| COURT: | Bombay High Court |
| CORAM: | Milind D. Jadhav J, Ujjal Bhuyan J |
| SECTION(S): | 28(iv) |
| GENRE: | Domestic Tax |
| CATCH WORDS: | subsidy, waiver of loan |
| COUNSEL: | P. C. Chhotaray, P. C. Tripathi, Subhash S. Shetty |
| DATE: | March 5, 2020 (Date of pronouncement) |
| DATE: | June 26, 2020 (Date of publication) |
| AY: | 1984-85 |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| 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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