The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently held that waiver of loan is not business Income, therefore it isnot taxable under section 28(i) of Income Tax Act 1961.
Section 28(i) Income Tax Act ,1961 deals with profit and gains of any business or profession of assessee at any time during the previous year.
Assessee-Runwal Realtors Pvt. Ltd. is a Domestic Company, case was selected for scrutiny after filing the income tax returns. After the scrutiny, the assessment order was passed by the assessing officer which held that amount of waiver of loan of Rs.143,71,02,0038/- was taxable under section 28(i) and 28(iv) and 41(1) of the Income Tax Act 1961.
Against the order assesee filed an appeal before Commissioner of Income Tax Appeal CIT(A). The CIT (A) allowed the appeal of the assesee. Ther after the aggrieved revenue filed appeal before ITAT.
Counsel for the revenue strongly relied on the order of the assessing officer.
Counsel for the assessee submitted that assessee had issued FRN. The FRNs are debt instruments carrying interest as mentioned in the subscription agreement. The discount on redemption of FRNs constituted capital receipt not chargeable to tax.
The Tribunal comprising S.S.Viswanethra Ravi, (Judicial Member) and Dipak P. Ripote, (Accountant Member) dismissed the appeal filed by the revenue and held that the Assessee is in the business of construction, therefore, waiver of loan amount of Rs.1,43,71,02,003/- is not business income of the assessee. Hence, it is not taxable under section 28(i) of the Income Tax Act 1961.
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