itxa-896-2017
\nIN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nORDINARY ORIGINAL CIVIL JURISDICTION
\nINCOME TAX APPEAL NO. 896 OF 2017
\nThe Pr. Commissioner of Income Tax-12 .. Appellant.
\nv\/s.
\nM\/s. Colour Roof (India) Ltd., .. Respondent.
\nMr. N. C. Mohanty, for the Appellant.
\nDr. K. Shivram, Sr. Advocate i\/b. Mr. Rahul Hakani, for the Respondent.
\nCORAM: M.S.SANKLECHA &
\nNITIN JAMDAR, JJ.
\nDATE : 25th SEPTEMBER, 2019.
\nP.C:-
\nThis Appeal under Section 260-A of the Income Tax Act, 1961
\n(the Act), challenges the order dated 10th August, 2016, passed by the
\nIncome Tax Appellate Tribunal (the Tribunal). The impugned order dated
\n10th August, 2016 is in respect of Assessment Year 2009-10.
\n2 Revenue urges the following questions of law, for our
\nconsideration:
\n\u201c(a) Whether on the facts and in the circumstances of the
\ncase and in law, the Tribunal was justified in law in deleting
\nthe addition of Rs.4,11,27,086\/- as income under Section
\n41(1) of the Act?
\n(b) Whether on the facts and in the circumstances of the
\ncase and in law, the Tribunal has erred in not upholding the
\naddition of Rs.4,11,27,086\/- as taxable income under Section
\n28 of the Act on account of cessation of loan liability in view
\nof decision of this Court in the case of Solid Containers Ltd.
\nv\/s. DCIT 308 ITR 471?
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\n(c) Whether on the facts and in the circumstances of the
\ncase and in law, the Tribunal being the final fact finding
\nauthority, is justified in not examining the unproven credit
\nentries in the Balance-Sheet and in not invoking the correct
\nprovision of Section 28(iv) of the Act, if Section 41(1)
\ninvoked by the Assessing Officer, was found by the Tribunal
\nnot to be the appropriate provision to tax the impugned
\namount of Rs.4,11,27,086\/-?
\nBrief facts leading to this Appeal are as under:-
\n3 Respondent is engaged in the business of manufacturing steel
\nprofiles and coils. For the subject Assessment Year, the Respondent filed its
\nreturn of income on 29th September, 2019, declaring loss of Rs.13.07
\nCrores. The Assessment was taken up for scrutiny and the Assessing
\nOfficer found that loan amounting to Rs.4.11 Crores had been waived and
\nadded the same to the income of the Respondent under Section 41(1) of
\nthe Act. Thus, determined the Appellant\u2019s income by Assessment Order
\ndated 23rd December, 2011 at Rs.14.68 Crores.
\n\\
\n4 Being aggrieved, the Respondent filed an Appeal to the
\nCommissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 23rd
\nJuly, 2012, the CIT (A) held on fact that the loan taken were on capital
\naccount and not on account of purchase of merchandise. It further held
\nSection 41(1) of the Act, would have no application. This as the unsecured
\nloan taken by the Respondent, was not on account of trading
\ntransaction and neither the same was claimed as deduction in any earlier
\nreturn of income i.e. no benefit in tax was obtained in respect of the loan
\nwaived. In these circumstances, it deleted the addition of Rs.4.11 Crores
\nmade under Section 41(1) of the Act.
\n5 Being aggrieved with the order dated 23rd July, 2012 of the
\nCIT(A), the Revenue filed an appeal to the Tribunal. The impugned order
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\ndated 10th August, 2016 of the Tribunal while dismissing the appeal of the
\nRevenue, records the fact that, loan transactions are on capital account
\nand not on purchase of any merchandise from any of the parties. It refers
\nto Section 41(1) of the Act and hold that it could only apply in respect of
\nremission or cessation of trading liabilities, the allowance or deduction of
\nwhich had been made in an earlier Assessment Year. In fact, the Revenue
\nhad before the Tribunal, conceded\/ accepted the fact that Section 41(1) of
\nthe Act will have no application to the present facts. Thus, the Tribunal
\nheld the waiver of loan in these facts is not covered under Section 41(1)
\nof the Act.
\n6 Being aggrieved with the impugned order dated 10th August,
\n2016 of the Tribunal, the Revenue is in appeal before us. We shall now
\ndeal with each of the questions urged in seriatum.
\n7 Re. Question (a):-
\n(i) Mr. Mohanty, learned Counsel for the Revenue states that on waiver
\nof the loan, its character undergone a change and it becomes on
\nrevenue account. Therefore, taxable under Section 41(1) of the Act.
\nIn support, reliance was placed upon the decision of this Court in
\nSolid Containers Ltd., v\/s. Dy. Commissioner of Income Tax [2009]
\n308 ITR 417. It is submitted that the loan was taken from agents\/
\ndealers has necessarily to be on revenue account;
\n(ii) Firstly we note that the Revenue had conceded the position before
\nthe Tribunal that Section 41(1) of the Act will have no application
\nin these fact. Thus, in view of the decision of this Court in CIT v\/s.
\nMahalaxmi Glass Works Ltd., 318 ITR 116, it is not open to the
\nRevenue to urge this issue as a substantial question of law. In any
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\ncase, the decision of the Solid Containers Ltd., (supra) relied upon
\nby the Revenue was not in the context of Section 41(1) of the Act
\nbut rendered in respect of Section 28 (iv) of the Act. In fact, Solid
\ncontainers Ltd. (supra) does not even remotely deal with Section
\n41(1) of the Act. Besides on fact, the Tribunal has rendered a
\nfinding therein that the amount which were received by the
\nAssessee therein were on trading account. Thus, it would have no
\napplication to the present case. In this case, we are dealing with
\nthe Section 41(1) of the Act. The Supreme Court in the case of
\nCommissioner v\/ s. Mahindra and Mahindra Ltd., [2018] 404
\nITR 1 has held that sine-qua-non for application of Section 41(1)
\nof the Act, is that there should have been allowance or
\ndeduction claimed by the Assessee in any Assessment Year as
\na loss, expenditure or trading liability incurred by the Assessee.
\nSubsequently, if any remission or waiver is granted in respect of
\nwhich such an allowance\/deduction has been claimed, then
\nthe Assessee is liable to pay t ax on the amount waived\/ remitted
\nunder Section 41(1) of the Act. This, as the Court held is only
\nto ensure that Assessee does not keep double benefit \u2013 one by
\nway of deduction and another by waiver of the amount, which has
\nalready been deducted in computing the tax;
\n(iii) In this case admittedly, no benefit in respect of the loan has been
\nclaimed by the Respondent in respect of Rs.4.11 Crores, in an
\nearlier Assessment Year;
\n(iv) In view of the above, the question as framed does not give rise to
\nany substantial question of law. Thus, not entertained.
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\n8 Re. Questions (b) & (c):-
\n(i) We find that these two questions are being urged for the first time
\nonly before us. At no point of time before the authorities under
\nthe Act, was it the Revenue\u2019s case that the waiver of loan should be
\nbrought to tax under Section 28 (iv) of the Act. No such claim
\nwas made either as a principal submission or even in the
\nalternative. Therefore, it is not open for the Revenue to urge an
\nissue which was not urged before the Tribunal. On this
\nlimited ground, the two questions as proposed are liable to be
\ndismissed;
\n(ii) In any case, it must be pointed out that the decision of this Court in
\nSolid Container Ltd., (supra), will have no application to this case.
\nIn the above case, the Tribunal had come to a finding of fact that
\ntransaction was on Revenue\u2019s account and not on capital
\naccount. Therefore, the waiver of loan was chargeable to tax. In
\nthis case, the CIT(A) as well as the Tribunal have both come to a
\nfinding of fact that loan taken was on capital account and not on
\ntrading account. Thus, the decision of the Solid Container Ltd.,
\n(supra) would have no application;
\n(iii) In any view of the matter, the issue now stands concluded by the
\ndecision of the Apex Court in Mahindra and Mahindra (supra). In
\nthe above case, the Apex Court has held that, Section 28 (iv) of the
\nAct can only apply where any benefit arises from a business or
\nprofession and such benefit is received other then in the shape
\nof money;
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\n(iv) In this case, the waiver of loan is, in fact, found is on capital
\naccount. Thus, these two questions as proposed do not give rise to
\nany substantial questions of law. Thus, not entertained.
\n9 Accordingly, Appeal dismissed. No order as to costs.
\n(NITIN JAMDAR,J.) (M.S.SANKLECHA,J.)
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\n::: Uploaded on – 30\/09\/2019 ::: Downloaded on – 12\/10\/2019 12:18:40 :::<\/p>\n","protected":false},"excerpt":{"rendered":"
Sine-qua-non for application of Section 41(1) of the Act, is that there should have been allowance or deduction claimed by the Assessee in any Assessment Year as a loss, expenditure or trading liability incurred by the Assessee. Subsequently, if any remission or waiver is granted in respect of which such an allowance\/deduction has been claimed, then the Assessee is liable to pay t ax on the amount waived\/ remitted under Section 41(1) of the Act. This, as the Court held is only to ensure that Assessee does not keep double benefit \u2013 one by way of deduction and another by waiver of the amount, which has already been deducted in computing the tax<\/p>\n