The Tax Publishers2020 TaxPub(DT) 2573 (Visakhapatnam-Trib) : (2020) 183 ITD 0586

INCOME TAX ACT, 1961

Section 41(1)

Where trading liability or the expenditure or deduction was claimed by assessee in respect of interest paid on the OCC loan and in respect of principal amount, though assessee had gained the benefit by way of one time settlement the same cannot be brought to tax under section 41(1) because the OCC loan represents the principal which was never claimed as expenditure, there was no case for making addition under section 41(1) in respect of the principal amount.

Business income - Addition under section 41(1) - Waiver of working capital loan -

During the course of assessment proceedings, AO found that assessee had received the benefit as a result of one-time settlement of loan by a bank. Assessee was due to Bank in respect of term loan & OCC for a sum which included the interest subsidy as well as the working capital loan. Interest was added back to income and taxed under section 43B. However, the sum which represent the waiver of working capital loan was added as income under section 41(1). Held: Trading liability or the expenditure or deduction was claimed by the assessee in respect of interest paid on the OCC loan. In respect of principal amount, though assessee had gained the benefit by way of one-time settlement the same cannot be brought to tax under section 41(1) because the OCC loan represents the principal which was never claimed as expenditure. AO also did not make out a case that the principal amount was debited to the Profit & Loss account in the earlier years. Therefore, there was no case for making addition under section 41(1) in respect of the principal amount.

Followed:CIT v. Mahindra & Mahindra Ltd. 2018 TaxPub(DT) 2139 (SC) CIT v. T.V. Sundaram Iyengar & Sons Ltd. (1996) 222 ITR 344 (SC) : 1996 TaxPub(DT) 1245 (SC) Income Tax Officer v. Tini Pharma Ltd. 2018 TaxPub(DT) 2964 (Hyd-Trib) M/s. SHRM Food & Allied Services Pvt. Ltd. v. ITO [ITA No. 657/Mum/2009, 595/Mum/2008 & 1116/Mum/2013, dt. 3-10-2017] : 2017 TaxPub(DT) 4950 (Mum-Trib)Relied:CIT v. M/s. Ramaniyam Homes P. Ltd. (formerly known as Rasi Silk Industries Ltd.) (2016) 68 taxmann.com 289 (Madras-HC) : 2016 TaxPub(DT) 2061 (Mad-HC) Rollatainers Ltd. v. CIT (2011) 15 taxmann.com 111 (Delhi-HC) : 2012 TaxPub(DT) 0235 (Del-HC) Solid Containers Ltd. v. Dy. CIT & Anr. 2009 TaxPub(DT) 0811 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

IN THE ITAT, VISAKHAPATNAM BENCH

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