHOLDERS AND SECURED CREDITORS INCLUDING DE BENTURE HOLDERS. IX. BACKGROUND TO THE SCHEME OF ARRANGEMENT/RATIONAL/OBJECTS FOR THE SCHEME. A) DURING 1999 - 2002 THE COMPANY SUFFERED FINANCIAL SETBACK. COMPANY PRODUCT PORTFOLIO MAINLY COMPRISED OF COTTON SEEDS. LARGE QUANTITIES OF SEEDS WERE CARRIED OVER R ESULTING INTO BLOCKAGE OF WORKING CAPITAL AND CONSEQUENT LOSSES. DURING THE SAME PERIOD THE COMPANY INCURRED SUBSTANTIAL EXPENDITURE IN SUCCESSFULLY DEVELOPING BT. COTTON SEEDS TECHNOLOGY. THE EFFORT OF THE COMPANY IN REDUCING COST, DIVERSIFYING PRODUCT PO RTFOLIO, ACCOMPANIED WITH INCREASED ADAPTION OF HYBRID SEEDS BY THE FARMING COMMUNITY ARE SHOWING POSITIVE RESULTS. B) ASSET RECONSTRUCTION COMPANY (INDIA) LTD. (ARCIL) HAS TAKEN OVER THE DEBENTURES OF BANK OF INDIA. C) ASSET RECONSTRUCTION COMPANY (INDIA) LTD. (ARCIL) HAS TAKEN OVER THE WOR KING CAPITAL DEBTS OF THE COMPANY FROM BANK OF INDIA, DENA BANK AND INDUSTRIAL DEVELOPMENT BANK OF INDIA (ERSTWHILE UNITED WESTERN BANK). BY VIRTUE OF TAKING OVER THE SAID WORKING CAPITAL DEBTS AS STATED 5 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD ABOVE. ARCIL HAS BEC OME MAJOR SECURED CREDITORS OF THE COMPANY. 6. OVER A PERIOD OF TIME, AFTER PROTRACTED DISCUSSIONS WITH THE BANKERS AND THE FINANCIAL INSTITUTIONS, THE COMPANY ENTERED INTO ONE TIME SETTLEMENT WITH THE CONSORTIUM. BASED ON THE SETTLEMENT, THE APPLIED INTER EST AND THE PRINCIPLE AMOUNT WERE WRITTEN BACK BY THE COMPANY IN THE BOOKS OF ACCOUNT AS UNDER : A) THE PRINCIPLE WAIVER WRITTEN BACK OF RS. 13,00,10,550/ - B) INTEREST WAIVER WRITTEN BACK OF RS. 5,81,69,874/ - IN BRIEF, ASSESSEE HAS RECEIVED RS. 18,81,80,424/ - AS WAIVER OF LOAN IN OTS SCHEME DURING THE YEAR. DETAILS RELATED TO SUCH LOAN RECEIVED IN EARLIER YEAR WAS CALLED FOR. THE BIFURCATION OF LOAN IS AS UNDER : TERM LOAN : RS.1050/ - LAKHS CC LOAN : RS.114.20 LAKHS TOTAL : RS.1164.12 LA KHS. WHICH PERIOD OF TIMES WHICH BECAME RS.18,81,80,424/ - ALONG WITH INTEREST . 6. THE ASSESSING OFFICER WAS OF THE OPINION THAT IT IS NOT CORRECT TO SAY THAT SEC. 41(1) IS NOT APPLICABLE. IN THIS CASE AS THERE WAS NO EXPENDITURE INCURRED AGAINST WHICH THE PRINCIP AL WAIVER HAS BEEN RECEIVED , T HE ASSESSING OFFICER HAS OBSERVED THAT IT IS INDISPUTABLY FACT S PRINCIP AL AMOUNT OF THE LOAN WHICH HAS BEEN WAIVED CONSTITUTES TERM LOAN AS WELL AS THE CASH CREDIT LOAN . IN THE OPINION OF THE ASSESSING OFFICER TO THE EXTENT OF WAIVER OF THE CASH CREDIT LOAN , THE AMOUNT IS CHARGEABLE TO TAX U/S. 41(1) OF THE INCOME - TAX ACT I N VIEW OF THE PRINCIPLES LAID DOWN IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. , 222 ITR 344 (SC) AND SOLID CONTAINERS LTD. VS. D Y. CIT, 308 ITR 417 (BOM) . AS THE ASSESSEE HAS NOT BIFURCATED THE ELEMENT OF THE TERM LOAN AND THE CASH CREDIT LOAN WAIVED BY THE BANK IN ONE TIME SETTLEMENT, HE PROCEEDED TO APPLY THE RATIO OF TERM LOAN VIS - A - VIS CASH CREDIT LOAN AND HELD THAT TO THE EXTENT OF RS.1,27,53,855/ - WHICH 6 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD ATTRIBUTE S TO THE WAIVER OF THE CASH CREDIT LOAN IN INDISPUTABLY TO BE TAX ED U/S. 41(1) OF THE ACT AND HE ACCORDINGLY MADE THE ADDITION. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE LD. CIT(A) BUT DID NOT FIND FAVOUR. T HE LD. CIT(A) PUT HIS STAMP OF APPROVAL ON THE ADDITION MADE BY THE ASSESSING OFFICER E VEN THOUGH HE GAVE THE RELIEF TO THE ASSESSEE IN RESPECT OF THE AMOUNT WAIVED TOWARDS THE TERM LOAN. THE OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 8. 5.4. IN VIEW OF THE ABOVE LEGAL PROPOSITIONS, I PROCEED TO DECIDE GROUND NOS. 4 & 5. IN RESPECT OF WAIVER OF CASH CREDIT LOAN IN THE CASE OF THE APPELLANT IT HAS BEEN OBSERVED THAT THE A.O. HAS HELD THAT THE SAID LOAN HAS BEEN UTILIZED FOR TRADING PURPOSE AND THE APPELLANT HAS NOT REBUTTED THIS FACT CLAIMED BY THE A.O. THE APPELLANT HAS SIMPLY CLAIMED THAT THE CASH CREDIT FACILITY GRANTED BY THE BANK IS NOT TRADING ACTIVITY AND THE OUTSTANDING BALANCE OF CASH CREDIT ACCOUNT IS NOT TRADING LIABILITY REFERRE D TO IN SECTION 41(1) OF THE ACT. IT HAS BEEN OBSERVED FROM THE VARIOUS DECISIONS RELIED ON BY THE A.O. AND THE APPELLANT THAT IN THE CASES WHERE THE LOAN HAS BEEN OBTAINED AND UTILIZED FOR TRADING ACTIVITY I.E. FOR REGULAR BUSINESS OF THE ASSESSEE AND NOT FOR ACQUIRING CAPITAL ASSET, THE SAID LIABILITY IS TO BE TREATED AS TRADING LIABILITY AND THE WAIVER OF SUCH LOAN SHALL BE LIABLE TO TAX U/S 41(1) OR 28 OF THE ACT. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN B Y THE VARIOUS DECISIONS REFERRED TO ABOVE, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS JUSTIFIED IN MAKING ADDITION OF RS.L,27,53,855/ - ON WAIVER OF CASH CREDIT LOAN WHICH HAS BEEN UTILIZED FOR TRADING PURPOSE AND NOT FOR ACQUIRING CAPITAL ASSET. GROUND NO. 4 IS, THEREFORE, DISMISSED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. IN THIS CASE IT IS NOT DISPUTED THAT ON FACTS THE AMOUNT OF RS.1,27,53,855/ - PERTAINS TO THE CASH CREDIT LOAN WAIVED BY THE BANK. THE ASSESSEE HAS NOT DISPUTED THE QUANTUM WORKED OUT BY THE ASSESSING OFFICER APPLYING THE RATIO ON PRORATA BASIS. THE ONLY ISSUE BEFORE US IS NOW WHETHER TO ACCEPT THE SUBMISSION OF THE ASSESSEE THAT WAIVER OF THE CASH CREDIT LOAN IS NOT LIABLE TO TAX AS THE SAID AM OUNT W AS NOT RECEIVED 7 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD IN THE COURSE OF TRADING TRANSACTION. IN FACT THIS ISSUE HAS BEEN CONSIDERED BY THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF LOGITRONICS P. LTD. VS. CIT AND CIT VS. JUBILANT SECURITIES P. LTD. 333 ITR 386 (DELHI). THE HON'BLE HIGH COURT HAS CONSIDERED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS LTD. (SUPRA) AND PLETHORA OF THE OTHER DECISIONS INCLUDING THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF SOLID CONTAINER S LTD. (SUPRA). THE HON'BLE HIGH COURT HAS ALSO REFERRED TO THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF MAHINDRA AND MAHINDRA LTD. VS. CIT 261 ITR 501 (BOM ) AND HELD AS UNDER: 23. IN THE CONTEXT OF WAIVER OF LOAN AMOUNT, WHAT FOLLOWS FROM THE READING OF THE AFORESAID JUDGMENT IS THAT THE ANSWER WOULD DEPEND UPON THE PURPOSE FOR WHICH THE SAID LOAN WAS TAKEN. IF THE LOAN WAS TAKEN FOR ACQUIRING THE CAPITAL ASSET, WAIVER THEREOF WOULD NOT AMOUNT TO ANY INCOME EXIGIBLE TO TAX. ON THE OT HER HAND, IF THIS LOAN WAS FOR TRADING PURPOSE AND WAS TREATED AS SUCH FROM THE VERY BEGINNING IN THE BOOKS OF ACCOUNT, AS PER T.V. SUNDARAM IYENGAR AND SONS LTD. [1996] 222 ITR 344 (SC), THE WAIVER THEREOF MAY RESULT IN THE INCOME MORE SO WHEN IT WAS TRAN SFERRED TO THE PROFIT AND LOSS ACCOUNT . IN OUR OPINION, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF WAIVER TO THE CASH CREDIT LOAN. WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE ASSESSEE. A CCORDINGLY, THE GROUND TAKEN BY THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. 9 . NOW WE TAKE UP THE REVENUES APPEAL BEING ITA NO. 417/PN/2012. THE REVENUE HAS TAKEN FOLLOWING GROUNDS IN THE APPEAL: 1. WHETHER IN TH E FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION ON ACCOUNT OF SECTION 35(2AB) EVEN THOUGH, THE ASSESSEE HAS NOT APPROVED BY PRESCRIBED AUTHORITY IN THE FORM NO. 3CM. 8 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION ON ACCOUNT OF WAIVER OF INTEREST ON LOAN EVEN THOUGH THE ASSESSEE HAS CLAIMED THE SAME AS EXPENDITURE IN EARLIER YEARS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION ON ACCOUNT OF PRINCIPLE AMOUNT OF WAIVER OF LOAN EVEN THOUGH IT IS COVERED U/S. 41 (1) AND FINDING OF HON'BLE APEX COURT. 10 . SO FAR AS GROUND NO. 1 IS CONCERNED , IT IS IN RESPECT OF DEDUCTION CLAIMED MADE BY THE ASSESSEE U/S . 35(2AB) OF THE ACT. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED WEIGHTED DEDUCTION ON INHOUSE SCIENTIFIC RESEARCH AND DEVELOPMENT U/S. 3 5(2AB) OF THE ACT @ 150% OF RS.3,88,55,696/ - I.E. RS.5,82,83,547/ - . IN SUPPORT OF THIS DEDUCTION , THE ASSESSEE HAS FILED RECOGNITION AS INHOUSE R & D UNIT OBTAINED FROM DEPARTMENT OF SCIENCE & INDUSTRIAL RESEARCH, NEW DELHI. THE ASSESSING OFFICER HAS NOT ED THAT THE RECOGNITION OBTAINED BY THE ASSESSEE IS NOT IN PRESCRIBED FROM NO. 3CM AS SPECIFIED IN RULE 6(1B) OF INCOME TAX RULES, 1962. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM WEIGHTED DEDUCTION U/S. 35(2AB) AND HAS MADE DISALLOWANCE AND ADDED BACK THE WEIGHTED DEDUCTION TO THE EXTENT OF RS.1,94,27,849/ - . THE ASSESSING OFFICER HAS FURTHER HELD THAT THE DEDUCTION CLAIMED ON SCIENTIFIC RESEARCH AMOUNTING TO RS.3,88,55,698/ - IS NOT ALLOWABLE U/S. 35 OF THE ACT, HOWE VER, HE HAS ALLOWED THE SAID EXPENDITURE U/S. 37(1) OF THE ACT BEING REVENUE EXPENDITURE. THE ISSUE WAS CARRIED BEFORE THE LD. CIT(A) AND LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. THE OPERATIVE PART OF THE FINDING S OF LD. CIT(A) ARE AS UNDER: 5.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. IT IS UNDISPUTABLE FACT THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS ACTIVITY OF PROCESSING AND PRODUCING SEEDS WHICH IS RESEARCH ORIENTED. IT IS ALSO UNDISPUTED FACT THAT IN ORDER TO 9 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD CLAIM WEIGHTED DEDUCTION U/S 35(2AB), THE APPELLANT HAS FILED APPLICATION FOR RECOGNITION AS IN - HOUSE R & D UNIT WITH DEPARTMENT OF SCIENCE & INDUSTRIAL RESEARCH, NEW DELHI AND HAS RECEIVED THEIR APPROVAL/RECOGNITION VIDE LETTER DATED 01/09/200 6. 5.2.1. THE PROVISIONS OF SECTION 35(2AB)(1) AND (4) ARE RELEVANT AND HENCE REPRODUCED BELOW '35(L)IN RESPECT OF EXPENDITURE ON SCIENTIFIC RESEARCH, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED .. (2AB)(1) WHERE A COMPANY ENGAGED IN THE BUSINESS OF BIO - TECHNOLOGY OR IN ANY BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, NOT BEING AN ARTICLE OR THING SPECIFIED IN THE LIST OF THE ELEVENTH SCHEDULE, INCURS ANY EXPENDITURE ON SCIENTIFIC RESEARCH (NOT BEING EXPENDITURE IN THE NATURE OF COS T OF ANY LAND OR BUILDING) ON IN - HOUSE RESEARCH AND DEVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY, THEN THEIR SHALL BE ALLOWED A DEDUCTION OF A SUM EQUAL TO ONE AND ONE HALF TIMES OF THE EXPENDITURE SO INCURRED. . (4) THE PRESCRIBED AU THORITY SHALL SUBMIT ITS REPORT IN RELATION TO THE APPROVAL OF THE SAID FACILITY TO THE DIRECTOR GENERAL IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED.' THE PRESCRIBED AUTHORITY REFERRED TO IN THE ABOVE SECTION IS SECRETARY, DEPARTMENT OF SCIENTIF IC & INDUSTRIAL RESEARCH, GOVERNMENT OF INDIA. 5.2.2. THE LETTER OF RECOGNITION/APPROVAL ISSUED BY THE PRESCRIBED AUTHORITY TO THE APPELLANT VIDE LETTER DATED 01/09/2006 IS REPRODUCED BELOW 'THIS HAS REFERENCE TO YOUR APPLICATION FOR RECO GNITION OF YOUR IN - HOUSE R&D UNIT(S) BY THE DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH. THIS IS TO INFORM YOU THAT IT HAS BEEN DECIDED TO ACCORD RECOGNITION TO THE IN - HOUSE R&D UNIT(S) OF YOUR FIRM AT NATH HOUSE, NATH ROAD, AURANGABAD UPTO 31.03.200 9.' 10 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD SUBSEQUENTLY, THE PRESCRIBED AUTHORITY HAS GIVEN RENEWAL OF RECOGNITION OF IN - HOUSE R&D UNIT VIDE LETTER DATED 16/06/2009 UPTO 31/03/2012. 5.2.3. THE CONTENTS OF PRESCRIBED FORM NO.3CM READ AS UNDER - 'FORM NO. 3CM ORDER OF APPROVAL OF IN - HOUSE RESEA RCH AND DEVELOPMENT FACILITY UNDER SECTION 35(2AB) OF THE INCOME - TAX ACT, 1961 1. NAME, ADDRESS AND PAN OF THE COMPANY. 2.NATURE OF THE BUSINESS OF THE COMPANY - MANUFACTURE/PRODUCTION OF ARTICLE OR THING. 3. OBJECTIVES OF THE SCIENTIFIC RESEARCH TO BE CONDU CTED BY IN - HOUSE RESEARCH AND DEVELOPMENT FACILITY. 4. ADDRESS AT - WHICH SUCH RESEARCH & DEVELOPMENT FACILITY IS LOCATED. 5. REF. NO. AND DATE OF THE APPLICATION. THE ABOVE RESEARCH & DEVELOPMENT FACILITY IS APPROVED FOR THE PURPOSE OF SECTION 35(2AB), SUB JECT TO THE CONDITIONS UNDERLINED THEREIN. PLACE . DATE.. (SIGNATURE (NAME) SECRETARY, DSIR (SEAL) COPY TO : (1) COMPANY (2) THE DIRECTOR GENERAL (INCOME - TAX EXEMPTION) 5.2.4. FROM THE LETTE R OF APPROVAL AND FROM FORM NO.3CM REPRODUCE ABOVE IT HAS BEEN NOTICED THAT THE INFORMATION MENTIONED IN FORM NO.3CM IS AVAILABLE OF! THE RECORD OF THE A.O. OF THE FACT THAT THE APPROVAL IS NOT IN PRESCRIBED FORM NO. 3CM IS NOT A SERIOUS DISCREPANCY WHICH SHALL RESULT IN DISALLOWANCE OF DEDUCTION U/S 35(2AB) OF THE ACT. IT IS ALSO A FACT THAT IN ORDER TO CLAIM WEIGHTED 11 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD DEDUCTION U/S 35(2AB), THE APPELLANT HAS TO APPLY TO THE PRESCRIBED AUTHORITY FOR APPROVAL/RECOGNITION AND THE PRESCRIBED AUTHORITY AFTER D UE VERIFICATION HAS TO ISSUE THE APPROVAL IN THE PRESCRIBED FORM. THE APPELLANT HAS PERFORMED ITS OBLIGATION OF FILING AN APPLICATION TO PRESCRIBED AUTHORITY AND OBTAINING THE APPROVAL LETTER. IT IS FOR THE PRESCRIBED AUTHORITY TO ISSUE THE SAID APPROVAL IN THE PRESCRIBED FORM. THE PRESCRIBED AUTHORITY IS, THEREFORE, REQUIRED TO ISSUE APPROVAL IN PRESCRIBED FORM AND THIS COMPLIANCE IS BEYOND THE CONTROL OF THE APPELLANT. 5.2.5. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE AX), IS NOT JUSTIFIED IN DISALLOWING THE DEDUCTION CLAIMED BY APPELLANT U/S 35(2AB) OF THE ACT. THE A.O. IS, THEREFORE, DIRECTED TO ALLOW THE DEDUCTION OF RS.5,82,83,547/ - CLAIMED BY THE APPELLANT U/S 35(2AB) OF THE ACT. THE A.O. IS ALSO DIRECTED TO CANC EL THE DEDUCTION U/S 37 OF THE ACT ALLOWED BY HIM TO THE EXTENT OF RS.3,84,67,141/ - AS THIS AMOUNT IS INCLUDE IN THE DEDUCTION CLAIMED BY THE APPELLANT AT RS.5,82,83,547/ - . GROUND NO. 1 STANDS ALLOWED . 1 1 . IN SUM AND SUBSTANCE THE LD. CIT(A) HELD TH AT HOW TO ISSUE THE CERTIFICATE IS NOT IN THE HAND S OF THE ASSESSEE BUT IT IS THE PRESCRIBED AUTHORITY WHO HAS TO ISSUE THE CERTIFICATE IN PRESCRIBED FORM. NOW , THE REVENUE IS IN APPEAL BEFORE US. 1 2 . WE HAVE HEARD THE PARTIES AND ALSO PERUSED THE REASON S GIVEN BY THE LD. CIT(A). THE ONLY RESERVATION OF THE ASSESSING OFFICER WAS IN RESPECT OF THE FORM IN WHICH THE PRESCRIBED AUTHORITY HAS GIVEN THE RECOGNITION WHICH IN THIS CASE IS SECRETARY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH, GOVERNMENT O F INDIA. THE ASSESSEE FILED THE COPY OF THE APPROVAL RECEIVED FROM THE COMPETENT AUTHORITY . IT IS TRUE THAT IT IS NOT IN CLEAR TERMS IN FORM NO. 3CM WHICH HAS BEEN PRESCRIBED UNDER THE INCOME - TAX RULE, 1962. WE CONCUR WITH THE FINDING OF THE LD. CIT(A) THAT IF THE APPROVAL IS NOT IN PRESCRIBED FORM NO. 3CM IS NOT A SERIOUS DISCREPANCY WHICH SH OULD RESULT IN DISALLOWANCE OF THE DEDUCTION TO THE 12 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD ASSESSEE U/S. 35(2AB) OF THE ACT. IN THIS CASE , IT IS NOT DISPUTED THAT THE ASSESSEE HAS APPLIED TO THE COMPETE NT AUTHORITY FOR GETTING THE APPROVAL/RECOGNITION AND ONLY AFTER THE VERIFICATION OF ALL THE DETAILS THE PRESCRIBED AUTHORITY HAVE ISSUED THE APPROVAL LETTER. IN OUR OPINION, THE LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE AND NO INTERFERENCE IS CALLED FOR IN THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, GROUND NO. 1 IS DISMISSED. 1 3 . THE GROUND NO. 2 IS CONCERNED , IT IS IN RESPECT OF DELETION OF ADDITION OF WRITE - OFF OF INTEREST PORTION OF AMOUNT WAIVED BY BANKS. THE FACTS ARE ALREADY NAR RATED WHILE DECIDING THE ASSESSEES APPEAL IN WHICH THE ASSESSEE HAS RAISED THE GRIEVANCE IN RESPECT OF THE ELEMENT OF THE CASH CREDIT LOAN WAIVED BY BANKS IN ONE TIME SETTLEMENT AND THE SAID ADDITION HAS BEEN CONFIRMED BY THE LD. CIT(A) U/S. 41(1) OF THE ACT. THE ASSESSING OFFICER HAS NOTED THAT THE TOTAL AMOUNT OF THE INTEREST WAIVED IN ONE TIME SETTLEMENT WAS TO THE EXTENT OF RS.5,81,69,874/ - . THE ASSESSING OFFICER HAS HELD THAT THE INTEREST IS DEBITED IN P & L ACCOUNT AS EXPENDITURE AND HENCE , A SUBSE QUENT WAIVER OF SUCH INTEREST IN INCOME OF THE ASSESSEE U/S. 41(1) OF THE ACT. THE ASSESSING OFFICER HAS NOTICED THAT OUT OF THE TOTAL AMOUNT OF INTEREST WAIVED OF RS.5,81,69,874/ - , THE ASSESSEE HAS ADDED BACK INTEREST OF RS.2,26,32,149/ - WHILE COMPUTING THE INCOME FOR THE A.Y. 2008 - 09. THE ASSESSING OFFICER FURTHER STATED THAT THE INTEREST OF RS.3,67,20,751/ - , RS.64,017/ - AND RS.51,962/ - WHICH WAS CLAIMED IN THE A.YS. 2004 - 05, 2005 - 06 AND 2006 - 07 RESPECTIVELY , HAS NOT BEEN ADDED BACK TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER HAS, THEREFORE, MADE THE ADDITION OF RS.3,55,37,725/ - BY HOLDING THAT THE SAID AMOUNT TO BE ADDED TO THE INCOME OF THE ASSESSEE U/S. 43B OF THE ACT. IT IS CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS NEVER CLAIMED THE AMOUNT OF RS.3,55,37,725/ - AS A DEDUCTION AND HENCE , THERE IS NO QUESTION OF MAKING THE ADDITION OF THE SAID AMOUNT. THE LD. CIT(A) WAS CONVINCED 13 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD WITH THE EXPLANATION OF THE ASSESSEE AND HE HAS NOTED THAT ON PERUSAL OF COMPUTATION OF INCOME OF P & L ACC OUNT OF THE ASSESSEE COMPANY FOR THE FINANCIAL YEAR RELEVANT TO THE A.YS. 2004 - 05, 2005 - 06 AND 2006 - 07 , THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN RESPECT OF THE SAID AMOUNT OF INTEREST OF RS.3,67,20,751/ - , RS.64,017/ - AND RS.51,962/ - RESPECTIVELY. ON PRINCIPLE THOUGH WE AGREE WITH THE LD. CIT(A) THAT IF THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION IN RESPECT OF ABOVE AMOUNT , THE SAME CANNOT BE DISALLOWED U/S. 43B NOR THE ADDITION U/S. 41(1) CAN BE MADE AS THE SAID AMOUNT OF THE INTEREST HAS NEVER BEEN CL AIMED AS AN EXPENDITURE. AT THE SAME TIME WE FIND THAT THERE IS A CONTRADICTION IN THE FACT NOTED BY THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) . W E, THEREFORE, FOR THE LIMITED PURPOSE OF THE VERIFICATION , REMIT THIS ISSUE TO THE FILE OF THE ASSESSIN G OFFICER WHETHER THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF THE ELEMENT OF THE AMOUNT OF THE INTEREST WAIVED IN ONE TIME SETTLEMENT. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE RECORD FOR THE A.YS. 2004 - 05, 2005 - 06 AND 2006 - 07 AND IF THE ASSESS EE HAS NOT CLAIMED ANY DEDUCTION THEN NO ADDITION SHOULD BE MADE AND IF THE ASSESSEE HAS CLAIMED THE DEDUCTION IN THE PROFIT AND LOSS ACCOUNT THEN TO THAT EXTENT ONLY THE ADDITION SHOULD BE MADE. THE ASSESSING OFFICER SHOULD GIVE OPPORTUNITY TO THE ASSESS EE TO REPRESENT HIS CASE BEFORE ARRIVING AT A FINAL CONCLUSION. ACCORDINGLY, GROUND NO. 2 IS ALLOWED FOR THE STATISTICAL PURPOSES. 1 4 . GROUND NO. 3 IS IN RESPECT OF THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS WAIVER OF THE PRINCIP AL AMOUNT OF TH E LOAN WHICH THE ASSESSEE HAD CLAIMED TOWARDS THE CAPITAL ACCOUNT WHICH WAS TO THE EXTENT OF RS.11,72,56,695/ - AND THIS ISSUE IS DISCUSSED BY THE ASSESSING OFFICER IN PARA NO. 7 OF THE ASSESSMENT ORDER. THE LD. CIT(A) DELETED THE ADDITION AND OPERATIVE PA RT OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 8.5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN OBSERVED THAT THE 14 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD APPELLANT HAS ACCEPTED TERM LOAN OF RS.10.50 CRORES AND CASH CREDIT LOAN O F RS.1.142 CRORES IN THE EARLIER YEARS TOTALING TO RS.11.642 CRORES. OVER THE PERIOD OF TIME THE LIABILITY TOWARDS THE ABOVE LOANS INCLUDING INTEREST HAS BECOME RS.18,81,40,424/ - . THE PRINCIPAL AND INTEREST AMOUNT OF RS.13,00,10,550/ - AND RS.5,81,69,874/ - HAS BEEN WAIVED DURING THE YEAR UNDER APPEAL BY THE FINANCIAL INSTITUTIONS. THE A.O. HAS WORKED OUT PRINCIPAL AMOUNT OF CASH CREDIT AND TERM LOAN WAIVED AT RS.1,27,53,855/ - AND RS.11,72,56,695/ - RESPECTIVELY ON THE BASIS OF ORIGINAL RATIO OF CASH CREDIT LOAN AND TERM LOAN OBTAINED IN THE EARLIER YEARS. IN SUPPORT OF GROUND NOS.4 & 5, THE APPELLANT HAS RELIED ON THE VARIOUS DECISIONS. SIMILARLY IN SUPPORT OF ADDITION ON ACCOUNT OF WAIVER OF CASH CREDIT AND TERM LOAN THE A.O. HAS ALSO RELIED ON THE VARIOU S DECISIONS. THE A.O. AND THE APPELLANT HAVE ALSO CONTENDED THAT THE RATIO LAID DOWN BY THE DECISIONS RELIED ON BY EACH OTHER ARE NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF THE ABOVE FACTS IT HAS BECOME NECESSARY TO NOTE THE BRIEF FACTS AND RATIO LAID DOWN IN THE SAID DECISIONS. 8.5.1. THE BRIEF FACTS OF THE DECISIONS AND RATIO LAID DOWN BY THE DECISIONS RELIED ON BY THE A.O. ARE NOTED AS UNDER (1) CIT VS. T.V. SUNDARAM IVENAAR & SONS LTD. (1996) 222 ITR 344 (S C) : IN THIS CASE, THE ASSESSE E HAS ACCEPTED DEPOSITS FROM TRADE PARTIES DURING THE COURSE OF CARRYING ON HIS BUSINESS. THE NATURE OF DEPOSIT WAS NOT SECURITY DEPOSIT AND THEY HAVE BEEN DEPOSITED BY ADJUSTMENT MADE FROM TIME TO TIME. THE SAID AMOUNT REPRESENTED CREDIT BALANCES IN THE N AME OF THE TRADE PARTIES. THE DEPOSIT HAVING BEEN TAKEN IN THE COURSE OF TRADE, THE CUSTOMERS DID NOT CLAIM THE REMAINING AMOUNT BACK AFTER ADJUSTMENT. THE CLAIMS OF THE CUSTOMERS HAVE BECOME BARRED BY LIMITATION AND THE ASSESSEE HAS TREATED THE SAID AMOUN T AS ITS OWN MONEY AND TRANSFERRED THE SAME TO PROFIT & LOSS ACCOUNT. THE HON'BLE APEX COURT ON THE ABOVE FACTS HELD THAT THE SAID AMOUNT CREDITED TO PROFIT & LOSS ACCOUNT WAS RECEIVED BY THE ASSESSEE IN THE COURSE OF CARRYING ON HIS BUSINESS AND HENCE IS A TRADING RECEIPT. THE COURT HELD THAT THE SAID WAIVER IS LIABLE TO TAX AS THE CLAIM OF THE DEPOSITOR HAVING BECOME BARRED BY TIME, THOUGH THE DEPOSITS WERE TREATED AS CAPITAL RECEIPT INITIALLY. 15 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD (2) SOLID CONTAINERS LTD. VS. DCIT 308 ITR 417 (BOM.): IN THIS CASE, THE ASSESSEE HAS TAKEN LOAN FROM M/S JAIN MOTORS OF RS.6,86,071/ - FOR BUSINESS PURPOSES AND INTEREST ON THE SAID LOAN WAS PAYABLE TO THE EXTENT OF RS.2,83,819/ - . THE LOAN WAS UNDISPUTEDLY TAKEN FOR TRADING ACTIVITY. THE PARTY FILED A SUIT F OR RECOVERY AND ASSESSEE COMPANY FILED COUNTER CLAIMS AND THE MATTER WAS SETTLED OUT OF THE COURT WHEREBY THE ASSESSEE COMPANY WAS NOT TO PAY ANY AMOUNT . THE ASSESSEE COMPANY HAS CREDITED THE AMOUNT OF RS.6,86,071/ - TO THE RESERVE ACCOUNT CONSIDERING THE SAME TO BE THE CAPITAL RECEIPT. THE ASSESSEE COMPANY HAS CLAIMED THE WAIVER OF LOAN IS NOT LIABLE TO TAX UNDER THE PROVISIONS OF SECTION 28 OR 41(1). IN SUPPORT OF THIS CONTENTION, THE ASSESS HAS RELIED ON THE DECISION IN THE CASE OF MAHINDRA & MAHINDRA LTD. VS. CIT [2003] 261 ITR 501 (BOM.). THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT IN THE CASE IF MAHINDFA & MAHINDRA LTD., THE LOAN WAS FOR CAPITAL ASSETS I.E. PLANT & MACHINERY AND DIES USED IN MANUFACTURING OF VEHICLES AND HENCE IN THE SAID CASE THE HO N'BLE BOMBAY HIGH COURT HAS HELD THAT WAIVER OF THE LOAN AMOUNT COULD NOT CONSTITUTE BUSINESS AND HENCE IS NOT LIABLE TO TAX. IN THE CASE UNDER APPEAL, THE HON'BLE BOMBAY HIGH COURT HAS OBSERVED THAT THE LOAN WAS TAKEN FOR TRADING ACTIVITY AND ULTIMATELY U PON WAIVER THE AMOUNT WAS RETAINED IN BUSINESS BY THE ASSESSEE AND HENCE THE SAME IS LIABLE TO TAX AS INCOME. THE HON'BLE BOMBAY HIGH COURT THEREFORE UPHELD THE DECISION OF HON'BLE ITAT MUMBAI BENCH AND HELD THAT NO QUESTION OF LAW MUCH LESS SUBSTANTIAL QU ESTION OF LAW ARISES FOR CONSIDERATION IN THE SAID APPEAL AND HENCE THE APPEAL OF THE ASSESSEE COMPANY WAS DISMISSED IN - LIMINE. (3) POLVFLEX INDIA (P) LTD. VS. CIT 257 ITR 343 (S C) : IN THIS CASE, THE ASSESSEE HAS PAID EXCISE DUTY IN THE YEAR 1986 IN RESPECT OF GOODS TRADED. THE FIRST APPELLATE AUTHORITY AS WELL AS CEGATE HELD THAT THE GOODS WERE NOT LIABLE TO EXCISE DUTY ON 20/09/1988 I.E. IN F.Y. RELEVANT TO A.Y.1989 - 90. THE APPEAL OF THE EXCISE DEPARTMENT HAS BEEN DISMISSED BY HON'BLE HIGH COURT AND THE APP EAL WAS PENDING BEFORE THE HON'BLE SUPREME COURT. THE ASSESSEE CLAIMED THAT THERE WAS NO REMISSION OR CESSATION OF TRADING LIABILITY WITHIN THE MEANING OF SECTION 41(1) SO LONG AS THE ISSUE WAS PENDING DETERMINATION BY SUPREME COURT. THE CONTENTION OF THE APPELLANT WAS ACCEPTED BY CIT(A) AND ALSO BY HON'BLE ITAT. THE HON'BLE KARNATAKA HIGH COURT ON FURTHER APPEAL BY REVENUE 16 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD HELD THAT THE EXCISE DUTY REFUNDED WAS ASSESSABLE U/S 41(1) OF THE ACT. THE HON'BLE SUPREME COURT HAS UPHELD THE DECISION OF THE HON'BL E KARNATAKA HIGH COURT THAT AS A LIABILITY OF PAYMENT OF EXCISE DUTY HAS BEEN INCURRED IN THE COURSE OF TRADE AND HAS BEEN REFUNDED BACK TO THE ASSESSEE, THE SAME IS LIABLE TO TAX U/S 41(1) OF THE ACT. THE HON'BLE COURT HELD THAT IN ORDER TO ATTRACT PROVIS IONS OF SECTION 41(1) SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF HAS TO BE OCCURRED. 4) NECTAR BEVERAGES PVT.LTD. VS. DCIT (2004) 267 ITR 385 (BOM.): IN THIS CASE, THE ASSESSEE COMPANY DERIVED INCOME FROM MA NUFACTURE AND SALE OF SOFT DRINKS. ~THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION @100% IN RESPECT OF BOTTLES AND CRATES PURCHASED BY THE ASSESSEE. IN THE SUBSEQUENT YEAR THE ASSESSEE COMPANY HAS SOLD SCRAP OF THE SAID BOTTLES AND CRATES AND CLAIMED THE SA LE PROCEEDS AS CAPITAL RECEIPTS. ON THESE FACTS THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT THE RECEIPT ON ACCOUNT OF SCRAP SALE OF BOTTLES AND CRATES ON WHICH 100% DEPRECIATION WAS AVAILED IS TRADING RECEIPT WHICH CONSTITUTED PROFIT CHARGEABLE TO TAX U/S 41(1) OF THE ACT. 8.5.2. THE BRIEF FACTS OF THE CASES AND RATIO LAID DOWN BY THE MAJOR DECISIONS RELIED ON BY THE APPELLANT ARE NOTED AS UNDER (1) MAHINDRA & MAHINDRA LTD, VS. CIT (2003) 182 CTR (BOM) 34 : (2003) 261 ITR 501 (BOM) IN THIS CASE THE ASSE SSEE COMPANY HAS OBTAINED LOAN WHICH HAS BEEN UTILIZED TO ACQUIRE CAPITAL ASSET I.E. MACHINERY/DIES USED IN MANUFACTURING ACTIVITY. THE PRINCIPAL AMOUNT LOAN OF RS.57,74,064/ - HAS BEEN WAIVED. THE APPELLANT HAS CLAIMED DEPRECIATION OF RS.27,29,585/ - ON THE SAID MACHINERY/DIES. IT HAS BEEN ARGUED BY THE DEPARTMENT THAT ON WAIVER OF THE LOAN THE ASSESSEE HAS REALIZED BENEFIT OF WAIVER OF ITS LIABILITY WHICH IS TAXABLE U/S 28(IV)/41(L) OF THE ACT. ALTERNATIVELY, IT WAS ARGUED THAT THE LOAN WAS USED FOR BUYING TOOLINGS ON WHICH ASSESSEE GOT DEPRECIATION ALLOWANCE OF RS.27,29,585/ - AND THEREFORE THE AMOUNT OF RS.27,29,585/ - SHOULD BE SET OFF AGAINST RS.757,T4,064/ - . THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT UNLESS THE DEDUCTION IS ALLOWED IN THE EARLIER YEARS I N RESPECT OF THE AMOUNTS WAIVED THE LIABILITY WAIVED COULD NOT BE TREATED AS TRADING LIABILITY AND HENCE SECTION 41(1) IS NOT ATTRACTED. THE HON'BLE BOMBAY HIGH COURT HAS 17 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD ALSO STATED THAT IT IS IMPORTANT TO BEAR IN MIND THAT THE TOOLING CONSTITUTED CAPITAL ASSET AND NOT STOCK IN TRADE. AS REGARDS ALTERNATIVE CLAIM OF THE DEPARTMENT THAT THE ASSESSEE WAS ALLOWED DEPRECIATION ON TOOLINGS, THE HON'BLE COURT HELD THAT THERE IS NO MERIT IN THE SAID ARGUMENT AS THERE IS REMISSION OF LOAN AND NOT REMISSION OF DEPR ECIATION. (2) CIT VS. TOSHA INTERNATIONAL LTD. 331 ITR 440 (DELHI) IN THIS CASE THE BANK HAS WAIVED PRINCIPAL AMOUNT OF LOAN TO THE EXTENT OF RS.10,47,93,857/ - UNDER THE ONE TIME SETTLEMENT SCHEME. THE A.O. HELD THAT THE ASSESSEE HAS DERIVED BENEFIT O N THE BASIS OF EITHER DEPRECIATION OR UTILIZING THE WORKING CAPITAL WHICH WOULD HAVE FORMED PART OF THE EARLIER YEAR'S INCOME. THE HON'BLE COURT APPROVED THE FINDING OF THE TRIBUNAL. THE PARA - 3 & 4 OF THE ORDER OF HON'BLE DELHI HIGH COURT IS RELEVANT IS EX TRACTED AS UNDER - 'THE REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) WITH REGARD TO THE DELETION OF THE SAID SUM OF RS. 10.47 CRORES. WE NOTE THAT THE TRIBUNAL HAS EXAMINED THE CASE IN DETAIL AND PARTICULARLY FROM THE STANDPOI NT OF THE PROVISIONS OF S. 41(1) OF THE SAID ACT. THE TRIBUNAL HAS OBSERVED AS UNDER: 'AS PER OUR CONSIDERED VIEW, FOR ATTRACTING THE PROVISIONS OF S. 41(1), THE FIRST REQUISITE CONDITION TO BE SATISFIED IS THAT THE ASSESSEE SHOULD HAVE GOT DEDUCTION OR BE NEFIT OF ALLOWANCE IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY IT AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, THE ASSESSEE SHOULD HAVE RECEIVED ANY AMOUNT IN RESPECT OF SUCH LOSS, EXPENDITURE OR TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. THE REMISSION WOULD BECOME INCOME ONLY IF THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF EXPENDITURE OR TRADING LIABILITY. IN MAHINDRA & MAHINDRA LTD. VS. CIT (2003) 182 CTR (BOM) 34: (2003) 261 ITR 501 (BOM), HON'BLE HIGH COURT OF BOM BAY HELD THAT NO ALLOWANCE OR DEDUCTION HAVING BEEN ALLOWED IN RESPECT OF LOAN TAKEN BY ASSESSEE FOR PURCHASE OF CAPITAL ASSETS, S. 41(1) WAS NOT ATTRACTED TO REMISSION OF PRINCIPAL AMOUNT OF LOAN . I N THE INSTANT CASE, THE ASSESSEE HAS NOT GOT ANY DEDUCTI ON ON ACCOUNT OF ACQUISITION OF CAPITAL ASSETS AS THE. SAME HAS BEEN REFLECTED' IN THE BALANCE SHEET AND NO T IN THE P&L A/C, AND ALSO THE REMISSION OF THE PRINCIPAL AMOUNT OF LOAN SO OBTAINED 18 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD FROM THE BANK AND FINANCIAL INSTITUTION HAD NOT BEEN CLAIMED AS EXPENDITURE OR TRADING LIABILITY IN ANY OF THE EARLIER PREVIOUS YEAR. SO FAR AS WAIVER OF INTEREST IS CONCERNED, THE ASSESSEE COMPANY ITSELF HAS TREATED THE SAME EITHER AS INCOME OR HAS NOT CLAIMED THE SAME AS EXPENDITURE IN THE COMPUTATION OF INCOME FILED BEFORE THE LOWER AUTHORITIES.' WE SEE NO REASON TO INTERFERE WITH THE TRIBUNAL AS THE SAME HAVE BEEN RENDERED ON A CORRECT APPRECIATION OF LAW. THE PRINCIPLES ENUNCIATED IN MAHINDRA & MAHINDRA LTD. VS. CIT (2003) 182 CTR (BORN) 34 : (2003) 261 ITR 501, A RE FULLY APPLICABLE AND WE SEE NO REASON TO TAKE A DIFFERENT VIEW. (3) ISKRAEMECO REGENT LTD. VS. CIT (2011*) 331 ITR 317 (MAD) IN THIS CASE, THE STATE BANK OF INDIA HAS WAIVED PRINCIPAL AMOUNT OF OUTSTANDING LOAN ON ONE TIME SETTLEMENT TO THE EXTENT OF RS.5,07,78,410/ - AND INTEREST OUTSTANDING RS.2,02,60,247/ - . THE A.O., CIT(A) AND HON'BLE ITAT HAVE REJECTED THE CONTENTION OF THE APPELLANT THAT NO INCOME COULD BE RESULTED ON WAIVER OF PRINCIPAL AMOUNT OF LOAN BY RELYING ON THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF CIT VS. T.V. SUNDARAM LYENGAR & SONS LTD. (1996) 222 ITR 344 (SC). IT IS ARGUED ON BEHALF OF THE APPELLANT BEFORE THE HON'BLE MADRAS HIGH COURT THAT RELIANCE PLACED BY LOWER AUTHORITIES UPON THE JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF CIT VS. T.V. SUNDARAM LYENGAR & SONS LTD. (1996) 222 ITR 344 (SC) IS WITHOUT APPLYING THEIR MIND TO THE FACTS OF THE CASE AS WELL AS THE FACTS INVOLVED THEREIN. IT WAS ARGUED THAT A JUDGEMENT CANNOT BE READ AS A STATUTE AND HAS TO BE MADE APPLICAB LE TO THE FA CTS AND CONSIDERATION OF EACH CASE AND THE RATIO LAID DOWN THEREIN WILL HAVE TO BE APPLIED TO THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN SUPPORT OF THE ABOVE PROPOSITION, THE APPELLANT HAS PLACED RELIANCE ON THE DECISION OF THE HON'BLE APEX C OURT IN THE CASE OF CCE VS. SRIKUMAR AGENCIES & ORS. (2009) 1 SCC 469. THE HON'BLE MADRAS HIGH COURT AFTER CONSIDERING THE ARGUMENTS AND THE DECISION RELIED ON BY THE APPELLANT HAS HELD THAT THE AUTHORITIES BELOW HAVE COMMITTED AN ERROR IN MERELY RELYING U PON THE JUDGEMENT RENDERED IN CIT VS. T.V. SUNDARAM LYENGAR & SONS LTD. (1996) 222 ITR 344 (SC) WITHOUT APPLYING THE FACTS INVOLVED THEREIN, VIS - A - VIS THE FACTS INVOLVED IN THE PRESENT APPEAL. THE HON'BLE MADRAS HIGH COURT OBSERVED THAT IN THE 19 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD SAID DECISIO N RELIED ON BY THE LOWER AUTHORITIES, THE FACTS ARE AS UNDER THE ASSESSEE HAS ACCEPTED DEPOSITS FROM TRADE PARTIES DURING THE COURSE OF CARRYING ON HIS BUSINESS. THE NATURE OF DEPOSIT WAS NOT SECURITY DEPOSIT AND THEY HAVE BEEN DEPOSITED BY ADJUSTMENT MA DE FROM TIME TO TIME. THE SAID AMOUNT REPRESENTED CREDIT BALANCES IN THE NAME OF THE TRADE PARTIES. THE DEPOSIT HAVING BEEN TAKEN IN THE COURSE OF TRADE, THE CUSTOMERS DID NOT CLAIM THE REMAINING AMOUNT BACK AFTER ADJUSTMENT. THE CLAIMS OF THE CUSTOMERS HA VE BECOME BARRED BY LIMITATION AND THE ASSESSEE HAS TREATED THE SAID AMOUNT AS ITS OWN MONEY. THEREFORE, A NEW ASSET CAME INTO BEING BY AUTOMATIC OPERATION OF LAW THROUGH THE TRADE TRANSACTION AND THE SAID AMOUNT HAS BEEN ENTERED INTO P&L ACCOUNT. THEREFOR E, IN AS MUCH AS THE DEPOSITED AMOUNT HAD ITS CHARACTER CHANGED, WHEN IT BECOMES THE MONEY OF THE ASSESSEE DUE TO THE OPERATIONS OF LAW OF LIMITATION, SUCH AN AMOUNT WOULD BECOME AN INCOME EXIGIBLE TO TAX AT THE HANDS OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS THE HON'BLE APEX COURT IN THE SAID JUDGEMENT HAS CLEARLY HELD THAT WHEN IN THE COURSE OF TRADING TRANSACTION, THE ASSESSEE BECOMES ENTITLED TO THE MONEY SUCH AN AMOUNT WOULD BECOME A TAXABLE INCOME AT THE HANDS OF THE ASSESSEE. THE HON'BLE MADRAS HIG H COURT OBSERVED THAT IN THE CASE BEFORE IT THE ASSESSEE WAS NOT TRADING IN MONEY TRANSACTIONS AND A GRANT OF LOAN BY A BANK CANNOT BE TERMED AS TRADING TRANSACTION AND IT CANNOT ALSO BE CONSTRUED IN THE COURSE OF BUSINESS. INDISPUTABLY, THE ASSESSEE OBTAI NED LOAN FOR THE PURPOSE OF INVESTING IN ITS CAPITAL ASSETS AND THE SAID LOAN HAS BEEN WAIVED BY THE BANK. THE HON'BLE MADRAS HIGH COURT HAS HELD THAT THEREFORE, THE FACTS INVOLVED IN THE PRESENT CASE ARE TOTALLY DIFFERENT IN THE FACTS INVOLVED IN CIT VS. T.V. SUNDARAM LYENGAR & SONS LTD. (1996) 222 ITR 344 (SC). IN THE SAID CASE, ADMITTEDLY THERE WAS TRADING TRANSACTION WHEREAS IN THE PRESENT CASE IT IS NOT SO. THERE IS NO CHANGE IN THE CHARACTER WITH REGARD TO THE ORIGINAL RECEIPT WHICH WAS CAPITAL IN NAT URE INTO THAT OF A TRADING TRANSACTION. THE HON'BLE COURT HAS FURTHER SEEN THAT THERE IS MARKED DIFFERENCE BETWEEN LOAN AND A SECURITY DEPOSIT. THE HON'BLE MADRAS HIGH COURT HAS HELD THAT PROVISION OF SECTION 28(IV) IS NOT APPLICABLE TO THE CASE OF THE APP ELLANT AS THE APPELLANT HAS ENTERED INTO A LOAN TRANSACTION AND THE SAME CANNOT BE TERMED AS INCOME WITHIN THE PURVIEW OF SECTION 20 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD 2(24) OF THE ACT. THE HON'BLE MADRAS HIGH COURT HAS FURTHER HELD THAT SECTION 41(1) HAS NO APPLICATION AT ALL TO THE FACTS OF THE CASE. THE HON'BLE MADRAS HIGH COURT, THEREFORE, DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE AND REVERSED THE ORDERS OF LOWER AUTHORITIES. 8.5.3. ON PERUSAL OF THE BRIEF FACTS AND RATIO LAID DOWN BY THE ABOVE MENTIONED DECISIONS RELIED ON BY THE A.O. AND THE APPELLANT, THE FOLLOWING PROPOSITIONS OF LAW HAVE EMERGED (1) IN THE CASES WHERE THE LOAN HAS BEEN OBTAINED AND UTILIZED FOR ACQUIRING CAPITAL ASSETS AND IN ANY OF THE SUBSEQUENT YEARS IF THE SAID LOAN LIABILITY HAS BEEN WAIVED THEN THE SAME IS N OT LIABLE TO TAX U/S 41(1) OR U/S 28 OF THE ACT. (2) IN THE CASES WHERE THE LOAN HAS BEEN OBTAINED AND UTILIZED FOR TRADING ACTIVITY I.E. FOR REGULAR BUSINESS OF THE ASSESSEE AND NOT FOR ACQUIRING CAPITAL ASSET, THE SAID LIABILITY IS TO BE TREATED AS TRADI NG LIABILITY AND THE WAIVER OF SUCH LOAN SHALL BE LIABLE TO TAX U/S 41(1) OR 28 OF THE ACT. (3) A JUDGEMENT CANNOT BE READ AS A STATUTE AND HAS TO BE MADE APPLICABLE TO THE FACTS AND CONSIDERATION OF EACH CASE AND RATIO LAID DOWN THEREIN WILL HAVE TO BE AP PLIED TO THE FACTS AND CIRCUMSTANCES OF EACH CASE. (4) THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS. T.V. SUNDARAM LYENGAR & SONS LTD. (SUPRA) IS NOT APPLICABLE TO THE CASES WHERE THE LOAN HAS BEEN OBTAINED FOR ACQUIRING CAPITAL ASSET AND IN AN Y OF THE SUBSEQUENT YEARS THE SAID LOAN LIABILITY HAS BEEN WAIVED. IN THE SAID CASE DECIDED BY THE HON'BLE APEX COURT, THE OUTSTANDING AMOUNT REPRESENTED CREDIT BALANCES IN THE NAME OF THE TRADE PARTIES. THE SAID DEPOSITS WERE TAKEN IN THE COURSE OF TRADE FROM THE CUSTOMERS WHO DID NOT CLAIM THE REMAINING OUTSTANDING AMOUNT WHICH HAS BECOME BARRED BY LIMITATION AND HENCE THE ASSESSEE HAS TREATED THE SAID AMOUNT AS OWN MONEY. THE WAIVER OF THE SAID AMOUNT IS THEREFORE HELD TO BE TRADING TRANSACTION LIABLE TO TAX. (5) THE ISSUE DECIDED IN THE CASE OF POLYFLEX INDIA LTD. IS TOTALLY DIFFERENT. IN THE SAID CASE EXCISE DUTY PAID ON THE GOODS TRADED HAS BEEN CLAIMED AS EXPENDITURE AND IN SUBSEQUENT YEAR IT HAS BEEN REFUNDED BY EXCISE DEPARTMENT AS THE FIRST APPELLA TE AUTHORITY AND 21 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD CEGATE & HON'BLE HIGH COURT HAS DECIDED THE APPEALS IN FAVOUR OF THE ASSESSEE. AGAINST THE SAID DECISIONS, EXCISE DEPARTMENT HAS PREFERRED APPEAL AND HENCE THE APPELLANT CLAIMED THAT THE ISSUE WAS PENDING DETERMINATION BY HON'BLE SUPREME C OURT. IT WAS UNDISPUTED FACT IN THE SAID CASE THAT THE RECEIPT OF EXCISE REFUND IS TRADING RECEIPT; THE ISSUE RAISED BY THE APPELLANT IS THAT IN VIEW OF APPEAL OF THE EXCISE DEPARTMENT PENDING IN SUPREME COURT, THE REFUND OF EXCISE DUTY HAS NOT REACHED FIN ALITY AND HENCE SECTION 41(1) IS NOT APPLICABLE. (6) THE FACTS OF THE CASE DECIDED BY NECTAR BEVERAGES PVT. LTD. VS. DCIT (SUPRA) ARE TOTALLY DIFFERENT. IN THE SAID CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFT DRINKS AND THE ASSESSEE HAS RECEIVED SALE PROCEEDS OF SCRAP OF BOTTLES AND CRATES ON WHICH THE APPELLANT HAS CLAIMED 100% DEPRECIATION. THE SAID RECEIPT ON ACCOUNT OF SCRAP IS HELD TO BE TRADING RECEIPT LIABLE TO TAX. 8.5.4 IN VIEW OF THE ABOVE LEGAL PROPOSITIONS, I PROCEED TO DECIDE GROUND N OS.4 & 5. IN RESPECT OF WAIVER OF CASH CREDIT LOAN IN THE CASE OF THE APPELLANT IT HAS BEEN OBSERVED THAT THE A.O. HAS HELD THAT THE SAID LOAN HAS BEEN UTILIZED FOR TRADING PURPOSE AND THE APPELLANT HAS NOT REBUTTED THIS FACT CLAIMED BY THE A.O. THE APPELL ANT HAS SIMPLY CLAIMED THAT THE CASH CREDIT FACILITY GRANTED BY THE BANK IS NOT TRADING ACTIVITY AND THE OUTSTANDING BALANCE OF CASH CREDIT ACCOUNT IS NOT TRADING LIABILITY REFERRED TO IN SECTION 41(1) OF THE ACT. IT HAS BEEN OBSERVED FROM THE VARIOUS DECI SIONS RELIED ON BY THE A.O. AND THE APPELLANT THAT IN THE CASES WHERE THE LOAN HAS BEEN OBTAINED AND UTILIZED FOR TRADING ACTIVITY I.E. FOR REGULAR BUSINESS OF THE ASSESSEE AND NOT FOR ACQUIRING CAPITAL ASSET, THE SAID LIABILITY IS TO BE TREATED AS TRADING LIABILITY AND THE WAIVER OF SUCH LOAN SHALL BE LIABLE TO TAX U/S 41(1) OR 28 OF THE ACT. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE VARIOUS DECISIONS REFERRED TO ABOVE, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS JUSTIFIED IN MAKING ADDITION OF RS.1,27,53,855/ - ON WAIVER OF CASH CREDIT LOAN WHICH HAS BEEN UTILIZED FOR TRADING PURPOSE AND NOT FOR ACQUIRING CAPITAL ASSET. GROUND NO.4 IS, THEREFORE, DISMISSED. 8.5.5 IN RESPECT OF WAIVER OF TERM LOAN OF RS. 11,72,56,695/ - , IT HAS BEEN NOTICED THAT THE SAID LOAN HAS BEEN UTILIZED FOR ACQUIRING 22 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD CAPITAL ASSETS. IT HAS BEEN OBSERVED FROM THE VARIOUS DECISIONS RELIED ON BY THE A.O. AND THE APPELLANT THAT IN THE CASES WHERE THE LOAN HAS BEEN OBTAINED AND UTILIZED FOR ACQUIRING CAPITAL ASSETS AND IN ANY OF THE SUBSEQUENT YEARS IF THE SAID LOAN LIABILITY HAS BEEN WAIVED THEN THE SAME IS NOT LIABLE TO TAX U/S 41(1) OR U/S 28 OF THE ACT. IT HAS BEEN OBSERVED FROM THE VARIOUS DECISIONS RELIED ON BY THE A.O. AND THE APP ELLANT THAT A JUDGEMENT CANNOT BE READ AS A STATUTE AND HAS TO BE MADE APPLICABLE TO THE FACTS AND CONSIDERATION OF EACH CASE AND RATIO LAID DOWN THEREIN WILL HAVE TO BE APPLIED TO THE FACTS AND CIRCUMSTANCES OF EACH CASE. THE DECISION OF HON'BLE APEX COUR T IN THE CASE OF CIT VS. T.V. SUNDARAM LYENGAR & SONS LTD. (SUPRA) IS NOT APPLICABLE TO THE CASES WHERE THE LOAN HAS BEEN OBTAINED FOR ACQUIRING CAPITAL ASSET AND IN ANY OF THE SUBSEQUENT YEARS THE SAID LOAN LIABILITY HAS BEEN WAIVED. IT HAS BEEN OBSERVED FROM THE VARIOUS DECISIONS RELIED ON BY THE A.O. AND THE APPELLANT THAT EVEN IF THE APPELLANT HAS CLAIMED DEPRECIATION ON THE CAPITAL ASSET ACQUIRED OUT OF TERM LOAN THEN ALSO THE PROVISIONS OF SECTION 41(1) OR SECTION 28 OF THE ACT DO NOT BECOME APPLICAB LE AND THE WAIVER OF THE TERM LOAN CANNOT BE TAXED UNDER THE SAID SECTIONS. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE ABOVE REFERRED DECISIONS, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIE D IN MAKING ADDITION OF RS.11,72,56,695/ - ON ACCOUNT OF WAIVER OF TERM LOAN WHICH HAS BEEN UTILIZED FOR ACQUIRING CAPITAL ASSETS. THE ADDITION OF RS.11,72,56,695/ - IS, THEREFORE, DELETED. GROUND NO.5 STANDS ALLOWED . 1 5 . WE HAVE HEARD THE PARTIES. WE FI ND THAT THE LD. CIT(A) HAS DISCUSSED THE RELEVANT PRECEDENT S ON THIS ISSUE. ADMITTEDLY, THERE IS NO DISPUTE ABOUT THE FACT THAT THE SAID AMOUNT PERTAINS TO THE TERM LOAN . IN THIS RESPECT WE MAY LIKE TO REFERRED TO THE DECISION OF THE HON'BLE HIGH COURT O F BOMBAY IN THE CASE OF CIT - 3, MUMBAI VS. M/S. XYLON HOLDINGS PVT. LTD . , INCOME TAX APPEAL NO. 3704 OF 2010 JUDGMENT DATED 13 - 09 - 23 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD 2012. THE HON'BLE HIGH COURT HAS CONSIDERED ALL THE RELEVANT DECISIONS O N THIS ISSUE AND HELD AS UNDER: 8) WE HAVE CONSIDERED THE SUBMISSIONS. THE ISSUE ARISING IN THIS CASE STAND COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA (SUPRA).THE DECISION OF THIS COURT IN THE MATTER OF SOLID CONTAINERS (SUPRA) IS ON COMPLETELY DIFFERENT FACTS AND INAPPLICABLE TO THIS CASE. IN THE MATTER OF SOLID CONTAINERS (SUPRA) THE ASSESSEE THEREIN HAD TAKEN A LOAN FOR BUSINESS PURPOSE. IN VIEW OF THE CONSENT TERMS ARRIVED AT, THE AMOUNT OF LOAN TAKEN WAS WAIVED BY THE LENDER. THE CASE OF THE ASSESSEE THEREIN WAS THAT THE L OAN WAS A CAPITAL RECEIPT AND HAS NOT BEEN CLAIMED AS DEDUCTION FROM THE TAXABLE INCOME IN THE EARLIER YEARS AND WOULD NOT COME WITHIN THE PURVIEW OF SECTION 41(1) OF THE ACT. HOWEVER, THIS COURT BY PLACING RELIANCE UPON THE DECISION OF THE APEX COURT IN T HE MATTER OF CIT V. T. V. SUNDARAM IYENGAR AND SONS LTD. 222 ITR 344 HELD THAT THE LOAN WAS RECEIVED BY THE ASSESSEE FOR CARRYING ON ITS BUSINESS AND THEREFORE, NOT A LOAN TAKEN FOR THE PURCHASE OF CAPITAL ASSETS. CONSEQUENTLY, THE DECISION OF THIS COURT I N THE MATTER OF MAHINDRA AND MAHINDRA LIMITED (SUPRA) WAS DISTINGUISHED AS IN THE SAID CASE THE LOAN WAS TAKEN FOR THE PURCHASE OF CAPITAL ASSETS AND NOT FOR TRADING ACTIVITIES AS IN THE CASE OF SOLID CONTAINERS LIMITED (SUPRA). IN VIEW OF THE ABOVE, THE D ECISION OF THIS COURT IN THE MATTER OF SOLID CONTAINERS LIMITED (SUPRA) WILL HAVE NO APPLICATION TO THE FACTS OF THE PRESENT CASE AND THE MATTER STANDS COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LIMITED (SUPRA). THE ALTERNAT IVE SUBMISSION THAT THE AMOUNT OF LOAN WRITTEN OFF WOULD BE TAXABLE UNDER SECTION 28(IV) OF THE ACT ALSO CAME UP FOR CONSIDERATION BEFORE THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LIMITED (SUPRA) AND IT WAS HELD THEREIN THAT SECTION 28(IV) OF THE ACT WOULD APPLY ONLY WHEN A BENEFIT OR PERQUISITE IS RECEIVED IN KIND AND HAS NO APPLICATION WHERE BENEFIT IS RECEIVED IN CASH OR MONEY . 1 6 . IN THIS CASE THE NATURE OF THE LOAN WHICH HAS BEEN WAIVED IN ONE TIME SETTLEMENT IS NOT DISPUTED. IN OUR OPINION, T HE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION IN THE CASE OF M/S. XYLON HOLDINGS PVT. LTD. (SUPRA) AS THE AMOUNT WAIVED PERTAINS TO THE TERM LOAN WHICH WAS TAKEN BY THE ASSESSEE FOR ACQUITION OF THE ASSETS . AFTER CONSIDERING THE 24 ITA NO S. 367 & 417/PN/2012, NATH BIO GENES (I) LTD., A URANGABAD DETAIL REASONING GIVEN BY THE LD. CIT(A) , I N OUR OPINION NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, GROUND NO. 3 IS DISMISSED. 1 7 . IN THE RESULT, THE REVENUES APPEAL IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 27 - 01 - 2014 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 27 TH JANUARY, 2014 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) , AURANGABAD 4 THE CIT, AURANGABAD 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE
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