Waiver of Principal Loan Amount in Cash cannot be treated as Business Perquisite: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the waiver of principal loan amount in cash cannot be treated as business perquisite under section 28(iv) of the Income Tax Act, 1961.

The assessee, Technichem Organics Pvt. Ltd. company is engaged in the business of manufacturing of organic chemicals. The Assessing Officer made addition at capital receipts amounting to Rs.1,29,78,902/- thereby observing that waiver of principal loan amounting to Rs.1,29,78,902/- which forms income of the assessee as contemplated under section 28(iv) of the Act.

A bench comprising Shri P.M. Jagtap, Vice President and Ms. Suchitra Kamble, Judicial Member observed that relied on the case of Mahindra & Mahindra and held that the decision is applicable in the present case as in the said case it was categorically held that when the assessee had not claimed deduction under Section 36(1)(iii) of the Act for interest on loan and loan was taken for acquiring capital asset then the waiver was on account of liability other than trading liability and thus provisions of Section 41(1) does not apply in such cases.

“Section 28(iv) of the Income Tax Act, 1961 will not be applicable in the present assessee’s case as the receipts are in the nature of cash or money. The waiver of loan amounts to cessation of liability other than trading liability, thus, the said amount cannot fall under Section 28(iv) will not be applicable. Therefore, the Assessing Officer as well as the CIT(A) was not right in making the said addition and confirming the same,” the Tribunal said.

Shri Chetan Agarwal appeared for the assessee.

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