ITO CORPORATE WARD 2, MADURAI vs. MADRAS SUSPENSIONS LIMITED, MADURAI

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ITA 1884/CHNY/2017Status: DisposedITAT Chennai02 January 2019AY 2013-144 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that waiver of a loan does not amount to cessation of a trading liability, and therefore, Section 41(1) is not applicable. The findings of the CIT(A) were confirmed.

What were the facts?

The Revenue appealed the deletion of an addition made under Section 41(1) by the Assessing Officer. The addition was related to a loan waiver of ₹2 crores by a bank, which was used for machinery purchase and building construction.

What were the issues?

Whether the waiver of a term loan for machinery and building construction constitutes cessation of a trading liability under Section 41(1) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 28(iv),Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, ‘ B’ BENCH : CHENNAI

Before: SHRI ABRAHAM P GEORGE & SHRI GEORGE MATHAN

आदेश / O R D E R

PER GEORGE MATHAN , JUDICIAL MEMBER

1.

This is an appeal filed by the Revenue against the order of the Commissioner of Income-tax (Appeals)-1, Madurai in appeal No.0085/2016-17 dated 17.05.2017 for the assessment year 2013-14.

2.

Mr.Guru Bashyam represented on behalf of the Revenue, and Mr.N.V.Balaji represented on behalf of the Assessee.

3.

It was submitted by ld.D.R that the issue in this appeal was against the action of the Ld.CIT(A) in deleting the addition made by ld. Assessing Officer by invoking Section 41(1) of the Act in respect of an amount of `2 crores waived by TamilNad Mercantile Bank Limited representing Term Loan for the purchase of machinery and for building construction. It was a submission that Ld.CIT(A) has relied upon the decision of Hon’ble Madras High Court in the case of Iskraemeco Regent Ltd. Vs. CIT in [2011] 331 ITR 317(Mad.) to grant the assessee relief. It was a further submission that the said decision is now stood reversed by the Hon’ble Madras High Court in the case of CIT vs. Ramaniyam Homes (P.) Ltd., reported in [2016] 384 ITR 530(Mad.). It was a prayer by ld.D.R that the order of the CIT(Appeals) was liable to be reversed.

4.

In reply, the ld.A.R submitted that the issue raised in this appeal was now settled by the decision of Hon’ble Apex Court in the case of Commissioner Vs. Mahindra And Mahindra Ltd., in [2018] 302 CTR 213(SC) wherein the Hon’ble Supreme Court has categorically held in para 17 that:-

“17. To sum up, we are not inclined to interfere with the judgement and order passed by the High Court in view of the following reasons:

(a) Section 28(iv) of the IT Act does not apply on the present case since the receipts of Rs.57,74,064/- are in the nature of cash or money.

(b) Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction u/s.36(1)(iii) of the IT Act qua the payment of interest in any previous year.”

It was a prayer that the order of the CIT(Appeals) is liable to be upheld.

5.

We have considered the rival submissions. In view of the principles laid down in the decisions of the Hon’ble Supreme Court in the cases of Commissioner Vs. Mahindra And Mahindra Ltd., referred to supra, wherein the Hon’ble Supreme Court has categorically held that Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability, the Tribunal is of the considered opinion that the findings of the Ld.CIT(A) on this issue stand confirmed.

6.

In the result, the appeal of the Revenue is dismissed.

Order pronounced on 02 January, 2019, at Chennai.

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