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DATE: March 5, 2020 (Date of pronouncement)
DATE: June 26, 2020 (Date of publication)
AY: 1984-85
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S. 28(iv): The Dept's argument that the waiver of a loan constitutes an operational subsidy which is taxable is not correct. There is a fundamental difference between “loan” and “subsidy” & the two concepts cannot be equated. While “loan” is a borrowing of money required to be repaid back with interest; “subsidy” is not required to be repaid back being a grant. Such grant is given as part of a public policy by the state in furtherance of public interest. Therefore, even if a “loan” is written off or waived, which can be for various reasons, it cannot partake the character of a “subsidy”. The waiver of a loan cannot be brought to tax u/s 28(iv) of the Act

Conceptually, “loan” and “subsidy” are two different concepts. As per the Concise Oxford English Dictionary, Indian Edition, the term “loan” has been explained as a thing that is borrowed, especially a sum of money that is expected to be paid back with interest; the action of lending. Black’s Law Dictionary, Eight Edition, describes “loan” as an act of lending; a grant of something for temporary use; a thing lent for the borrower’s temporary use, especially a sum of money lent at interest; to lend, especially money. In Supreme Court on Words and Phrases, it is stated that “loan” necessarily supposes a return of the money loaned; in order to be a loan, the advance must be recoverable; “loan” is an advance in cash which includes any transaction which in substance amounts to such advance

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DATE: April 24, 2018 (Date of pronouncement)
DATE: May 2, 2018 (Date of publication)
AY: -
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Loan Waiver - Applicability of S. 28(iv) & 41(1): (a) S. 28(iv) does not apply if the receipts are in the nature of cash or money (b) S. 41(1) does not apply if the waiver of loan does not amount to cessation of trading liability i.e if the assessee has not claimed any deduction u/s 36 (1) (iii) of the IT Act qua the payment of interest in any previous year

On a perusal of section 41(1), it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax under Section 41 of the IT Act. The objective behind this Section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability

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DATE: April 22, 2016 (Date of pronouncement)
DATE: April 28, 2016 (Date of publication)
AY: 2006-07
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CITATION:
S. 28(iv): The waiver by the lender of even the principal amount of loan constitutes a "benefit" arising from business and is assessable to tax as income. Logitronics 333 ITR 386 (Del), Rollatainers 339 ITR 54 (Del), Mahindra & Mahindra 261 ITR 501 (Bom) and Iskraemeco Regent 196 TM 103 (Mad) not followed

In our considered view, the waiver of a portion of the loan would certainly tantamount to the 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

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