Case Law Details
Pr.CIT Vs SICOM Ltd (Bombay High Court)
The issue under consideration is that whether addition under section 41(1) can be made in respect of waiver of loan by Maharashtra Government?
As per section 41( 1), there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax under Section 41 of the IT Act. The objective behind this Section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability.
Further, it is important to note that, the loan has been taken to give effect of the purchase in respect of plant, machinery and tooling equipment which are capital assets of the Respondent. The said purchase amount had not been debited to the trading account or to the profit or loss account in any of the assessment years. Here, HC deem it proper to mention that there is difference between ‘trading liability’ and ‘other liability’. Section 41(1) of the IT Act particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, HC find no force in the argument of the Revenue that the case of the Respondent would fall under Section 41(1) of the IT Act.”
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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