DCIT Vs Rudra Buildwell Homes Private Limited (ITAT Delhi)
No OTS, No Waiver, No 41(1)- ARC Haircut Is Lender’s Loss, Not Borrower’s Income: Loan Assignment at Discount ≠ Cessation of Liability-Delhi ITAT Rejects ₹71.34 Cr u/s 41(1)-
Delhi ITAT ‘G’ Bench in DCIT vs Rudra Buildwell Homes Pvt Ltd & Rudra Buildwell Projects Pvt Ltd (ITA Nos.4119 & 4118/Del/2025, AY 2022-23, order dated 24-12-2025) dismissed Revenue’s appeals and upheld deletion of a huge addition of ₹71.34 crore u/s 41(1), holding that assignment of a loan to an Asset Reconstruction Company (ARC) at a discounted value does not result in remission or cessation of liability in the hands of the borrower.
Assessee companies had availed loans of ₹85 crore from ECL Finance Ltd, which later became NPA. ECL assigned the loan to CFM Asset Reconstruction Pvt Ltd for ₹92.38 crore, while the total outstanding including interest was ₹163.72 crore, leading AO to presume a so-called “haircut” of ₹71.34 crore and tax the same as cessation of liability u/s 41(1) in regular assessment u/s 143(3).
CIT(A) conducted an independent enquiry u/s 133(6) directly from CFM ARC, which categorically confirmed that:
– no One-Time Settlement (OTS) was offered,
– no waiver, remission or reduction of loan was granted to the assessee, and
– ARC merely stepped into the shoes of the original lender, with the assessee continuing to be liable for the entire principal and interest.
On appeal, ITAT noted that:
