Section 41(1) Not Applicable to Loan Waiver related to Capital Asset Purchase

DCIT Vs Rama Phosphates Ltd (ITAT Mumbai) The issue under consideration is whether Section 41(1) is applicable in case of waiver of liability incurred in respect of purchase of capital asset? In the present case, AO treated principal amount of working capital loan waived off by Central Bank and IDBI Bank as income of assessee under section 41(1). Assessee challenged this on the ground that part of the working capital loan had been utilized for acquisition of capital goods. ITAT states that  Section 41(1) of the Income Tax Act does not apply since waiver of loan does not amount to cessation of...