PLR Textiles Ltd. Vs ACIT (ITAT Chennai)
ITAT Chennai held that waiver of amount of loan, whether principal or interest component, cannot be brought to tax under section 41(1) of the Income Tax Act. Accordingly, appeal of assessee allowed and addition directed to be deleted.
Facts- The case of the assessee was reopened for the reason that the brought forward business loss for the A.Y.1999- 2000 was set off erroneously and waiver of loan was inadvertently deducted from prior income. AO passed an order u/s.143(3) r.w.s.147 of the Act on 30.12.2010 by adding the waiver of loan and treated as cessation of liability u/s.41(1) to the tune of Rs.2,39,57,911/- and also restricted the deduction of cost of acquisition of the sale of land and building to Rs.23,872/- instead of Rs.6.07 Crores as claimed by the assessee.
CIT(A) upheld the action of AO. Being aggrieved, the present appeal is filed.
Conclusion- Held that the cost of acquisition of land and building recorded in the books of accounts of the assessee is to be considered for deduction from the sale consideration for computing the capital gain – Long term capital on land and short term capital gain on building as the depreciation has been claimed on building and accordingly we direct the AO to re-compute long term capital gain.
