JINDAL INDIA POWER LIMITED,DELHI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 13(1), DELHI

ITA 4966/DEL/2026Status: DisposedITAT Delhi09 October 2026AY 2022-2349 pages
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What did the Tribunal hold?

The Tribunal held that the waiver of the principal portion of the loan amount is not taxable under Section 56(2)(x) of the Income-tax Act, 1961. The Tribunal reasoned that the Supreme Court's decision in Mahindra & Mahindra Ltd., which dealt with the taxability of waived amounts under Section 28(iv) and Section 41(1), cannot be extended to Section 56(2)(x). The Court noted that the Supreme Court had not had occasion to apply Section 56(2) in that case. Furthermore, the Tribunal observed that Section 28(iv) was amended from April 1, 2024, to include cash receipts, but no corresponding amendment was made to Section 56(2)(x). This indicated that the legislature never intended to bring loan waivers under Section 56(2)(x). Therefore, the transaction of loan waiver on capital account could not be brought to tax under Section 56(2)(x). The Tribunal allowed Ground No. 3 raised by the assessee.

What were the facts?

The assessee, Jindal India Power Limited, is in appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, against the order of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2022-23. The NFAC's order was based on an assessment order passed by the Assessing Officer (AO) under Section 143(3) of the Income-tax Act, 1961. The assessee had taken a substantial loan for power plant construction, which became an NPA due to financial difficulties. Subsequently, a One-Time Settlement (OTS) was entered into with the lenders, resulting in a waiver of a portion of the principal loan amount. The AO sought to tax this waived amount under Section 56(2)(x) of the Act. The assessee's grounds 1 and 2 were not pressed.

What were the issues?

1. Whether the waiver of the principal portion of the loan amount is taxable under Section 56(2)(x) of the Income-tax Act, 1961, as income from other sources, or if it constitutes a capital receipt. The assessee contended that the waiver of a loan on capital account is not taxable under Section 56(2)(x) and that the Supreme Court's decision in Mahindra & Mahindra Ltd. regarding Section 28(iv) and Section 41(1) is not applicable to Section 56(2)(x). The assessee argued that the legislature's intent was not to tax loan waivers under Section 56(2)(x), especially considering the amendment to Section 28(iv) from April 1, 2024, which did not have a corresponding amendment in Section 56(2)(x). The revenue argued that the waiver of the loan amount is taxable income. The revenue relied on the Supreme Court's observations in Mahindra & Mahindra Ltd. concerning the taxability of waived amounts.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 56(2)(x),Section 28(iv),Section 41(1),Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: MAHAVIR SINGH & SHRI M BALAGANESH

PER SHRI M BALAGANESH, ACCOUNTANT MEMBER:

The appeal in ITA No.4966/Del/2026 for AY 2022-23, arises out of the 1. order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 16.03.2026 against the order of assessment passed u/s 143(3) of the Income-ta

The order continues below.

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