D.C.I.T. CIRCLE 3(3), MUMBAI V. VIBHADEEP INVESTMENT & TRADING LTD., MUMBAI

ITA 4466/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3485 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KUMARAN
• Assessee Lawyers: ARTI VISSANJI
• Keywords: Capital asset; Capital receipt
• Section: 115JB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI BEFORE SRI JASON P. BOAZ, AM AND SRI SANDEEP GOSAIN , JM ITA NO.4466/MUM/2012 (ASSESSMENT YEAR: 2008-09) THE ASST. COMMISSIONER OF INCOME TAX-3(3), ROOM NO.609, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI 400 020 VS. M/S. VIBHADEEP INVESTMENT & TRADING LTD., MAFATLAL HOUSE, H. T. PAREKH MARG, BACKBAY RECLAMATION, MUMBAI 400 020 PAN: A AACV 1 9 46 M APPELLANT .. RESPONDENT C. O. NO.155/MUM/2013 (IN ITA NO.4466/MUM/2012- AY: 2008-09) M/S. VIBHADEEP INVESTMENT & TRADING LTD., MAFATLAL HOUSE, H. T. PAREKH MARG, BACKBAY RECLAMATION, MUMBAI 400 020 VS. THE ASST. COMMISSIONER OF INCOME TAX-3(3), ROOM NO.609, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI 400 020 PAN: A AACV 1946 M CROSS OBJECTOR .. RESPONDENT REVENUE BY MR. S. S. KUMARAN, DR ASSESSEE BY MS. ARTI VISSANJI, AR DATE OF HEARING 02 - 06 - 2016 DATE OF PRONOUNCEMENT 19 - 08 - 2016 O R D E R PER SANDEEP GOSAIN, (JUDICIAL MEMBER) : THE PRESENT APPEAL BY THE REVENUE BEING ITA NO.4466 /MUM/2012 AND THE CROSS OBJECTION BY THE ASSESSEE BEING C.O. NO.155/MUM/2013 ARE ARISING OUT OF THE ORDER OF THE LEARNED CIT (A) -7, MUMBAI DATED 23-02- 2012 PASSED IN APPEAL NO.CIT (A)-7/DCIT-3(3)/IT-149 /10-11 FOR ASSESSMENT YEAR 2008-09 ON THE FOLLOWING RESPECTIVE EFFECTIVE GROUNDS:- REVENUES APPEAL IN ITA NO.4466/MUM/2012: ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE LD . CIT (A) ERRED IN DELETING THE ADDITION OF RS.8,41,34,321/-, BEING DISALLOWANCE OF PRINCIPAL AMOUNT OF LOAN WAIVED OFF BY THE LENDER ON ACCOUNT OF ONE TIME SETTLEMENT OF LOAN WI TH MAFATLAL FINANCE COMPANY LTD., HOLDING THAT THE LOAN WAS ACQ UIRED FOR ACQUISITION INVESTMENT OF CAPITAL ASSETS AS SUCH IT S WAIVER CANNOT BE TERMED AS REVENUE RECEIPT, WITHOUT APPREC IATING THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSESS EE FAILED TO FURNISH ANY EVIDENCE TO SHOW THAT THE LOAN WAS A CQUIRED FOR THE PURPOSE OF ACQUIRING/INVESTMENT IN CAPITAL ASSETS. THEREFORE THE BENEFIT OF REMISSION OF LOAN AMOUNTS TO BENEFITS AS CONSTRUED U/S. 28(IV) AND IS LIABLE TO BE TAXED AS HELD IN THE CASE OF SOLID CONTAINER LTD. VS. DCIT (308 ITR 417). ASSESSEES C.O.NO.155/MUM/2013 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE DIRECTED FOR DELETION OF DISALLOWANCE MADE OF INTEREST OF RS.14,65,654/- INCURRED DURING THE YEAR. 2. AT FIRST, WE TAKE UP THE REVENUES APPEAL IN ITA NO.4466/MUM/2012. THE BRIEF FACTS IN THE CASE ARE T HAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT IN SH ARES, BONDS AND DEBENTURES FILED ITS RETURN OF INCOME FOR ASSESSMEN T YEAR 2008-09 ON 30-09-2008 DECLARING TOTAL INCOME AT RS.3,77,24,331 /-. THE RETURN WAS SELECTED FOR SCRUTINY AND THE AO AFTER ISSUING STAT UTORY NOTICES AND RECEIVING REPLIES PASSED THE ASSESSMENT ORDER U/S 1 43 (3) OF THE ACT ON 06-10-2010 ASSESSING THE TOTAL INCOME OF THE ASSESS EE AT RS.12,33,24,300/- AFTER DISALLOWING RS.8,41,34,321/ - IN RESPECT OF WAIVER OF LOAN AND RS.14,65,654/- IN RESPECT OF INTEREST. THE AO COMPUTED BOOK PROFIT U/S 115JB OF THE ACT AT RS.12,49,97,809/-. A GGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE LEARNED CIT (A) AND THE LEARNED CIT (A) AFTER CONSIDERING THE F ACTS OF THE CASE HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE THE REBY DELETING THE ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 3 ADDITIONS MADE BY THE AO ON ACCOUNT OF PRINCIPAL AM OUNT OF LOAN WAIVED FOR RS.8,41,34,321/- BUT SUSTAINED THE ACTION OF TH E AO IN DISALLOWING THE INTEREST PAID ON BORROWED LOAN BY HOLDING THAT THE ASSESSEE HAD ADVANCED INTEREST-FREE LOANS TO ITS SUBSIDIARIES/SI STER CONCERNS. AGGRIEVED BY THIS ORDER OF THE LEARNED CIT (A), THE REVENUE A S WELL AS THE ASSESSEE, BOTH IS NOW IN APPEAL BEFORE US ON THE GROUNDS MENT IONED HEREINABOVE. 3. THE SOLE EFFECTIVE GROUND RAISED BY THE REVENUE BEFORE US IS THAT THE LEARNED CIT (A) HAS ERRED IN DELETING THE ADDIT ION OF RS.8,41,34,321/- BEING DISALLOWANCE OF PRINCIPAL AMOUNT OF LOAN WAIV ED BY THE LENDER ON ACCOUNT OF ONE TIME SETTLEMENT OF LOAN WITH MAFATLA L FINANCE CO. LTD. HOLDING THAT THE LOAN WAS ACQUIRED FOR ACQUISITION/ INVESTMENT OF CAPITAL ASSETS AND AS SUCH ITS WAIVER CANNOT BE TERMED AS R EVENUE RECEIPT WITHOUT APPRECIATING THAT IN THE COURSE OF THE ASSE SSMENT PROCEEDINGS THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO SHOW THA T THE LOAN WAS ACQUIRED FOR THE PURPOSE OF INVESTMENT IN CAPITAL A SSETS. THEREFORE, AS PER THE REVENUE, THE BENEFIT OF REMISSION OF LOAN AMOUN TS TO BENEFIT AS CONSTITUTED U/S 28 (IV) OF THE ACT IS LIABLE TO BE TAXED AS HELD IN THE CASE OF SOLID CONTAINER LTD. VS. DCIT REPORTED IN 308 ITR 4 17. 4. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PER USED THE MATERIALS PLACED ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. BEFORE WE DECIDE THE MERITS, IT IS NECESSARY TO ANA LYZE THE ORDER OF THE LEARNED CIT (A). THE RELEVANT PART OF THE ORDER OF THE LEARNED CIT (A) IS REPRODUCED HEREIN BELOW:- ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 4 4.7 I HAVE CONSIDERED THE A.O.S ORDER AS WELL AS THE APPELLANTS A/R SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT THE A. O. TAXED THE AFORESAID WAIVER OF RS.8,41,34,321/- AS REVENUE RECEIPT TO THE APPELLANT COMPANY TAKING STRENGTH FROM JURISDICTION AL HIGH COURTS DECISION IN THE CASE OF SOLID CONTAINER LTD. VS. DC IT 308 ITR 417 ON THE BASIS THAT THE APPELLANT COMPANY HAS ACQUIRED B ENEFIT ON ACCOUNT OF WAIVER OF THE PRINCIPAL AMOUNT AND HENCE THE A.O . WAS OF THE VIEW THAT AS A RESULT OF SUCH BENEFIT ARISEN TO THE APPE LLANT COMPANY, THE SAME WILL BE TAXABLE IN THE HANDS OF THE APPELLANT AS REVENUE RECEIPT U/S 41(1) R. W. S. 28(IV) OF THE IT ACT KEEPING ON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF SOLID CONTAINER LTD. (SUPRA). 4.8 HAVING CONSIDERED THE APPELLANTS SUBMISSION, W HEREIN THE APPELLANTS A/R SPECIFICALLY DRAWN MY ATTENTION TO THE OBSERVATION OF BOMBAY HIGH COURTS JUDGMENT (SUPRA) REFERRED BY TH E A. O., WHICH IS GIVEN ON PAGE NO.421 OF THE DECISION, WHICH IS REPR ODUCED AS UNDER:- THE FACTS OF THE PRESENT CASE ARE ENTIRELY DIFFERE NT AS MUCH AS IT WAS A LOAN TAKEN FOR TRADING ACTIVITY AND ULTIMA TELY, UPON WAIVER THE AMOUNT WAS RETAINED IN THE BUSINESS BY T HE ASSESSEE. THUS, THE PRINCIPAL STATED BY THE SUPREME COURT IN THE CASE OF T. V. SUNDAERAM IYENGER & SONS LIMITED (1996) 222 ITR 344 WOULD BE SQUARELY APPLICABLE TO T HE FA CTS OF THE PRESENT CASE. THE AMOUNT WHICH INITIALLY DID NOT FA LL WITHIN THE SCOPE OF THE PROVISIONS RENDERING IT LIABLE TO TAX SUBSEQUENTLY HAD BECOME THE ASSESSEES INCOME BEING PART OF THE TRADING OF THE ASSESSEE. 4.9 THE APPELLANTS A/R, HAVING DRAWN MY ATTENTION TO THE AFORESAID OBSERVATION OF JURISDICTIONAL HIGH COURT DECISION S UBMITS THAT VIRTUALLY THE CASE AND OBSERVATION OF JURISDICTIONAL HIGH COU RT SUPPORT THE CASE OF THE APPELLANT, AS THE APPELLANT LOAN WAS ACQUIRE D ON ACCOUNT OF MAKING INVESTMENT/ACQUISITION OF CAPITAL ASSET, HEN CE THE WAIVER OF SUCH LOAN ACCOUNT CANNOT BE TERMED BY ANY STRETCH O F IMAGINATION AS REVENUE RECEIPT, AS THE SAID LOAN WAS NOT ACQUIRED ON TRADING RECEIPT, BUT ON ACCOUNT OF MAKING INVESTMENT IN CAPITAL ASSE T. I.E. INVESTMENT IN SHARES, HENCE, THE A. O.S RELIANCE ON THE AFORE SAID JUDGMENT OF JURISDICTIONAL HIGH COURT IS MISPLACED. 4.10 HAVING TAKEN NOTE OF THE JUDGMENTS CITED BY TH E APPELLANT IN ITS SUBMISSION EXTRACTED AS ABOVE SPECIFICALLY THE JUDG MENT OF JURISDICTIONAL ITAT IN THE CASE OF KING PRAWNS LTD. VS. ITO, 2011 TIOL 100-ITA (MUM) AND IN THE CASE OF ISKRAEMECO REGEN T LTD. VS. CIT, 2010-TIOL-776-HC-MADRAS, WHEREIN THE JUDGMENT OF JU RISDICTIONAL HIGH COURT WAS DEALT ON WHICH THE A. O. RELIED UPON AND THEN AFTER IN BOTH THE DECISION IT HAS BEEN SPECIFICALLY HELD THA T THE REMISSION OR REDUCTION OF LIABILITY, WHICH IS CREATED ON CAPITAL ACCOUNT AS THE CASE OF THE APPELLANT. HENCE IN THE GIVEN AFORESAID FACT OF THE APPELLANTS CASE, THE SAME CANNOT RESULT IN A REVENUE RECEIPT M AKING IT TAXABLE U/S ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 5 28 OR U/S 41 OF THE IT ACT. FURTHER I FIND THAT THE MADRAS HIGH COURT IN AFORESAID CASE (SUPRA) HAS HELD SPECIFICALLY THAT O NCE THE LOAN WAS OBTAINED FOR THE PURPOSE OF INVESTING IN CAPITAL AS SET THEN THE WAIVER OF SUCH LOAN IN FAVOUR OF THE ASSESSEE BY THE BANK WIL L NOT CHANGE THE CHARACTER OF RECEIPT WITH REGARD TO ORIGINAL RECEIP T, WHICH WAS OBTAINED INITIALLY FOR INVESTING IN CAPITAL ASSET AND HENCE THE HONBLE MADRAS HIGH COURT HELD THAT WAIVER OF PRINCIPAL SUM IS ALS O NOT TAXABLE U/S 28 (4) OF THE IT ACT, 1961. 4.11 IN THE AFORESAID STATED FACTS OF THE CASE OF T HE APPELLANT, THE APPELLANTS A/R ALSO SPECIFICALLY DREW MY ATTENTION TO THE RECENT JUDGMENT OF HONBLE DELHI HIGH COURT IN THE MATTER OF JUBILIANT SECURITIES PVT. LTD. IN ITA NO.503 OF 2010 REPORTE D IN 197 TAXMAN 394/9, WHERE3IN THE HONBLE HIGH COURT HAS HELD THA T ONCE THE LOAN TAKEN WAS UTILIZED TO GENERATE CAPITAL ASSET AND I .E. INVESTMENT IN SHARES, HENCE ON THE WAIVER OF SUCH LOAN, THE CHARA CTER OF LOAN WILL NOT CHANGE AND WILL REMAIN CAPITAL RECEIPT ITSELF, AS T HE PURPOSE OF LOAN, WHICH WAS UTILIZED BY THE APPELLANT WAS FOR INVESTM ENT IN SHARES. 4.12 THUS HAVING TAKEN NOTE OF APPELLANTS SUBMISSI ON AND ALSO THE DECISIONS CITED THEREIN, WHICH CLEARLY DEPICTS THE CONTENTION OF THE APPELLANT COMPANY THAT THE SAID LOAN WAS TAKEN FOR PURPOSE OF LONG TERM INVESTMENT, WHICH IS EVIDENT FROM APPELLANTS SUBMISSION AS EXTRACTED ABOVE. HENCE AFTER TAKING NOTE OF JURISDI CTIONAL HIGH COURTS DECISION OF SOLID CONTAINER LTD. VS. DCIT SUPRA) AN D MAHINDRA & MAHINDRA LTD. REPORTED IN 261 ITR 501(BOM) AND ALSO THE DECISION OF DELHI HIGH COURT IN THE CASE OF JUBILIANT SECURITIE S PVT. LTD. (SUPRA), I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE A. O. WAS NOT CORRECT IN TAXING THE AFORESAID WAIVER OF LOAN AS R EVENUE RECEIPT. ACCORDINGLY ON THE BASIS OF AFORESAID FACTS OF THE APPELLANTS CASE AND ALSO HAVING TAKEN NOTE OF THE LEGAL POSITION PRONOU NCED BY VARIOUS COURTS AS EXTRACTED ABOVE, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE AFORESAID WAIVER OF LOAN IS CAPITAL RECEIP T AND HENCE T HE SAME IS NOT TAXABLE. ACCORDINGLY THE ADDITION MADE BY TH E A. O. IS DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 5. WE HAVE ANALYZED THE ORDER OF THE LEARNED CIT (A ) AND HAVE ALSO HEARD THE ARGUMENTS FROM BOTH THE SIDES. AS PER THE LEARNED DR APPEARING ON BEHALF OF THE REVENUE IT WAS SUBMITTED THAT IN THE PRESENT CASE THE UNSECURED LOAN WAS RECEIVED IN THE COURSE OF BUSINESS AND IN THE PRESENT YEAR UNDER CONSIDERATION THE SAID LOAN WAS WAIVED AND HENCE, THE LIABILITY CEASED TO EXIST. WHILE ARGUING , THE LEARNED DR RELIED ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 6 UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS PVT. LTD. REPORTED IN 308 ITR 417 (BOM.) . AS PER THE SAID JUDGMENT ALSO THE HONBLE HIGH COURT HAS CONSIDERED THE PROVISIONS OF SECTION 28 (IV) WHICH READS AS UNDER:- SECTION 28 (IV) OF THE INCOME-TAX ACT, 1961 BUSI NESS INCOME VALUE OF ANY BENEFIT OR PERQUISITE ARISING FROM BUS INESS OR EXERCISE OF PROFESSION ASSESSEE HAD TAKEN A LOAN FROM P DURING PREVIOUS YEAR FOR BUSINESS PURPOSE WHICH WAS WRITTEN BACK IN RELEVANT ASSESSMENT YEAR AS A RESULT OF CONSENT TERMS ARRIVE D BETWEEN P AND ASSESSEE ASSESSEE CLAIMED THAT SAID LOAN WAS A CAPITAL AND, THEREFORE, DID NOT COME UNDER SECTION 41(1) ASSES SING OFFICER REJECTED ASSESSEES CONTENTION AND HELD THAT CREDIT BALANCE WRITTEN BACK WAS INCOME OF ASSESSEE IN VIEW OF FACT THAT IT WAS DIRECTLY ARISING OUT OF BUSINESS ACTIVITY OF ASSESSEE AND, T HUS, WAS LIABLE TO TAX UNDER SECTION 28 COMMISSIONER (APPEALS) AS WE LL AS TRIBUNAL, FOLLOWING DECISION OF SUPREME COURT IN CIT V. T. V. SUNDARAM IYENGAR & SONS LTD. (1996) 88 TAXMAN 429, UPHELD TH E ORDER OF ASSESSING OFFICER WHETHER ORDER OF TRIBUNAL WAS I N ACCORDANCE WITH SETTLED POSITION OF LAW AND, THEREFORE, IT WA S TO BE UPHELD HELD, YES. 5.1 THE LEARNED DR WHILE RELYING UPON THE AFORESAID JUDGMENT HAS CATEGORICALLY POINTED OUT THAT SINCE THE FACTS OF T HE AFOREMENTIONED CASE ARE SIMILAR TO THE PRESENT CASE, THEREFORE, FOLLOWI NG THE DECISION OF THE HONBLE SUPREME COURT IN CIT V. T. V. SUNDARAM IYEN GAR & SONS LTD. (1996) 88 TAXMAN 429 IT WAS SUBMITTED BY THE LEARNE D DR THAT THE AO HAS RIGHTLY REJECTED THE ASSESSEES CONTENTION AND HENCE IN VIEW OF THE FACT THAT IT WAS DIRECTLY ARISING FROM BUSINESS ACT IVITY OF THE ASSESSEE AND THUS LIABLE TO BE TAXED U/S 28 (IV) OF THE ACT. IT WAS FURTHER SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE COMPANY HAS ACQUIR ED THE BENEFITS BY ENTERING INTO ONE TIME SETTLEMENT AGREEMENT WITH M/ S. MAFATLAL FINANCE CO. LTD. BY NOT REPAYING THE PRINCIPAL AMOUNT OF RS .8,41,34,321/-, ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 7 THEREFORE, IT IS CRYSTAL CLEAR THAT THE AMOUNT RECE IVED BY THE ASSESSEE BEING WAIVER IS CHARGEABLE TO TAX AND HENCE, THE SA ME HAS RIGHTLY BEEN ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE . 6. ON THE OTHER HAND, THE LEARNED AR SUBMITTED THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAD ENTERED INTO ONE TIM E SETTLEMENT AGREEMENT WITH M/S. MAFATLAL FINANCE CO. LTD. IN RE SPECT OF AMOUNT PAYABLE AGAINST OUTSTANDING LOAN. CONSEQUENTLY, AN AMOUNT OF RS.12,17,18,379/- BEING NO LONGER PAYABLE HAD BEEN WRITTEN OFF. IT WAS FURTHER ARGUED BY THE LEARNED AR THAT VIDE LETTERS DATED 04-08-2010, 25- 08-2010 AND 27-08-2010 SUBMITTED BEFORE THE AO THAT FOR CHARGEABILITY U/S 41 (1) OF THE ACT THERE MUST BE ACTUAL LOAN DUR ING THE EARLIER YEAR. WHENEVER THE LOAN RELATABLE IS OFFERED FOR TAXATION U/S 41(1) OF THE ACT IT HAS BEEN CLAIMED AS DEDUCTION. HOWEVER, IN THE CASE OF PRINCIPLE AMOUNT, THE ASSESSEE COMPANY HAS NEVER BEEN ALLOWED ANY DED UCTION AS NO DEDUCTION WAS MADE FOR THE PRINCIPLE AMOUNT. HOWEVE R, THE PROVISION OF SECTION 41(1) OF THE ACT IS NOT APPLICABLE IN RESPE CT OF PRINCIPLE LOAN AMOUNT. IN THIS REGARD THE LEARNED AR RELIED UPON T HE DECISION OF THE HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF M AHINDRA & MAHINDRA LTD. VS CIT REPORTED IN 261 ITR 501 (BOM.) AND THE DECISION OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CI T VS TOSHA INTERNATIONAL LTD. REPORTED IN 176 TAXMAN 187 (DEL. ). FURTHER, THE LEARNED AR SUBMITTED THAT REGARDING TAXABILITY U/S 2 (24) F OR ANY BENEFIT, WHETHER CONVERTIBLE INTO MONEY OR NOT, SHALL BE TAXED AS PR OFIT & GAINS OF BUSINESS ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 8 OR PROFESSION. HE FURTHER SUBMITTED THAT U/S 28(IV) OF THE ACT DOES NOT APPLY TO CASH RECEIPT. WHEN LOAN AMOUNTS TO RECEIPT IN CASH, IT IS NOT COVERED BY THE DEFINITION OF SECTION 28 (IV). IN TH IS CONNECTION, THE LEARNED AR RELIED UPON THE JUDICIAL PRONOUNCEMENT RENDERED IN THE CASE OF CIT VS MAFATLAL GANGABHAI AND CO. LTD. [219 ITR 644 (SC)] AND CIT VS ALCHEMIC P. LTD. [130 ITR 168 (GUJ). IT WAS FURTHER SUBMITTE D BY THE LEARNED AR THAT WAIVER IS CAPITAL ACCOUNT AS THE LOAN WAS UTILIZED IN SHARES OF SUBSIDIARIES AND IN OTHER COMPANIES. AS THE SAID LOAN WAS NOT TA KEN FOR ASSESSEES TRADING, THE WRITE BACK THEREOF DOES NOT GIVE ANY R ISE TO ANY TRADEABLE RECEIPTS. IN THIS CONNECTION, HE RELIED UPON THE DE CISION RENDERED IN THE CASE OF ACCELERATED FREEZE & DRYING CO. LTD. VS DCI T REPORTED IN 31 SOT 442 (COACHIN). IT WAS FURTHER SUBMITTED BY THE LEARNED AR THAT WHENEVER ON ACCOUNT OF ONE TIME SETTLEMENT THE ASSE SSEE BECOMES DEFAULTER IN REPAYMENT OF LOAN, WAIVER OF THE SAME CANNOT PARTAKE THE CHARACTER OF ASSESSABLE INCOME EITHER U/S 28 (IV) O R U/S 41 (1) OF THE ACT AND THAT EVEN THE CAPITAL RECEIPT IS NOT CHARGEABLE TO TAX U/S 2 (24) OF THE ACT. IN THIS REGARD, THE LEARNED AR PLACED RELIANCE ON THE JUDICIAL PRONOUNCEMENT RENDERED IN THE CASE OF CIT VS. D. P. SANDU BROS. CHEMBUR P. LTD. [273 ITR 1 (SC)]. 7. AFTER HEARING BOTH THE PARTIES AND ANALYZING THE JUDICIAL PRONOUNCEMENTS AS WELL AS THE ORDERS OF THE AUTHORI TIES BELOW WE ARE OF THE VIEW THAT THE MOOT QUESTION FOR CONSIDERATION B EFORE US IS AS TO WHETHER THE RECEIPT IS CAPITAL OR REVENUE IN NATURE AND WHETHER THE ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 9 ASSESSEE WAS IN THE BUSINESS OF FINANCING OR TRADIN G. IN THIS RESPECT WE HAVE APPRECIATED THE SUBMISSIONS OF THE LEARNED AR AND HAVE ALSO NOTED THAT IN THIS REGARD THE ASSESSEE HAS ALREADY TAKEN A SPECIFIC STAND BEFORE THE AO WHICH IS ALREADY MENTIONED IN THE SUBMISSION S MADE BY THE ASSESSEE BEFORE THE AO AT PARA 6.4 WHICH SHOWS THAT THE AO WHILE DEALING WITH THE SAID ISSUE HAS NOTED SOME FACTUALL Y INCORRECT FACTS WHICH ARE CONTRARY TO THE WRITTEN STATEMENTS MADE BY THE ASSESSEE BEFORE THE AO. BUT THE LEARNED CIT (A) HAS CONSIDERED THE DEPT H OF THE STAND TAKEN BY THE ASSESSEE AND THE FACTS OF THE CASE AND HAS R IGHTLY COME TO THE CONCLUSION THAT THE SAID LOAN WAS TAKEN FOR THE PUR POSE OF LONG TERM INVESTMENTS AND THE LEARNED CIT (A) HAS ALSO TAKEN NOTE OF THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT RENDERED I N THE CASE OF (I) SOLID CONTAINERS LTD. VS. DCIT [308 ITR 417] AND (II) MAH INDRA & MAHINDRA LTD. VS. CIT [261 ITR 501 (BOM.)] AND THE LEARNED CIT (A ) AFTER CONSIDERING THE SUBMISSIONS RECORDED FROM PARA 4.1 TO 4.12 OF HIS ORDER HAS RIGHTLY COME TO THE CONCLUSION THAT THE AO WAS NOT CORRECT IN TAXING THE AFORESAID WAIVER OF LOAN BY TREATING THE SAME AS REVENUE RECE IPT. NO NEW MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO REBUT/ CONTROVERT THE FINDINGS OF THE LEARNED CIT (A). IN VIEW OF THE ABO VE, WE FIND NO REASON TO DEVIATE FROM THE FINDINGS OF THE LEARNED CIT (A). A CCORDINGLY, WE SUSTAIN THE FINDINGS OF THE LEARNED CIT (A) ON THIS ISSUE A ND DISMISS THE APPEAL OF THE REVENUE. ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 10 8. THE ASSESSEE IN ITS C. O. NO.155/MUM/155 HAS RAI SED SOLITARY GROUND THAT THE LEARNED CIT (A) OUGHT TO HAVE DIREC TED DELETION OF DISALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST FOR RS.14,65,654/- INCURRED DURING THE YEAR. WE HAVE HEARD BOTH THE PA RTIES AND PERUSED THE MATERIALS PLACED ON RECORD. THE LEARNED CIT (A) WHI LE DEALING WITH THIS ISSUE HAS CONSIDERED THE DETAILED SUBMISSIONS AS RE CORDED IN PARA 5.1 TO 5.3 OF HIS ORDER. THE LEARNED CIT (A) HAS ALSO ANAL YZED THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE AND HAS RIGHTLY COME TO THE CONCLUSION THAT THE ADVANCES EXTENDED BY THE ASSESS EE TO ITS SUBSIDIARIES WERE NOT FOR BUSINESS PURPOSES. THE LEARNED CIT (A) HAS ALSO NOTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO ADDUCE ANY VALID PROOF OR EXPLANATION TO SUPPORT THE CONTENTIONS OF THE ASSESSEE. IN THE ABSENCE OF ANY VALID EXPLANATION/EVIDENCE SUPPORTING THE ASSESSEES CLAI M, THE LEARNED CIT (A) HAS RIGHTLY CONFIRMED THE ACTION OF THE AO THE LEARNED CIT (A) WHILE REACHING TO THIS CONCLUSION HAS ALSO APPRECIATED TH E DETAILED SUBMISSION OF THE ASSESSEE WHEREIN IT HAS BEEN SPECIFICALLY RE CORDED THAT THE LOAN AMOUNT HAS BEEN ADVANCED TO THE ASSESSEES SISTER C ONCERNS CAN BE TREATED AS INVESTMENT MADE WITH DEPOSIT WITH THE SI STER CONCERNS. SINCE, IT IS NOT THE BUSINESS ACTIVITY OF THE ASSESSEE COMPAN Y AS CAN BE SEEN FROM THE RECORDS THAT THIS CAN BE INVESTED IN THE MARKET . IT HAS ALSO BEEN NOTED BY THE LEARNED CIT (A) THAT THE ASSESSEE WAS NOT IN A POSITION TO ADDUCE ANY EVIDENCE TO PROVE THAT THE BUSINESS PROSPECT OF THE ASSESSEE ARE INSEPARABLY LINKED WITH ITS SISTER CONCERNS. THEREF ORE, WHILE RIGHTLY APPRECIATING THE ORDER OF THE AO, THE LEARNED CIT ( A) HAS CONFIRMED THE ITA NO.4466/MUM/2012 CO NO.155/MUM/2013 11 ACTION OF THE AO IN DISALLOWING THE INTEREST EXPENS ES BECAUSE THE ASSESSEE HAS ADVANCED INTEREST-FREE LOANS TO ITS SU BSIDIARIES WITHOUT SHOWING THAT THERE WAS ANY BUSINESS EXIGENCY FOR TH E SAME. IN VIEW OF THIS, WE FIND NO REASON TO INTERFERE WITH THE FINDI NGS OF THE LEARNED CIT (A). ACCORDINGLY, WE CONFIRM HIS FINDINGS AND DISMISS TH E GROUND OF CROSS OBJECTION RAISED BY THE ASSESSEE. 9. IN THE RESULT, REVENUES APPEAL AS WELL AS THE CROS S OBJECTION OF THE ASSESSEE, BOTH STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/8/2016. SD/- SD/- (JASON P. BOAZ) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI , DATED 19/8/2016 LAKSHMIKANTA DEKA/SR.PS LAKSHMIKANTA DEKA/SR.PS LAKSHMIKANTA DEKA/SR.PS LAKSHMIKANTA DEKA/SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//