M.J. International Pvt. Ltd., Uttar Pradesh V. ITO, New Delhi

ITA 6296/DEL/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0263 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RINKU SINGH SENIOR
• Assessee Lawyers: V K JAIN CA SHRI VIKAS SINGH
• Keywords: Capital asset; Depreciation; Earning of tax free income; Rule 8D; Set aside
• Section: 14A; 36 (1) (iii); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI. BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6191/DEL./2012 (ASSESSMENT YEAR : 2009-10) ITO, WARD 6 (4), VS. M/S. M.J. INTERNATIONAL LTD., NEW DELHI. B 52, SECTOR 59, NOIDA, GAUTAM BUDH NAGAR, U.P. (PAN : AAACM1572A) ITA NO.6192/DEL./2012 (ASSESSMENT YEAR : 2009-10) ITO, WARD 6 (4), VS. M/S. M.J. ENTERPRISES PVT. LT D., NEW DELHI. B 52, SECTOR 59, NOIDA, GAUTAM BUDH NAGAR, U.P. (PAN : AAACM8819L) ITA NO.6296/DEL./2012 (ASSESSMENT YEAR : 2009-10) M/S. M.J. INTERNATIONAL LTD., VS. ITO, WARD 6 (4), B 52, SECTOR 59, NOIDA, NEW DELHI. GAUTAM BUDH NAGAR, U.P. (PAN : AAACM1572A) ITA NO.6297/DEL./2012 (ASSESSMENT YEAR : 2009-10) M/S. M.J. ENTERPRISES PVT. LTD., VS. ITO, WARD 6 ( 4), B 52, SECTOR 59, NOIDA, NEW DELHI. GAUTAM BUDH NAGAR, U.P. (PAN : AAACM8819L) ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 2 ITA NO.6298/DEL./2012 (ASSESSMENT YEAR : 2009-10) M/S. M.J. GLOBAL PVT. LTD., VS. ITO, WARD 6 (4), B 52, SECTOR 59, NOIDA, NEW DELHI. GAUTAM BUDH NAGAR, U.P. (PAN : AAACM8809J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. JAIN, CA SHRI VIKAS SINGH, CA REVENUE BY : MS. RINKU SINGH, SENIOR DR DATE OF HEARING : 12.03.2019 DATE OF ORDER : 29.03.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : PRESENT CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE BEING DISPOSED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION . 2. THE APPELLANT, ITO, WARD 6 (4), NEW DELHI (HEREI NAFTER REFERRED TO AS THE REVENUE), BY FILING THE PRESEN T APPEALS BEING ITA NOS.6191/DEL/2012 & 6192/DEL/2012, SOUGHT TO SE T ASIDE THE IMPUGNED ORDERS BOTH DATED 10.09.2012 PASSED BY LD. CIT (APPEALS)-IX, NEW DELHI QUA THE ASSESSMENT YEAR 200 9-10 ON THE IDENTICAL GROUNDS EXCEPT THE DIFFERENCE OF AMOUNT OF ADDITION INTER ALIA THAT :- ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 3 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARN CIT(A)-IX HAS ERRED IN RESTRICTING THE ADDITION U/S 41(1) OF THE ACT ON ACCOUNT OF WAIVER OF WORKING CA PITAL LOAN (TO RS.2,32,37,364/- AS AGAINST RS.4,02,76,413/- AND RS .3,11,37,526/- AS AGAINST RS.4,15,65,691/- IN ITA NOS.6191/DEL/201 2 & 6192/DEL/2012 RESPECTIVELY) WORKED OUT BY THE A.O. 2. WHETHER THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE BY MERELY STATING THAT THERE WAS A MIS TAKE IN COMPUTATION OF DISALLOWANCE, WITHOUT EXAMINING AND APPRECIATING THAT THE DISALLOWANCE WAS COMPUTED BY THE A. A. AFTER DETAILED DISCUSSION AND REASONING GIVEN IN TH E ASSESSMENT ORDER. 3. WHETHER THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE WITHOUT POINTING OUT THE ALLEGED MISTA KE IN COMPUTATION OF DISALLOWANCE BY THE A.O. IN THE ASSE SSMENT ORDER. 4. WHETHER THE LD.CIT(A) ERRED IN ACCEPTING THE CON TENTION OF THE ASSESSEE ABOUT MISTAKE IN COMPUTATION WITHOU T AFFORDING ANY OPPORTUNITY TO THE A.O. TO EXPLAIN THE SAME. 3. THE APPELLANTS, M/S. M.J. INTERNATIONAL PVT. LTD . AND M/S. M.J. GLOBAL PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE), BY FILING THE PRESENT APPEALS BEING ITA NO.6296/DEL/20 12 AND 6298/DEL/2012 RESPECTIVELY, SOUGHT TO SET ASIDE THE IMPUGNED ORDERS BOTH DATED 10.09.2012 PASSED BY LD. CIT (AP PEALS)-IX, NEW DELHI QUA THE ASSESSMENT YEAR 2009-10 ON THE ID ENTICAL GROUNDS EXCEPT THE DIFFERENCE OF AMOUNT OF ADDITIO N INTER ALIA THAT:- 1. THE ORDERS PASSED BY THE LD. AO AND CIT (A) ARE ERRONEOUS AND BAD IN LAW. 2. THAT THE LD. CIT (A) ERRED IN NOT APPRECIATING O R CONSIDERING THE CASES OF THE JURISDICTIONAL HIGH CO URT, TITLED CIT V SIEL HOLDING LIMITED [207 TAXMAN 6 (DELHI)(MAG.)] , CIT V VARDHMAN OVERSEAS LTD. [343 ITR 408 (DELHI)] AND CI T VS. ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 4 PHOOL CHAND JIVAN RAM [131 ITR 37 (DELHI)] WHICH AR E SQUARELY APPLICABLE TO THE PRESENT CASE. 3. THAT THE JUDGMENT, RELIED UPON BY THE LD. A.O AN D CIT (A), IN THE SINCERE BELIEF OF THE APPELLANT, LACKS PRECEDENTIAL VALUE AND HENCE, CANNOT BE RELIED ON IN THE PRESENT CASE. 4. THE LD. CIT (A) ERRED IN RESTRICTING THE ADDITIO N MADE BY THE A.O (OF RS.4,15,65,691/- TO 2,32,37,364/- AND R S.4,99,23,273/- TO RS.1,17,85,880/-), WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF SECTION 41 (1) OF THE INCOME TAX ACT, 1961 ARE NOT ATTRACTED TO THE FACTS OF THE CASE AND THAT THE ENT IRE BASIS OF THE ADDITION IS ILLEGAL, ARBITRARY AND MISCONCEIVED. 5. THE APPELLANT WAS ENTITLED TO CONSEQUENTIAL RELI EF AS REGARDS THE APPROPRIATE ADJUSTMENT AGAINST BROUGHT FORWARD LOSSES WHICH WAS DENIED TO IT BY THE LD. CIT (A). 6. THE LD. A.O. WRONGLY INITIATED PENALTY PROCEEDI NGS AGAINST THE APPELLANT AND THE LD. CIT (A) ERRED IN REFUSING TO DELETE THE PENALTY PROCEEDINGS. THE APPELLANT SUBMI TS THAT INITIATION OF THE PENALTY PROCEEDINGS IS TOTALLY UN WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 4. THE APPELLANT, M/S. M.J. ENTERPRISES PVT. LTD. ( HEREINAFTER REFERRED TO AS THE ASSESSEE), BY FILING THE PRESE NT APPEAL BEING ITA NO.6297/DEL/2012, SOUGHT TO SET ASIDE THE IMPUG NED ORDER DATED 10.09.2012 PASSED BY LD. CIT (APPEALS)-IX, N EW DELHI QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUNDS INTER AL IA THAT :- 1. THE ORDERS PASSED BY THE LD. AO AND CIT (A) AR E ERRONEOUS AND BAD IN LAW. 2. THAT THE LD. CIT (A) ERRED IN NOT APPRECIATING O R CONSIDERING THE CASES OF THE JURISDICTIONAL HIGH CO URT, TITLED CIT V SIEL HOLDING LIMITED [207 TAXMAN 6 (DELHI)(MAG.)] , CIT V VARDHMAN OVERSEAS LTD. [343 ITR 408 (DELHI)] AND CI T VS. PHOOL CHAND JIVAN RAM [131 ITR 37 (DELHI)] WHICH AR E SQUARELY APPLICABLE TO THE PRESENT CASE. 3. THAT THE JUDGMENT, RELIED UPON BY THE LD. A.O AN D CIT (A), IN THE SINCERE BELIEF OF THE APPELLANT, LACKS PRECEDENTIAL VALUE AND HENCE, CANNOT BE RELIED ON IN THE PRESENT CASE. ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 5 4. THE LD. CIT (A) ERRED IN RESTRICTING THE ADDITIO N MADE BY THE A.O (OF RS.4,02,76,413/-) TO RS.3,1137,526/-, W ITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF SECTIO N 41 (1) OF THE INCOME TAX ACT, 1961 ARE NOT ATTRACTED TO THE FACTS OF THE CASE AND THAT THE ENTIRE BASIS OF THE ADDITION IS ILLEGA L, ARBITRARY AND MISCONCEIVED. 5. THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLD ING THE DISALLOWANCE OF RS.2,02,436/- (WHICH HAD BEEN MADE BY THE LD. AO UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 RE AD WITH THE INCOME TAX RULES, 1962, IN VIEW OF THE FACT THAT TH E APPELLANT HAD NOT EARNED ANY INCOME IN WHICH EXEMPTION WAS CL AIMED. IN OTHER WORDS, THE BASIS FOR INVOKING SECTION 14A IS DEVOID OF MERIT. 6. THE APPELLANT WAS ENTITLED TO CONSEQUENTIAL RELI EF AS REGARDS THE APPROPRIATE ADJUSTMENT AGAINST BROUGHT FORWARD LOSSES WHICH WAS DENIED TO IT BY THE LD. CIT (A). 7. THE LD. A.O. WRONGLY INITIATED PENALTY PROCEEDI NGS AGAINST THE APPELLANT AND THE LD. CIT (A) ERRED IN REFUSING TO DELETE THE PENALTY PROCEEDINGS. THE APPELLANT SUBMI TS THAT INITIATION OF THE PENALTY PROCEEDINGS IS TOTALLY UN WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 5. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS INTO THE BUSI NESS OF MANUFACTURING OF CORRUGATED BOXES, PRINTING & PACKA GING AND ALLIED JOB WORKS. IN M/S. M.J. INTERNATIONAL PRIVAT E LTD., M/S. MJ GLOBAL PRIVATE LTD. AND M/S. MJ ENTERPRISES PRIVATE LIMITED BELONGING TO SAME PROMOTER HAVE AVAILED OF LOANS FR OM CANARA BANK WHICH BECAME NON-PERFORMING ASSETS (NPA) IN TH E YEAR 2003 FOR AND DURING AY 2009-10, AFORESAID LOANS WER E SUBJECTED TO ONE TIME SETTLEMENT. ONE TIME SETTLEMENT OF DUE LI ABILITY OF MJ GROUP IS EXTRACTED FOR READY PERUSAL AS UNDER :- ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 6 DETAILS OF ONE TIME SETTLEMENT OF DUE LIABILITIES W ITH CANARA BANK OF MJ GROUP COMPANY NAME LOAN FOR PLANT & MACHINERY/ BUILDING / OTHER FIXED ASSETS VALUE OF BOOK DEBTS/ SSB/ ILC VALUE OF DYES, NEGATIVES POSITIVES AND MACHINERY/ MOTOR TOOLS SEPARATE PARTS THOUGH OF CAPITAL NATURE BUT SHOWN IN STOCK STATEMENT FOR ARRIVING DRAWING POWER TOTAL WORKING CAPITAL LOAN TOTAL LOAN SETTLEMENT AMOUNT WAIVER M J INTERNATIONA L PVT. LTD. 57,049,719 532,488 30,251,340 30,783,828 87,833,547 22,000,000 65,833,547 M J GLOBAL PVT. LTD. 80,153,000 2,741,501 22,028,772 24,770,273 104,923, 273 55,000,000 49,923,273 M J ENTERPRISES PVT. LTD. 29,584,985 11,482,438 30,178,671 41,661,109 71,246, 094 18,000,000 53,246,094 6. AO DECIDED THE ISSUE AS TO WHETHER WAIVER OF LOA N ON ACCOUNT OF ONE TIME SETTLEMENT IS TAXABLE UNDER SEC TION 41(1) OF THE INCOME-TAX ACT, 1961 IN THE HANDS OF THE ASSESSEE A ND TAKEN THE VIEW THAT WAIVER OF TERM LOAN FOR ACQUISITION OF CA PITAL ASSETS DOES NOT COME UNDER THE PURVIEW OF SECTION 41(1) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) WHEREAS WAIVER OF W ORKING CAPITAL LOAN IS REMISSION OF LIABILITY COVERED UNDER THE PR OVISIONS OF SECTION 41(1) OF THE ACT. CONSEQUENTLY, LOAN AMOUN T OF ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 7 RS.5,56,17,916/- IN AY 2009-10 RESPECTIVELY BEING W ORKING CAPITAL LOAN HAS BEEN SUBJECTED TO TAX UNDER THE PROVISIONS CONTAINED UNDER SECTION 41(1) OF THE ACT AND MADE ADDITION THEREOF TO THE TOTAL INCOME OF THE ASSESSEE. 7. IN ITA NO.6297/DEL.2012, AO BY INVOKING THE PROV ISIONS CONTAINED UNDER SECTION 14A MADE DISALLOWANCE OF RS .2,02,436/-. 8. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF APPEALS WHO HAS PARTLY ALLOWED THE APPEALS. FEELIN G AGGRIEVED, THE ASSESSEE AS WELL AS THE REVENUE HAVE COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 OF ITA NOS.6296/DEL/2012, 6297/DEL/2012 & 6298/DEL/2012 (ASSESSEES APPEAL) 7. GROUND NO.1 OF ITA NOS.6296/DEL/2012, 6297/DEL/2 012 & 6298/DEL/2012 OF ASSESSEES APPEAL IS GENERAL IN NA TURE, HENCE NEEDS NOT ADJUDICATION. ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 8 GROUNDS NO.2, 3, 4 & 5 OF ITA NOS.6296/DEL/2012 & 6298/DEL/2012 (ASSESSEES APPEAL) GROUNDS NO.2, 3, 4 & 6 OF ITA NOS. 6297/DEL/2012 (ASSESSEES APPEAL) AND GROUNDS NO.1, 2, 3 & 4 OF ITA NOS.6191/DEL/2012 & 6192/DEL/2012 (REVENUES APPEAL) 8. IN AY 2009-10, IN CASE OF MJ INTERNATIONAL PRIVA TE LIMITED AND IN CASE OF MJ ENTERPRISES PRIVATE LIMITED, THE REVENUE HAS CHALLENGED THE RELIEF GIVEN BY THE LD. CIT (A) BY R ESTRICTING THE ADDITION FROM RS.4,02,76,413/- TO RS.2,32,37,364/- AND RS.4,15,65,691/- TO RS.3,11,37,526/- IN CASES OF MJ INTERNATIONAL PRIVATE LTD. AND MJ ENTERPRISES PRIVATE LTD. RESPEC TIVELY UNDER SECTION 41(1) OF THE ACT. LD. DR FOR THE REVENUE A LSO FILED WRITTEN SUBMISSIONS DATED 17.04.2018 WHICH HAS BEEN MADE PA RT OF THE JUDICIAL RECORD. HOWEVER, AT THE TIME OF ARGUMENT, THE LD. DR FOR THE REVENUE STATED THAT ON RECEIPT OF REPORT GIVEN BY AO AS TO THE COMPUTATION OF DISALLOWANCE UNDER SECTION 41(1) OF THE ACT, THE REVENUE HAS LEFT WITH NO GRIEVANCE. IN THE CIRCUMS TANCES, REVENUES APPEALS BEING ITA NOS.6191/DEL/2012 & 619 2/DEL/2012 STAND DISMISSED. 9. UNDISPUTEDLY, ASSESSEES HAVE AVAILED OF LOAN FRO M CANARA BANK WHICH BECAME NPA IN THE YEAR 2003-04 AND THE A SSESSEE HAS ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 9 OPTED FOR ONE TIME SETTLEMENT. IT IS ALSO NOT IN D ISPUTE THAT THE AO HAS ACCEPTED THE WAIVER OF TERM LOAN AVAILED OF FOR ACQUISITION OF CAPITAL ASSET NOT COVERED UNDER SECTION 41(1) OF TH E ACT. IT IS ALSO NOT IN DISPUTE THAT AO HAS SUBJECTED WAIVER OF LOAN TAKEN BY THE ASSESSEE FOR WORKING CAPITAL UNDER SECTION 41(1) OF THE ACT. 10. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, THE SOLE QUESTION ARISES FOR DETERMINATIO N IN THIS CASE IS :- AS TO WHETHER WAIVER OF LOAN AVAILED OF BY THE ASS ESSEE FOR WORKING CAPITAL FALLS WITHIN THE PURVIEW OF SEC TION 41(1) OF THE ACT. 11. IT IS MATTER OF RECORD THAT THE TOTAL OUTSTANDI NG LOAN OF RS.8,78,33,547/- WAS SETTLED FOR RS.2,20,00,000/- W ITH NET WAIVER AMOUNT OF RS.6,58,33,547/- AS DETAILED AT PAGE 2 OF THE ASSESSMENT ORDER. IT IS THE CASE OF THE ASSESSEE THAT THE WOR KING CAPITAL LOAN IS STATED AT RS.3,07,83,828/- AND GIVEN ITS BREAK UP A S UNDER :- VALUE OF BOOK DEBTS / SSB / ILC 5,32,488/- VALUE OF DYES, NEGATIVES, POSITIVES AND MACHINERY / MOTOR TOOLS SPARE PARTS THOUGH OF CAPITAL NATURE BUT SHOWN IN STOCK STATEMENT FOR ARRANGING DRAWING POWER 3,02,51,340/- TOTAL 3,07,83,828/- 12. NOW, THE LD. AR FOR THE ASSESSEE CONTENTED THAT VALUE OF DYES AND MACHINERY TOOLS ARE OF CAPITAL IN NATURE AND AS SUCH, THE ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 10 WORKING CAPITAL LOAN AND WAIVER THEREOF ALSO AMOUNT ED TO REMISSION OF THE TERM LOAN AND AS SUCH NOT CHARGEAB LE TO TAX UNDER SECTION 41(1) OF THE ACT. 13. LD. AR FOR THE ASSESSEE BY RELYING UPON THE DEC ISION RENDERED BY HONBLE SUPREME COURT IN CASE CITED AS CIT VS. MAHINDRA AND MAHINDRA LTD. CIVIL APPEAL NOS.6949- 6950 OF 2006 ORDER DATED 24.04.2018 FURTHER CONTENDED THAT THE AO HAS WRONGLY TREATED THE PROPORTIONATE AMOUNT OF ENTIRE WORKING CAPITAL LOAN OF RS.3,07,83,828/- AS TAXABLE UNDER SECTION 4 1(1) OF THE ACT WHEREAS OUT OF THE SAID LOAN, RS.3,02,51,340/- IS O N ACCOUNT OF LOAN OF CAPITAL NATURE TO WHICH PROVISIONS OF SECTION 41 (1) OF THE ACT ARE NOT APPLICABLE. 14. HONBLE SUPREME COURT IN CASE OF MAHINDRA AND MAHINDRA LTD. (SUPRA) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF T HE ASSESSEE WHEREIN FOLLOWING QUESTIONS OF LAW WERE FRAMED :- 5. THE SHORT POINT FOR CONSIDERATION BEFORE THIS C OURT IS WHETHER IN THE PRESENT FACTS AND CIRCUMSTANCES OF T HE CASE THE SUM OF RS.57,74,064/- DUE BY THE RESPONDENT TO KAIS ER JEEP CORPORATION WHICH LATER ON WAIVED OFF BY THE LENDER CONSTITUTE TAXABLE INCOME OF THE RESPONDENT OR NOT? 14) ANOTHER IMPORTANT ISSUE WHICH ARISES IS THE AP PLICABILITY OF THE SECTION 41 (1) OF THE IT ACT. THE SAID PROVI SION IS RE- PRODUCED AS UNDER: 41. PROFITS CHARGEABLE TO TAX.- (1) WHERE AN ALLO WANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR AN Y YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIA BILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO A S THE ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 11 FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR,- (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BYWAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR XXX 15. HONBLE APEX COURT DECIDED BOTH THE AFORESAID Q UESTIONS IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDI NGS :- 13) ON A PLAIN READING OF SECTION 28 (IV) OF THE I T ACT, PRIMA FACIE, IT APPEARS THAT FOR THE APPLICABILITY OF THE SAID PROVISION, THE INCOME WHICH CAN BE TAXED SHALL ARISE FROM THE BUSINESS OR PROFESSION. ALSO, IN ORDER TO INVOKE THE PROVISION OF SECTION 28 (IV) OF THE IT ACT, THE BENEFIT WHICH IS RECEIVED H AS TO BE IN SOME OTHER FORM RATHER THAN IN THE SHAPE OF MONEY. IN TH E 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 O F LOAN. THEREFORE, THE VERY FIRST CONDITION OF SECTION 28 ( IV) OF THE IT ACT WHICH SAYS ANY BENEFIT OR PERQUISITE ARISING FROM T HE BUSINESS SHALL BE IN THE FORM OF BENEFIT OR PERQUISITE OTHER THAN IN THE SHAPE OF MONEY, IS NOT SATISFIED IN THE PRESENT CAS E. 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 SE CTION 28 (IV) OF THE IT ACT. 14) ANOTHER IMPORTANT ISSUE WHICH ARISES IS THE APP LICABILITY OF THE SECTION 41 (1) OF THE IT ACT. THE SAID PROVI SION IS RE- PRODUCED AS UNDER: 41. PROFITS CHARGEABLE TO TAX.- (1) WHERE AN ALLOW ANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY Y EAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILIT Y INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIR ST- MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVI OUS YEAR,- ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 12 (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BYWAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR X X X 15) ON A PERUSAL OF THE SAID PROVISION, IT IS EVIDE NT THAT IT IS A SINE QUA NON THAT THERE SHOULD BE AN ALLOWANCE OR D EDUCTION CLAIMED BY THE ASSESSEE IN ANY ASSESSMENT FOR ANY Y EAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE. THEN, SUBSEQUENTLY, DURING ANY PREVIOUS YEAR, IF TH E CREDITOR REMITS OR WAIVES ANY SUCH LIABILITY, THEN THE ASSES SEE IS LIABLE TO PAY TAX UNDER SECTION 41 OF THE IT ACT. THE OBJECTI VE 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 DEDUC TION AND ANOTHER BY NOT BEING TAXED ON THE BENEFIT RECEIVED BY HIM IN THE LATER YEAR WITH REFERENCE TO DEDUCTION ALLOWED EARL IER IN CASE OF REMISSION OF SUCH LIABILITY. IT IS UNDISPUTED FACT THAT THE RESPONDENT HAD BEEN PAYING INTEREST AT 6 % PER ANNU M TO THE KJC AS PER THE CONTRACT BUT THE ASSESSEE NEVER CLAI MED 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 RECEIVE D AMORTIZATION BENEFIT. AMORTIZATION IS AN ACCOUNTING TERM THAT REFERS TO THE PROCESS OF ALLOCATING THE COST OF AN ASSET OVER A PERIOD OF TIME, HENCE, IT IS NOTHING ELSE THAN DEPR ECIATION. DEPRECIATION IS A REDUCTION IN THE VALUE OF AN ASSE T OVER TIME, IN PARTICULAR, TO WEAR AND TEAR. THEREFORE, THE DEDUCT ION CLAIMED BY THE RESPONDENT IN PREVIOUS ASSESSMENT YEARS WAS DUE TO THE DEPRECATION OF THE MACHINE AND NOT ON THE INTEREST PAID BY IT. 16) MOREOVER, THE PURCHASE EFFECTED FROM THE KAISER JEEP CORPORATION IS IN RESPECT OF PLANT, MACHINERY AND T OOLING EQUIPMENTS WHICH ARE CAPITAL ASSETS OF THE RESPONDE NT. 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 LIABILITY. SECTION 41 (1) OF THE IT ACT PARTICULAR LY DEALS WITH THE REMISSION OF TRADING LIABILITY. WHEREAS IN THE INST ANT CASE, WAIVER ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 13 OF LOAN AMOUNTS TO CESSATION OF LIABILITY OTHER THA N TRADING LIABILITY. HENCE, WE FIND NO FORCE IN THE ARGUMENT OF THE REVENUE THAT THE CASE OF THE RESPONDENT WOULD FALL UNDER SE CTION 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 REASONS: (A) SECTION 28(IV) OF THE IT ACT DOES NOT APPLY ON THE PRESENT CASE SINCE THE RECEIPTS OF RS 57,74,064/- ARE IN THE NATURE OF CASH OR MONEY. (B) SECTION 41(1) OF THE IT ACT DOES NOT APPLY SINC E WAIVER OF LOAN DOES NOT AMOUNT TO CESSATION OF TRADING LIABILITY. IT IS A MATTER OF RECORD THAT TH E RESPONDENT HAS NOT CLAIMED ANY DEDUCTION UNDER SECTION36 (1) (III) OF THE IT ACT QUA THE PAYMENT O F INTEREST IN ANY PREVIOUS YEAR. 18) IN VIEW OF ABOVE DISCUSSION, WE ARE OF THE CONS IDERED VIEW THAT THESE APPEALS ARE DEVOID OF MERITS AND DESERVE TO BE DISMISSED. 16. SO, IN VIEW OF THE RATIO OF THE DECISION OF MAHINDRA AND MAHINDRA LTD. (SUPRA) AS CULLED OUT BY THE HONBLE APEX COURT, WE ARE OF THE CONSIDERED VIEW THAT SECTION 41(1) OF THE ACT SPECIFICALLY DEALS WITH THE REMISSION OF TRADING LI ABILITY, WHEREAS IN THE INSTANT CASE, ASSESSEE CLAIMED THAT THE AO HAS CONSIDERED ENTIRE WORKING CAPITAL LOAN OF RS.3,07,83,828/- TO WORK OU T THE PROPORTIONATE AMOUNT TO BE TAXABLE UNDER SECTION 41 (1) OF THE ACT WHEREAS OUT OF WORKING CAPITAL LOAN OF RS.3,07,83,8 28/-, LOAN OF RS.3,02,51,340/- REPRESENTS LOAN OF CAPITAL NATURE BEING THE VALUES OF DYES, NEGATIVES, POSITIVES AND MACHINERY / MOTOR TOOLS SPARE PARTS THOUGH OF CAPITAL NATURE BUT SHOWN IN STOCK S TATEMENT FOR ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 14 ARRANGING DRAWING POWER AND THE WORKING CAPITAL LOA N WORKS OUT TO BE RS.3,91,113/- ONLY AS PER FOLLOWING CALCULATION :- A TERM LOAN FOR ACQUISITION OF CAPITAL GOODS 8,73,01,059 B WORKING CAPITAL LOAN 5,32,488 C TOTAL LOAN A + B 8,78,33,547 D WAIVER AMOUNT OF LOAN 6,58,33,547 HENCE TOTAL WAIVER ATTRIBUTABLE TO WORKING CAPITAL LOAN 5,32,488 X 6,58,33,547 / 8,78,33,547 = 3,99,113/- 17. SO, IN VIEW OF THE MATTER, LD. CIT (A) HAS WRON GLY RESTRICTED THE ADDITION UNDER SECTION 41(1) OF THE ACT AT RS. 2,32,37,364/- AS AGAINST RS.4,02,76,413/- MADE BY THE AO ON ACCOUNT OF MISTAKE IN COMPUTATION OF DISALLOWANCE BY THE AO. SO, WE ARE OF THE CONSIDERED VIEW THAT ENTIRE WORKING LOAN OF RS.3,07 ,83,828/- CANNOT BE SUBJECTED TO TAX UNDER SECTION 41(1) OF T HE ACT RATHER LOAN OF RS.3,02,51,340/- IS TO BE TREATED AS LOAN O F CAPITAL NATURE TO WHICH PROVISIONS CONTAINED UNDER SECTION 41(1) ARE NOT APPLICABLE AS PER RATIO OF THE JUDGMENT OF MAHINDRA AND MAHINDRA LTD. (SUPRA). SO, AO IS DIRECTED TO VERIFY THE CALCULAT ION GIVEN BY THE ASSESSEE AND TO TAX THE WAIVER ATTRIBUTABLE TO THE WORKING CAPITAL LOAN OF RS.3,91,113/- ONLY AS PER THE CALCULATION G IVEN BY THE ASSESSEE. CONSEQUENTLY, GROUNDS NO.2, 3, 4 & 5 OF ITA ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 15 NOS.6296/DEL/ 2012 & 6298/DEL/2012 AND GROUNDS NO. 2, 3, 4 & 6 OF ITA NO. 6297/DEL/2012 RAISED BY THE ASSESSEES IN AY 2009- 10 ARE DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NO.5 OF ITA NO.6297/DEL/2012 (ASSESSEES APPEAL) 18. AO BY INVOKING THE PROVISIONS CONTAINED U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (FO R SHORT THE RULES) MADE A DISALLOWANCE OF RS.2,02,436/- WHICH H AS ALSO BEEN CONFIRMED BY THE LD. CIT (A). 19. IT IS THE CASE OF THE ASSESSEE THAT SINCE ASSES SEE HAS NOT RECEIVED ANY DIVIDEND INCOME OR EXEMPT INCOME DURIN G THE YEAR UNDER ASSESSMENT, NO DISALLOWANCE CAN BE MADE AND R ELIED UPON THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT (CENTRAL)-1 VS. M/S. CHETTINAD LOGISTICS PVT. L TD. VIDE SLP NO.15631/2018 DATED 02.07.2018 AND HONBLE DELHI HI GH COURT IN CIT VS. HOLCIM INDIA PVT. LTD. IN ITA NOS. 486/2 014 & 299/2014 DATED 17.10.2014 . 20. HONBLE SUPREME COURT IN M/S. CHETTINAD LOGISTICS PVT. LTD. (SUPRA) HAS DISMISSED THE SLP FILED BY THE REVENUE AGAINST THE ORDER OF HONBLE MADRAS HIGH COURT, RATIO OF WHICH IS THAT, WHERE THERE IS NO EXEMPT INCOME FORMING PART OF THE TOTAL INCOME OF THE ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 16 ASSESSEE DURING THE YEAR UNDER ASSESSMENT, NO DISAL LOWANCE CAN BE MADE U/S 14A OF THE ACT. 21. HONBLE DELI HIGH COURT IN HOLCIM INDIA PVT. LTD. (SUPRA) AND HONBLE SUPREME COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT 394 ITR 449 (SC) HAS HELD THAT, WHEN THE ASSESSEE HAS NOT EARNED DIVIDEND INCOME FORMING PART OF THE TOTAL INCOME DURING THE YEAR UNDER ASSESSMENT, SECT ION 14A READ WITH RULE 8D IS NOT ATTRACTED . SO, FOLLOWING THE LAW LAID DOWN BY HONBLE SUPREME COURT AND HONBLE HIGH COURTS, WE A RE OF THE CONSIDERED VIEW THAT WHEN UNDISPUTEDLY ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME/DIVIDEND INCOME DURING THE YEAR U NDER ASSESSMENT, NO DISALLOWANCE U/S 14A CAN BE MADE. C ONSEQUENTLY, GROUND NO.5 OF ITA NO.6297/DEL/2012 RAISED BY THE A SSESSEE IN AY 2009-10 ARE DETERMINED IN FAVOUR OF THE ASSESSEE . GROUNDS NO.6 OF ITA NOS.6296/DEL/2012 & 6298/DEL/2012 (ASSESSEES APPEAL) AND GROUND NO.7 OF 6297/DEL/2012 (ASSESSEES APPEAL) 22. GROUND NO.6 OF ITA NOS.6296/DEL/ 2012 & 6298/ DEL/2012 AND GROUND NO.7 OF ITA NO. 6297/DEL/2012 RAISED BY THE ASSESSEES IN AY 2009-10 8 BEING PREMATURE NEEDS NO SPECIFIC FINDINGS. ITA NOS.6191 & 6192/DEL./2012 ITA NOS.6296, 6297 & 6298/DEL./2012 17 23. RESULTANTLY, ITA NOS.6191/DEL/2012 & 6192/DEL/2 012 FILED BY THE REVENUE ARE DISMISSED WHEREAS ITA NOS.6296/D EL/2012, 6297/DEL/2012 & 6298/DEL/2012 FILED BY THE ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF MARCH, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF MARCH, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.