One time Loan waiver arising out of BIFR order -
AO taking the stand that the same should go to offset the WDV of the block of
assets under section 43(1) Explanation 10 thereby denying depreciation
thereafter on the block of assets
Facts:
Asseessee, arising out of a BIFR order got a one time
settlement waiver of their loans which were taken for acquiring fixed
assets. It was the stand of the AO that the waiver of loan should go to reduce
the WDV (which was only partly existent at that point of time) as per Section
43(1) Explanation 10 thus denied depreciation in toto thereafter by making the
WDV as zero due to the waiver of loan and denied depreciation thereafter for
future assessment years as well. An alternate plea was also taken by revenue
that this should be seen in the realm of Section 43(6c) where in the waiver
should go to reduce the WDV in the computation of depreciation thereafter if
not under section 43(1) Explanation 10. The appeal was dismissed by the CIT(A).
On higher appeal the ITAT for the relevant assessment year has remanded the
case back to the CIT(A). Meanwhile in these batch of appeals the assessee
pleaded that the stand of the revenue was incorrect -
Held in favour of the assessee that the one time loan
waiver was a capital receipt and it cannot be read in a manner to offset cost
of the asset as per Explanation 10 to Section 43(1) nor are the provisions of
Section 43(6c) to apply.
Applied:
CIT v. Tata Iron & Steels Co. Ltd. (1998) 2 SCC 366
CIT v. Cochin Co. (P) Ltd. (1990) 184 ITR 230 (Kerala
HC) : 1990 TaxPub(DT) 0662 (Ker-HC)
Akzo Nobel Coatings India Private Ltd. v. DCIT (2012)
139 ITD 612 (Bang-Trib) : 2013 TaxPub(DT) 0159 (Bang-Trib);
Aditya Oil & Chemicals Ltd, ITA No. 4878/Mum/2010,
dated 08-02-12 (Mumbai ITAT)
Case: STI India
Ltd. v. DCIT/ACIT 2023 TaxPub(DT) 5566 (Ind-Trib)