|
III. Direct Taxes Case Law:
1. Commissioner
Vs. Mahindra and Mahindra Ltd., Civil Appeal Nos. 6949-6950 of 2004,
Date of Pronouncement: 24.04.2018, Supreme Court of India
Issue
Whether the wavier of loan for purchase of capital goods would constitute as taxable income in hands of the recipient.
Held:- No
Brief Facts
The assessee-company entered into an agreement with Kaiser Jeep
International Corporation (KJIC) a subsidiary of Kaiser Jeep
Corporation(KJC) based in America where KJIC agreed to sell dies,
welding equipments to the assessee. For procurement of above purchases,
KJC agreed to provide loan to assessee at the rate of 6% repayable after
10 years in installments. Later on American Motor Corporation (AMC)
took over KJC and agreed to waive the principal amount of loan advanced
and cancel all the matured promissory notes on 17.02.1976 which were
received back in cash. On 30.06.1976, the assessee filed its return
showing 57,74,064 as cessation of liability towards AMC. The Ld.AO
treated the sum as income and taxable u/s 28 of Income tax Act. The Ld.
CIT(A) upheld the order of ld.AO which was set aside by Hon’ble ITAT and
the Hon’ble High Court of Bombay. Being aggrieved, the revenue has
filed an appeal before Hon’ble Supreme Court of India.
Held
The Hon’ble Supreme Court held that the sine qua non of Sec 28 is
receipt of benefit or perquisite in form other than money which is not
satisfied in the present case as money already paid is received back in
cash on account of loan waiver.
On the Ld. CIT(A) order taxing the amount under Sec 41, the Hon’ble
Supreme Court held that Sec 41 only applies to cessation of trade
liability and the liability mentioned supra is on the capital account
and not in nature of income.
The appeal was held in favour of the assessee and against the revenue.
(Please click here for judgment)
|
New User? 
Subscribe Now