Case Law Details
CA Deepak Goel
Waiver of loan – Madras HC has reignited this issue. Held that Waiver of loan is taxable under section (‘u/s’) 28(iv)
Brief
Under one time settlement the bank waived loan amount (used by the assessee for acquiring capital assets) which includes both principal amount of loan and interest on loan. Held that Waiver of loan is taxable under section (‘u/s’) 28(iv) of the Income-tax Act, 1961 (‘the Act’). The waiver of a portion of the loan would certainly tantamount to the value of a benefit. This benefit may not arise from “the business” of the assessee. But, it certainly arises from “business”.
Decision of Supreme Court in the case of CIT v. T.V.Sundaram Iyengar & Sons Ltd. [222 ITR 344] and various decisions of different High courts referred to. Madras HC overruled its own ruling in Iskraemeco Regent Limited and Delhi High Court rulings in Logitronics and in Rollatainers.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Can anybody further throw light on the following para narrated by the Madras High Court while giving decision regarding Chargeability of waived loan as taxable :
” two entries are made in the books of account, one in the profit and loss account where payments are entered – ; and
“Alternatively, the amount representing the waived portion of the loan is shown as a capital receipt in the profit and loss account its”