M/s.Esplanade Developers Private Limited, Bangalore V. Assistant Commissioner of Income-Tax, Bangalore

ITA 998/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7614 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Business expenditure; Capital receipt; Revised return
• Section: 56; 11

Judgement Text

ITA.998/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER I.T.A NO.998/BANG/2017 (ASSESSMENT YEAR : 2011-12) ESPLANADE DEVELOPERS P. LTD, (FORMERLY KNOWN AS MILLENNIA PROPERTIES P. LTD, 2 FRONTLINE GRANDEUR, 14 WALTON ROAD, BENGALURU 560 001 .. APPELLANT PAN : AAFCM0561L V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -2 (1), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. AJIT KUMAR JAIN, CA REVENUE BY : SHRI. SANJAY KUMAR, CIT-III HEARD ON : 27.06.2017 PRONOUNCED ON : 13.09.2017 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF THE CIT (A), BENGALURU -2, BENGALURU, DT.22.03.2017, FOR TH E ASSESSMENT YEAR 2011-12. ITA.998/BANG/2017 PAGE - 2 02. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS B EFORE THIS TRIBUNAL : ITA.998/BANG/2017 PAGE - 3 03. FACTS APROPOS ARE THE ASSESSEE FILED ITS ORIGIN AL RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 DECLARING NIL INCOM E. SUBSEQUENTLY THE ASSESSEE FILED A REVISED RETURN AND OFFERED AN INCOME OF RS.29,26,847/- TO TAX WITHOUT CLAIMING ANY BUSINESS EXPENDITURE. THE CASE WAS SELECTED FOR SCRUTINY. NOTICE WAS ISS UED U/S.143(2) OF THE ACT, WAS ISSUED BY THE DCIT, CIRCLE 12(1), BENG ALURU, SEEKING CERTAIN INFORMATION WHICH WAS DULY SUPPLIED BY THE ASSESSEE. THEREAFTER THE CASE WAS TRANSFERRED TO ITO, RANGE - 12(1) (TPO). 04. THE TPO ISSUED NOTICE U/S.142(1) REQUESTING FOR SUBMISSION OF ADDITIONAL INFORMATION WHICH WERE ALSO DULY FILED B Y THE ASSESSEE. THE TPO WAS NOT SATISFIED WITH THE REPLY SUBMITTED BY THE ASSESSEE AND HAD COMPLETED THE ASSESSMENT BY COMPUTING THE T OTAL INCOME AT RS.16,34,26,850/-, AFTER ADDING BACK THE WRITE BACK OF LOAN AMOUNTING TO RS.16,05,00,000/-, AS AGAINST THE RETU RNED INCOME OF RS.29,26,847/-. THE AO IN THE ASSESSMENT ORDER HAS GIVEN THE REASONING FOR WRITING BACK OF THE LOAN, AS FOLLOWS : ITA.998/BANG/2017 PAGE - 4 ITA.998/BANG/2017 PAGE - 5 FEELING AGGRIEVED BY THE ORDER OF THE AO, WHEREBY T HE AO HAS ADDED BACK THE LOAN AMOUNT OF RS.16,05,00,000/-, THE ASSE SSEE FILED APPEAL BEFORE THE CIT (A). 05. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE FIR ST APPELLATE AUTHORITY THAT : I) IN ORDER TO CARRY OUT THE COMMERCIAL PROJECT, TH E ASSESSEE INTENDED TO AVAIL FINANCE FROM THE FINANCIAL INSTIT UTIONS / BANKS. IT AVAILED AN INTERIM LOAN OF RS.16,05,00,000- AS A TE MPORARY ARRANGEMENT FROM RMZ PROPERTIES P. LTD, WHICH IS A GROUP COMPANY. ITA.998/BANG/2017 PAGE - 6 II) THE ASSESSEE EXECUTED CORPORATE LOAN AGREEMENT ON 18.03.2009 WITH RPPL AND RECEIVED INTEREST FROM UNSECURED LOAN FOR RS.16,05,00,000/- FROM RPPL DURING THE FINANCIAL YE AR 2008-09 IN THREE INSTALMENTS. III) IT IS THE CONTENTION OF THE ASSESSEE THAT IT A GREED TO RETURN BACK THE LOAN AMOUNT ON RECEIPT OF CONSTRUCTION LOAN FRO M FINANCIAL INSTITUTION / BANK. IT IS ALSO THE CASE THAT THE A SSESSEE UTILISED THE ABOVE FUNDS FOR DEVELOPMENT OF PROJECTS AND CAPITAL ISED THE EXPENDITURE UNDER WORK-IN-PROGRESS. THE ASSESSEE S UBMITTED THAT ON ACCOUNT OF DOWNWARD TREND IN THE REAL-ESTATE, THERE WAS AN INTERRUPTION IN THE CONSTRUCTION OF THE PROJECT. AS THE ASSESSEE WAS NOT IN A POSITION TO REPAY THE LOAN RECEIVED FROM RPPL, THE BOARD OF DIRECTORS OF RPPL APPROVED THE W RITE-OFF OF THE LOAN. AFTER WRITING OFF THE LOAN BY RPPL, THE ASSE SSEE WROTE-BACK THE SAME TO ITS PROFIT AND LOSS ACCOUNT FOR THE FY 2010 -11. IT WAS THE CASE OF THE ASSESSEE BEFORE THE AUTHORITIES THAT IN PROF IT AND LOSS ACCOUNT THE LOAN WAS A CAPITAL RECEIPT, HENCE NOT CHARGEABLE TO IT IN VIEW OF SECTION 56 OF THE ACT. ITA.998/BANG/2017 PAGE - 7 06. HOWEVER, THE CIT (A) WAS NOT CONVINCED WITH THE SUBMISSION MADE BY THE ASSESSEE AND THEREFORE HAD CONFIRMED TH E ORDER PASSED BY THE AO. HOWEVER, THE REASONING GIVEN BY THE CIT (A ) WAS DIFFERENT THAN THE REASONING GIVEN BY THE AO. FOR THE PURPOS ES OF CLARITY, WE ARE HEREINBELOW REPRODUCING PARAS 4.1, 7 AND 8 OF T HE CIT (A)S ORDER: 4.1 AS IS APPARENT FROM THE FACTS ABOVE, THE APPELL ANT COMPANY HAS RECEIVED A BENEFIT OF RS.16,05,00,000 DURING THE YEAR. THIS B ENEFIT IS BY VIRTUE OF WRITE OFF OF A LOAN DUE TO RMZ PROPERTIES PVT. LTD. WHICH HAD BEEN TAKEN IN THE COURSE OF BUSINESS. 28(IV) AND ALSO U/S.41(1). THUS, THE ADDITION MADE BY THE AO IS UPHELD WITH THE FINDING AND QUALIFICATION AS ABOVE. FEELING AGGRIEVED BY THE ORDER OF THE CIT(A), THE A SSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. ITA.998/BANG/2017 PAGE - 8 07. BEFORE US, IT IS URGED BEFORE US BY THE ASSESSE E THAT THE ORDER PASSED BY THE CIT (A) IS CONTRARY TO THE JUDGMENT P ASSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S . COMFUND FINANCIAL SERVICES [67 ITD 304]. IT IS SUBMITTED T HAT THE AO RELIED UPON SECTIONS 56 AND 57 TO KNOCK OUT THE ASSESSEE, WHEREAS THE CIT (A) RELIED UPON SECTION 28(4) R.W.S.41(1) OF THE IT ACT, TO HOLD THE WRITE-BACK AS VALID. IT WAS SUBMITTED BY THE ASSES SEE BEFORE US THAT THE ASSESSEE BEFORE THE AO HAD SUBMITTED THAT THE L OAN BY ITSELF IS OF CAPITAL IN NATURE AND ITS WAIVER IS TO BE TREATED A S CAPITAL IN NATURE AND IS NOT CHARGEABLE TO INCOME-TAX UNDER THE ACT. IT WAS SUBMITTED THAT SECTION 28(IV) DEFINES CHARGE OF INCOME-TAX UPON TH E TOTAL INCOME OF THE PREVIOUS YEAR. IT WAS SUBMITTED THAT THE WRITE -BACK OF LOAN IS NOT COVERED AND HENCE NOT TAXABLE U/S.28(IV) AND SECTIO N 41(1) OF THE ACT. IT WAS SUBMITTED THAT THE WORD USED IN SECTION 28(I V), IS CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXE RCISE OF PROFESSION, THEREFORE FOR THE PURPOSES OF SECTION 28(IV), THE BENEFIT OF PERQUISITE SHOULD ARISE FROM BUSINESS OR PROFESSION . AS THE ASSESSEE WAS NOT IN THE PROFESSION OF GIVING LOANS, THE WAIV ER OF LOANS CANNOT ITA.998/BANG/2017 PAGE - 9 BE CONSTRUED AS THE BENEFIT ARISING FROM SUCH BUSIN ESS. FURTHER IT WAS SUBMITTED THAT THE WRITE-BACK OF LOAN IS ALSO NOT T AXABLE U/S.41(1). 08. THE LD. AR HAS DRAWN OUR ATTENTION TO PAGE 37 O F THE PAPER BOOK WHERE IT IS MENTIONED THAT PURSUANT TO THE BOA RD RESOLUTION OF RMZ PROPERTIES P. LTD, DT. AUGUST, 19, 2010, INTER EST FREE UNSECURED LOAN HAS BEEN WRITTEN OFF AS IT IS NO LONGER PAYABL E AND TRANSFERRED TO OTHER INCOME. THE LD. AR HAS ALSO DRAWN OUR ATTENT ION TO THE COPY OF THE LETTER ISSUED BY RMZ PROPERTIES P. LTD, DT.19.0 8.2010 WHERE THE ENTIRE INTEREST-FREE UNSECURED LOAN AMOUNTING TO RS .16,05,00,000/- WHICH WAS AVAILED BY THE ASSESSEE WAS APPROVED TO B E WRITTEN OFF. IN THE LIGHT OF THE ABOVE, IT WAS SUBMITTED THAT THE A SSESSEE HAD TREATED THE LOAN AS CAPITAL RECEIPT AND AS THE SAME WAS APP ROVED TO BE WRITTEN- OFF, THE SAME WAS WRONGLY WRITTEN BACK BY THE LOWER AUTHORITIES. THE ASSESSEE RELIED UPON THE JUDGMENT OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE COMFUND FINANCIAL SERVICES (SUPRA). 09. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ISSUE HAS BEEN EXAMINED IN DETAIL BY THE HONBLE MADRAS HIGH COURT IN CIT V. ITA.998/BANG/2017 PAGE - 10 RAMANIYAM HOMES P. LTD [(2016) 384 ITR 530]. HE DR EW OUR ATTENTION TO PARAS 39 TO 44 OF THE JUDGMENT, WHICH READS AS UNDER : 39. THEREFORE, IT IS NOT THE ACTUAL RECEIPT OF MONEY, BUT THE RECEIPT OF A BENEFIT OR PERQUISITE, WHICH HAS A MONETARY VALUE, WHETHER SUC H BENEFIT OR PERQUISITE IS CONVERTIBLE INTO MONEY OR NOT, WHICH IS WHAT IS COVERED BY SECT ION 28(IV). SAY FOR INSTANCE, A GIFT VOUCHER IS ISSUED, ENABLING THE HOLDER OF THE VOUCH ER TO HAVE DINNER IN A RESTAURANT, IT IS A BENEFIT OF PERQUISITE, WHICH HAS A MONETARY VALUE . IF THE HOLDER OF THE VOUCHER IS ENTITLED TO TRANSFER IT TO SOMEONE ELSE FOR A MONET ARY CONSIDERATION, IT BECOMES A PERQUISITE CONVERTIBLE INTO MONEY. BUT, IRRESPECTIV E OF WHETHER IT IS CONVERTIBLE INTO MONEY OR NOT, IT SHOULD HAVE A MONETARY VALUE SO AS TO ATTRACT SECTION 28(IV). A MONETARY TRANSACTION, IN THE TRUE SENSE OF THE TERM , CAN ALSO HAVE A VALUE. ANY NUMBER OF INSTANCES WHERE A MONETARY TRANSACTION CONFERS A BENEFIT OR PERQUISITE THAT WOULD HAVE A VALUE, CAN BE CONCEIVED OF. THERE MAY BE CAS ES WHERE AN INCENTIVE IS GRANTED BY THE SUPPLIER, WAIVING A PORTION OF THE SALE PRICE O R GRANTING A REBATE OR DISCOUNT OF A PORTION OF THE PRICE TO BE PAID, WHEN THE PAYMENTS SCHEDULED OVER A PERIOD OF TIME, ARE MADE PROMPTLY. IT IS NEEDLESS TO POINT OUT THAT IN SUCH CASES, THE PROMPT PAYMENT OF MONEY ITSELF BRINGS FORTH A BENEFIT IN THE FORM OF AN INCENTIVE OR A REBATE OR A DISCOUNT IN THE PRICE OF THE PRODUCT. WE DO NOT KNOW WHY IT SHO ULD NOT HAPPEN IN THE CASE OF WAIVER OF A PART OF THE LOAN. THEREFORE, THE FINDING RECOR DED IN PARAGRAPH 27.1 OF THE DECISION IN ISKRAEMECO REGENT LTD. (SUPRA) THAT SECTION 28(IV) HAS NO APPLICATION TO ANY TRANSACTION, WHICH INVOLVES MONEY, IS A SWEEPING ST ATEMENT AND MAY NOT STAND IN THE LIGHT OF THE EXPRESS LANGUAGE OF SECTION 28(IV). IN OUR CONSIDERED VIEW, THE WAIVER OF A PORTION OF THE LOAN WOULD CERTAINLY TANTAMOUNT TO T HE VALUE OF A BENEFIT. THIS BENEFIT MAY NOT ARISE FROM 'THE BUSINESS' OF THE ASSESSEE. BUT, IT CERTAINLY ARISES FROM 'BUSINESS'. THE ABSENCE OF THE PREFIX 'THE' TO THE WORD 'BUSINESS' MAKES A WORLD OF DIFFERENCE. 40. WE SHALL NOW TURN OUR ATTENTION TO THE DISTINCTION SOUGHT TO BE MADE BETWEEN THE WAIVER OF A PORTION OF THE LOAN TAKEN FOR THE PURPO SE OF ACQUIRING CAPITAL ASSETS ON THE ONE HAND AND THE WAIVER OF A PORTION OF THE LOAN TA KEN FOR THE PURPOSE OF TRADING ACTIVITIES ON THE OTHER HAND. 41. IT APPEARS THAT IN SO FAR AS ACCOUNTING PRACTICES ARE CONCERNED, NO SUCH DISTINCTION EXISTS. IRRESPECTIVE OF THE PURPOSE FOR WHICH, A LO AN IS AVAILED BY AN ASSESSEE, THE AMOUNT OF LOAN IS ALWAYS TREATED AS A LIABILITY AND IT GETS REFLECTED IN THE BALANCE SHEET AS SUCH. WHEN A REPAYMENT IS MADE IN MONTHLY, QUARTERL Y, HALF YEARLY OR YEARLY INSTALMENTS, THE INSTALMENT IS DIVIDED INTO TWO COM PONENTS, ONE RELATING TO INTEREST AND ANOTHER RELATING TO A PORTION OF THE PRINCIPAL. TO THE EXTENT OF THE PRINCIPAL REPAID, THE LIABILITY AS REFLECTED IN THE BALANCE SHEET GETS RE DUCED. THE INTEREST PAID ON THE PRINCIPAL AMOUNT OF LOAN, WILL BE ALLOWED AS DEDUCTION, IN CO MPUTING THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', AS P ER THE PROVISIONS OF THE ACT. 42. BUT, SECTION 36(1)(III) MAKES A DISTINCTION. THE A MOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PRO FESSION IS ALLOWED AS DEDUCTION UNDER ITA.998/BANG/2017 PAGE - 11 SECTION 36(1)(III), IN COMPUTING THE INCOME REFERRE D TO IN SECTION 28. BUT, THE PROVISO THEREUNDER STATES THAT ANY AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING B USINESS OR PROFESSION, WHETHER CAPITALISED IN THE BOOKS OF ACCOUNT OR NOT FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR THE ACQUISITION OF THE ASSET, TILL THE DATE ON WHICH SUCH ASSET WAS PUT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION. 43. THEREFORE, IT IS CLEAR THAT THE MOMENT THE ASSET I S PUT TO USE, THEN THE INTEREST PAID IN RESPECT OF THE CAPITAL BORROWED FOR ACQUIRING THE A SSET, COULD BE ALLOWED AS DEDUCTION. WHEN THE LOAN AMOUNT BORROWED FOR ACQUIRING AN ASSE T GETS WIPED OFF BY REPAYMENT, TWO ENTRIES ARE MADE IN THE BOOKS OF ACCOUNT, ONE I N THE PROFIT AND LOSS ACCOUNT WHERE PAYMENTS ARE ENTERED AND ANOTHER IN THE BALANCE SHE ET WHERE THE AMOUNT OF UNREPAID LOAN IS REFLECTED ON THE SIDE OF THE LIABILITY. BUT , WHEN A PORTION OF THE LOAN IS REDUCED, NOT BY REPAYMENT, BUT BY THE LENDER WRITING IT OFF (EITHER UNDER A ONE TIME SETTLEMENT SCHEME OR OTHERWISE), ONLY ONE ENTRY GETS INTO THE BOOKS, AS A NATURAL ENTRY. A DOUBLE ENTRY SYSTEM OF ACCOUNTING WILL NOT PERMIT OF ONE E NTRY. THEREFORE, WHEN A PORTION OF THE LOAN IS WAIVED, THE TOTAL AMOUNT OF LOAN SHOWN ON THE LIABILITIES SIDE OF THE BALANCE SHEET IS REDUCED AND THE AMOUNT SHOWN AS CAPITAL RE SERVES, IS INCREASED TO THE EXTENT OF WAIVER. ALTERNATIVELY, THE AMOUNT REPRESENTING THE WAIVED PORTION OF THE LOAN IS SHOWN AS A CAPITAL RECEIPT IN THE PROFIT AND LOSS ACCOUNT ITSELF. THESE ASPECTS HAVE NOT BEEN TAKEN NOTE OF IN ISKRAEMECO REGENT LTD.(SUPRA) 44. IN VIEW OF THE ABOVE, THE QUESTIONS OF LAW ARE LIA BLE TO BE ANSWERED IN FAVOUR OF THE REVENUE/APPELLANT. ACCORDINGLY, THEY ARE ANSWERED I N FAVOUR OF THE APPELLANT/REVENUE AND THE APPEAL FILED BY THE REVENUE IS ALLOWED. NO COSTS. THE LD. DR ARGUED THAT THE CIT (A) WAS RIGHT IN COM ING TO THE CONCLUSION, AS HE HAD EXAMINED THE JUDGMENT OF THE MADRAS HIGH COURT IN DETAIL AND HENCE, THIS ISSUE OF THE ASSESS EE HAD TO BE DISMISSED. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE BEFORE US IS HINGES ON THE ASPECT WHETHER THE LOAN TAKEN BY THE ASSESSEE WAS IN THE NATURE OF CAPITAL OR REVENU E. WE FIND THAT THIS ASPECT WAS NOT EXAMINED BY THE AUTHORITIES BELOW. THE NATURE OF LOAN TAKEN BY THE ASSESSEE COULD BE DETERMINED ON THE BA SIS OF THE PURPOSE ITA.998/BANG/2017 PAGE - 12 FOR WHICH THE LOAN WAS TAKEN IS TO BE EXAMINED. IF THE LOAN IS TAKEN FOR A PURPOSE WHICH GIVES ENDURING BENEFIT, THEN IT MAY BE TERMED AS A CAPITAL RECEIPT. IF IT DOES NOT GIVE ANY ENDURING BENEFIT TO THE ASSESSEE, THEN IT IS TO BE TREATED AS REVENUE IN NATURE. BES IDES, THE EXAMINATION OF THIS ASPECT BY THE LOWER AUTHORITIES, IT IS ALSO REQUIRED THAT THE ASPECT OF THE ASSESSEES STATEMENT BEFORE THE AO TH AT THIS LOAN WAS TAKEN AS A STOP-GAP ARRANGEMENT, TILL THE LOAN IS D ISBURSED BY THE FINANCIAL INSTITUTION / BANK, HAS ALSO TO BE EXAMIN ED. IN THIS REGARD, NECESSARY ASSISTANCE IS TO BE PROVIDED BY THE ASSES SEE TO THE AO DURING VERIFICATION FOR WHAT PURPOSES THE LOAN WAS TAKEN FROM SISTER CONCERNED. WE WOULD LIKE TO REFER TO THE EXTRACTS OF THE ASSESSMENT ORDER AT PARA 04 ABOVE, WHICH GOES TO SHOW THAT THE LOAN WAS ONLY TAKEN BY THE ASSESSEE TO CARRY OUT THE DEVELOPMENT OF COMMERCIAL PROJECT AS AN INTERIM ARRANGEMENT, TILL THE ASSESSE E AVAILED A LOAN FROM THE FINANCIAL INSTITUTION. THUS THE LOAN TAKEN BY THE ASSESSEE WAS ONLY AS A TEMPORARY ARRANGEMENT AND NOT AS A REGULAR BOR ROWING FOR THE PURPOSE OF BUILDING CAPITAL ASSETS. IN OUR VIEW, T HE AO IS ALSO REQUIRED TO VERIFY THE ACTUAL USE OF THE LOAN AMOUN T AFTER BORROWING IT FROM RMZ PROPERTIES. ASSUMING THAT THE LOAN WAS US ED FOR ACQUIRING ITA.998/BANG/2017 PAGE - 13 OR CONSTRUCTING SOME CAPITAL ASSET, THEN AFTER WRIT E OFF OF THE LOAN LIABILITY BY THE LENDER, THE COST OF SUCH ASSET SHO ULD GO DOWN AS PER THE PROVISIONS OF SECTION 43(1) OF THE ACT. THESE ASPE CTS ARE REQUIRED TO BE EXAMINED BY THE AO WHICH HAVE NOT BEEN DONE, AS THE ASSESSEE HAS NOT PROVIDED THE DATE AND AMOUNT OF LOAN TAKEN FROM THE FINANCIAL INSTITUTION / BANK FOR THE DEVELOPMENT OF THE COMME RCIAL PROJECT. 11. FURTHER IN OUR VIEW THE ASSESSEE HAD ALSO RELIE D UPON PAGE 119 OF THE PAPER BOOK WHICH IS A LETTER WRITTEN BY RMZ PROPERTIES P. LTD TO THE ASSESSEE. THE SAID LETTER IN OUR VIEW CANNO T SUBSTITUTE THE BOARD RESOLUTION PASSED BY THE COMPANY RMZ PROPERTIES, B UT IS MERELY A LETTER ISSUED BY IT. FURTHER THE SAID RMZ PROPERTI ES IS ALSO REQUIRED TO CONFIRM FOR WHAT PURPOSE THE LOAN WAS INITIALLY GIV EN AND WHETHER THERE WAS A BOARD RESOLUTION PASSED BY THE BOARD OF DIRECTORS AT THE TIME OF GRANT OF LOAN ABOUT THE PURPOSE OF THE LOAN . ALL THESE ASPECTS HAVE NOT BEEN EXAMINED BY THE AUTHORITIES BELOW. W E ARE OF THE OPINION THAT THE EXAMINATION OF ALL THESE ASPECTS A RE REQUIRED TO ANSWER THE MOOT QUESTION WHETHER THE LOAN GIVEN WAS TOWARDS CAPITAL OR OTHERWISE. FURTHER I N THE MATTER ROLLATAINERS LTD. VS COMMISSIONER OF INCOME-TAX*[2011] 15 TAXMANN.COM 111 (DELHI) IT WAS HELD AS UNDER ITA.998/BANG/2017 PAGE - 14 16. THUS, THE ENTIRE JUDGMENT RESTED ON THE PREMISE TH AT THE LIABILITY IN QUESTION WAS NOT A TRADING LIAB ILITY. COMING TO THE CASE OF TOSHA INTERNATIONAL LTD. ( SUPRA ) THE FACTS ARE THAT THE ASSESSEE WAS ENGAGED IN MA NUFACTURING OF BLACK AND WHITE PICTURE TUBES. IT RAN INTO HUGE LOSSES AND UL TIMATELY BECAME A SICK COMPANY AND WAS SO REGISTERE D WITH THE BIFR. UNDER ONE TIME SETTLEMENT SCHEME, THE BANKS AND FINANCIAL INSTITUTIONS REQUIRED THE ASSESSEE TO PA Y 60% OF THE AMOUNT TOWARDS THE PRINCIPAL AND WAIVED THE ENTIRE INTEREST AMOUNT. THE QUESTION BEFORE THE COURT WAS W HETHER WAIVER OF THE PRINCIPAL AMOUNT OF AMOUNT RS. 10.48 C RORE, CREDITED TO THE CAPITAL RESERVE ACCOUNT, CONS TITUTED INCOME? THE COURT CAME TO THE CONCLUSION THAT THE AMOUNT IS NOT COVERED BY THE PROVISION CONTAINED IN SECTION 4 1(1). IT WAS ALSO MENTIONED THAT THE PRINCIPLES ENUNCIATED IN TH E CASE OF MAHINDRA & MAHINDRA LTD. V. CIT [2003] 261 ITR 501 / 128 TAXMAN 394 (BOM.) ARE FULLY APPLICABLE. AGAIN, IT WAS A CASE W HERE THE LOAN WAS ON CAPITAL ACCOUNT AND NOT FOR TR ADING PURPOSES. EVEN IN THE INSTANT CASE, AS FAR AS TERM LOANS ARE CONCERNED, WAIVER THEREOF BY THE FINANCIA L INSTITUTIONS HAS NOT BEEN TREATED AS INCOME AT THE HANDS OF THE ASSE SSEE. IT IS ONLY THE WRITING OFF LOANS ON CASH CRED IT ACCOUNT WHICH WAS RECEIVED FOR CARRYING OUT THE DAY TO DAY OPERAT IONS OF THE ASSESSEE WHICH IS TREATED AS 'INCOME' I N THE HANDS OF THE ASSESSEE. THE JUDGMENT OF THE BOMBAY HIGH COURT I N SOLID CONTAINERS LTD.'S CASE ( SUPRA ) AND THAT OF MADRAS HIGH COURT IN ARIES ADVERTISING (P.) LTD.'S CASE ( SUPRA ) ARE DIRECTLY ON THIS ISSUE. THE TRIBUNAL HAS RIGH TLY APPLIED THE SAID JUDGMENTS WHEREIN THE VIEW TAKEN IS THE SAME A S TAKEN BY THIS COURT IN LOGITRONICS (P.) LTD.'S CASE ( SUPRA ). 17. INSOFAR AS THE DECISION IN JINDAL EQUIPMENT LEASING & CONSULTANCY SERVICES LTD. IS CONCERNED, THAT WAS A CASE WHERE THE ASSESSEE WAS AN INVESTMENT COMPANY REGIST ERED WITH THE RESERVE BANK OF INDIA AS A NON BANKING FINANCIAL COMPANY (NBFC). IN THE RETURN FOR THE ASSESS MENT YEAR 2003-04, IT HAD SHOWN A LOAN OF RS. 6,80,3 1,189 PAYABLE TO M/S JINDAL STEEL & POWER LTD. (JSPL). IT IS THE JSPL WHICH HAD RETURN OF A SUM OF RS. 1,46,5 3,065 IN ITS BOOKS OF ACCOUNT. ON THAT PREMISE, THE ASSESSING OF FICER HAD TREATED THE SAME AS INCOME OF THE ASSESSE E ON THE GROUND THAT THE CREDITOR HAD WRITTEN OF THE SAID AM OUNT AND, THEREFORE, IT WAS NO MORE THE LIABILITY O F THE ASSESSEE AND TO THIS EXTENT IT WAS THE ASSESSEE'S GAIN AND ADDED THE SAME UNDER SECTION 41(1) OF THE ACT. THE PLEA OF THE ASSESSEE IN THAT CASE WAS THAT JSPL HAD DONE IT UNILATERALLY AN D WITHOUT THE KNOWLEDGE OF THE ASSESSEE. THE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER IN TERM OF SECTION 41(1) READ WITH SECTION 28( I ) OF THE ACT. THE ITAT DELETED THE ADDITION HOLDING THAT SECTION 41(1) OF THE ACT HAD NO APPLICATION. IN THE APPEAL PREFERRED BY THE REVENUE, IT DID NOT PRESS THE APPLICABILITY OF SECTION 41(1) ACT OR SECTION 28( I ) OF THE OF THE ACT BUT TOOK A TOTALLY DIFFERENT STAND NAMELY THE SAID WAIVER WAS TO BE TREATED AS I NCOME UNDER SECTION 28( IV ) OF THE ACT. NO DOUBT, THIS COURT HELD THAT THE AMOUNT WRITTEN OF IN THE BOOKS OF ACCOUNT BY JSPL WAS IN THE NATURE OF VALUE OF ANY BENEFIT O R PERQUISITES, WHETHER CONVERTIBLE INTO MONEY OR NOT AND, THEREFOR E, COULD NOT BE TREATED 'PROFITS AND GAINS FROM BUS INESS'. HOWEVER, NO OTHER ASPECTS WERE LOOKED INTO OR DISCUSSED. THE NATURE OF LOAN TAKEN BY THE SAID ASSESSEE, WHICH W AS WAIVED BY THE JSPL, NAMELY WHETHER IT WAS ON CAPITAL ACCOUNT OR IN THE TRADING FIELD WAS NOT THE ASPECT LOOKED I NTO. IN FACT, NEITHER THERE WAS ANY MATERIAL ON THIS ASPECT NOR I T WAS ARGUED. THIS COURT HAD RELIED UPON THE JUDGMEN T OF BOMBAY HIGH COURT IN MAHINDRA & MAHINDRA LTD.'S CASE ( SUPRA ). WHEN WE GO THROUGH THE SAID JUDGMENT OF THE BOMB AY HIGH COURT, IT BECOMES CLEAR THAT IN THAT CASE, THE LOAN ARRANGEMENT IN ITS ENTIRETY WAS NOT OBLITERATE D AND MORE IMPORTANTLY THE PURCHASE CONSIDERATION RELATED TO C APITAL ASSET. IN VIEW THEREOF THE ISSUES REFERRED IN ABOVE PARAG RAPHS 10-11 ARE REQUIRED TO BE DECIDED BY THE AO AFTER GIVING THE OPPORTUNITY TO THE PARTIES. 12. IN OUR VIEW RELIANCE PLACED BY BOTH THE PARTIES ON THE JUDGMENTS (SUPRA), CANNOT BE BLINDLY APPLIED TO THE FACTS OF THE PRESENT CASE UNLESS THE FACTS ARE CLEAR. IN ANY CASE IF THE FAC TS OF THE CASE BEFORE US ITA.998/BANG/2017 PAGE - 15 AND THE FACTS OF THE CASE DECIDED BY THE JURISDICTI ONAL HIGH COURT IN THE MATTER OF COMFUND FINANCIAL SERVICES (SUPRA) AR E SIMILAR, THEN THE SAME IS BINDING ON US. HOWEVER, AT THIS STAGE IT I S TOO EARLY TO DECIDE WHETHER THE JUDGMENT OF COMFUND FINANCIAL SERVICES (SUPRA) IS APPLICABLE OR NOT. THEREFORE, WE ARE LEFT WITH NO OTHER OPTION BUT TO REMAND THE MATTER TO THE FILE OF THE AO TO ANALYSE THE MATTER AFRESH, AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE . 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH DAY OF S EPTEMBER, 2017. SD/- SD/- (A. K. GARODIA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER BENGALURU DATED : 13.09.2017 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY