Case Law Details
Share Microfin Ltd Vs DCIT (ITAT Hyderabad)
ITAT Hyderabad held that waiver of the principal amount, which was taken for trading purpose, which is credited to the profit & loss account results in income in the hands of assessee and accordingly taxable.
Facts- During the course of assessment proceedings, the AO noted from the computation statement that the assessee company has claimed an amount of Rs.14,89,99,689/- as gain in One Time Settlement (OTS) of the term loan borrowings and reduced the same from computation.
From the details furnished by the assessee, he noted that the assessee company has availed rupee term loan of Rs.25.92 crores from Citi Bank against which guarantee was provided by Blue Orchard Micro Finance, Luxembourg (BOMF). Subsequently, the assessee company was referred to the Corporate Debt Restructuring (CDR) to restructure its outstanding debts. Being a non-CDR lender, Citibank invoked the stand-by letter of Credit issued by Citibank International on behalf of BOMF and appropriated the outstanding rupee term loan and closed the account. Thus, BOMF became a creditor to the assess company. Later, as per the settlement agreement between the assessee company and BOMF, out of the total principal amount, assessee company paid final settlement amount of Rs.4.20 crores only. The assessee company stated that out of the total gain of Rs.18,10,78,268/- the principal component was not brought to tax as the same is capital in nature.
However, AO made addition of the principal amount of Rs. 14,89,99,689/- to the total income of the assessee. CIT(A) upheld the addition. Being aggrieved, the present appeal is filed.
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