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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI J. SUDHAKAR REDDY & SMT SUCHITRA KAMBLE
This appeal is filed against the order dated 20/12/2011 passed by CIT (A) XI, New Delhi.
The grounds of appeal are as follows:-
“1. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.13,28,59,000/- made on account of waiver of loan from IDBI under one time settlement u/s 28(iv) of the I.T Act, 1961?
2. On the facts and circumstances of the case and in law, the CIT (A) has erred in relying upon the decision of M/s Tosha International Ltd, while allowing the relief without considering that the issue involved in this case was cessation of liability u/s 41(1) of the I.T. Act, whereas in the present case addition was made u/s 28(iv) of the I.T. Act.
The return of income declaring an income of Rs.5,99,410/- was filed by the assessee on 25/09/2009. Thereafter the case of the assessee was selected for scrutiny and the A.O made an addition of Rs.13,28,59,000/- u/s 28 (iv) of the Act treating the waiver of Term Loan by IDBI Bank, on One time Settlement as the income of the assessee. The assessee went in appeal before the CIT (A). The CIT(A) deleted the said addition stating that the loan availed from the IDBI is a Term Loan and not a working capital loan and thus the case of the assessee company squarely covered by the decision of Hon’ble Delhi High Court in the case of CIT Vs. Tosha International Ltd. 331 ITR 440.
The Ld. DR submitted that the case of Tosha International is not applicable and in fact has been considered in the case of Rollatainers Ltd vs. CIT (ITA No. 127 of 2011 decided on 30.08.2011) passed by Hon’ble Delhi High Court. The Hon’ble Delhi High Court held that under One Time Settlement Scheme the banks and the institutions required the assessee to pay certain percentage of the amount towards the principal and waiver the entire interest amount. Whether waiver of the principal amount credited to the capital Court came to the conclusion that the amount is not covered by the provision contained in Section 41(1). Thus, the Ld. DR submitted that the working capital cannot amount to Term Loan. The Ld. DR further pointed out that the assessee has not rightly discharged its burden of proof.
5. However, the Ld. AR refuted the same. The Ld. AR submitted that during the year under consideration the assessee has gone for One Time Settlement with IDBI Bank. Under the said Settlement, the outstanding liability of the Term Loan from IDBI Bank was settled at Rs.538.86 lakhs from Rs.1867.16 lakhs giving the assessee a total benefit of Rs.1328.59 lakhs in the year under consideration. The assessee company has got its Term Loan waived from IDBI Bank which was taken into account by CIT (A) in his order. The Ld. AR submitted that the factual aspects as well as the legal aspect are similar to that of the case of Tosha International (Supra). Therefore, the additions were rightly deleted by the CIT (A).
We have perused all the records and heard both the parties. The factual aspects are similar to the case of Tosha International (Supra). In the judgment of the Hon’ble Delhi High Court in the case of Rollatainers Ltd., noticed, the assessee therein revised the original claim, by filing before the assessing officer, a revised computation of income, by reducing the principal amount of loans (term loans as well as working capital loans) waived by the banks, from its taxable income. The assessing Officer denied the said request on the ground that revision of claim made in the original return of income could not be entertained otherwise than by way of revised return, which was required to be filed within the time limit prescribed under Section 139 (5) of the Act. But in the present case, loan waiver was claimed in the original Return of Income by the assessee. The One Time Settlement (OTS amount) has been paid out of fresh induction of funds by promoters as directed in the BIFR order.
In the case of Tosha International (supra), it was held as follows:
“3. The revenue went in appeal before the Tribunal against the order of the Commissioner of Income Tax (Appeals) with regard to the deletion of the said sum of Rs 10.47 crores. We note that the Tribunal has examined the case in detail and particularly from the standpoint of the provisions of Section 41 (1) of the said Act. The Tribunal has observed as under:-
As per our considered view, for attracting the provisions of Section 41 (1), the first requisite condition to be satisfied is that the assessee should have got deduction or benefit of allowance in respect of loss, expenditure or trading liability incurred by it and subsequently during any previous year, the assessee should have received any amount in respect of such loss, expenditure or trading liability by way of remission or cessation thereof. The remission would become income only if the assessee has claimed deduction in respect of expenditure or trading liability. In Mahindra & Mahindra Ltd. Vs. CIT, Hon‟ble High Court of Bombay 261 ITR 501, held that no allowance or deduction having been allowed in respect of loan taken by assessee for purchase of capital assets, Section 41 (1) was not attracted to remission of principal amount of loan. In the instant case, the assessee has not got any deduction on account of acquisition of capital assets as the same has been reflected in the balance sheet and not in the P&L account, and also the remission of the principal amount of loan so obtained from the bank and financial institution had not been claimed as expenditure or trading liability in any of the earlier previous year. So far as waiver of interest is concerned, the assessee company itself has treated the same either as income or has not claimed the same as expenditure in the computation of income filed before the lower authorities.
4. We see no reason to interfere with the conclusions of the Tribunal as the same have been rendered on a correct appreciation of law. The principles enunciated in Mahindra & Mahindra Limited v. CIT: 261 ITR 501(Bom) are fully applicable and we see no reason to take a different view.
Consequently, no substantial question of law arises for our consideration. The appeal is dismissed.”
The CIT (A) has rightly applied the ratio laid down in Tosha International (Supra) to the facts of this case and allowed the appeal of the assessee. Hence, we do not interfere in this order.
In result, the appeal is dismissed.
The order is pronounced in the open court on 30th of May, 2016.