suresh 13-ITXA-1803.2014.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1803 OF 2014 Commissioner of Income Tax 9, 3rd Floor, Room No.315, Aayakar Bhawan, M.K. Road, Mumbai 400020. Appellant Versus M/s. Graham Firth Steel Products (I) Ltd., B 212, Shreyash Industries Estate, Near Jai Coach, Western Express Highway, Goregaon (E), Mumbai 400 063. .... Respondent Mr. Arvind Pinto for Appellant. Mr. J.D. Mistri, Senior Counsel with Mr. Atul K. Jasani & Mr. P.C. Tripathi for Respondent. CORAM: S.C. DHARMADHIKARI & SMT. VIBHA KANKANWADI, JJ. DATE : AUGUST 07, 2017 ORAL ORDER ( Per Shri S.C. DHARMADHIKARI, J. : ) 1. This appeal of Revenue challenges order of Income Tax Appellate Tribunal dated 23 4 2014. 2. Mr. Arvind Pinto, appearing for Revenue, would Page 1 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:22 ::: suresh 13-ITXA-1803.2014.doc submit that questions of law at pages 6 & 7 of paper book are substantial questions of law deserving admission of this appeal. 3. Before we turn to his submissions based on legal provisions and which he says are attracted, facts, as noted by Assessing Officer, are that respondent/assessee filed its e return of income for Assessment Year 2006 07 on 29 11 2006 declaring total loss of Rs.1,22,04,360/ . This return was revised on 31 10 2007 declaring Nil income. case was selected for scrutiny and notice under Section 143(2) of Income Tax Act, 1961 (for short, I.T. Act ) was issued on 29 11 2007 and served on assessee on next day, i.e. 30 11 2007. Further notice under Section 142(1), dated 11 1 2008, was issued along with detailed questionnaire and served on assessee. Then, fresh notice had been issued and in response to which assessee attended. assessee pointed out that in past it has been engaged in manufacture and sale of cold rolled steels. There have been huge losses incurred by assessee during past several years, and during Page 2 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:22 ::: suresh 13-ITXA-1803.2014.doc year under assessment no business activities have been carried out by it. After receipts credited in accounts and other income are noted, Assessing Officer proceeded to note non business receipts. Pertinently, there was no production nor any sales, nor any business activity. assessee was requested to explain claim of allowability of Expenses and Depreciation. 4. By written clarification dated 4 11 2008, assessee contended that during year, based on Board for Industrial and Financial Reconstruction's order, there has been restructuring and demerger. company has incurred expenses and they are incurred for very survival of company. business activities were temporarily halted due to labour problems, financial constraints for working capital, lack of demand and pendency of proceedings before Board for Industrial and Financial Reconstruction (for short, BIFR ). Subsequently, BIFR issued show cause notice for winding up, but proposal for revival of company was submitted. BIFR passed order on 29 5 2007 approving scheme of Page 3 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:22 ::: suresh 13-ITXA-1803.2014.doc rehabilitation/demerger of company. As per this order, Goregaon unit of assessee (only land and building) along with certain liabilities will be hived off in new corporate entity, namely, Graham Firth Mumbai Limited. All residue assets and liabilities will continue in existing company. 5. With effect from appropriate date of demerger, hiving off took place and what scheme envisaged thereafter is that assessee is going to start production at Aurangabad. machineries are being shifted from Goregaon, Mumbai to Aurangabad. company is in process of revival. company, therefore, argued that expenses which have been incurred were for survival. 6. We are not concerned with everything that Assessing Officer dealt with but for claim of depreciation. claim of depreciation was sought to be disallowed by Assessing Officer on ground that there is no business activity and plant and machineries are not in use. assessee submitted that business may not have been carried out but Page 4 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:22 ::: suresh 13-ITXA-1803.2014.doc depreciation claimed of Rs.74,04,808/ includes depreciation claim amounting to Rs.69,26,452/ on goodwill of written down value of Rs.2,77,05,807/ . Assessing Officer held that depreciation on goodwill is not allowable under Section 32(1)(ii) of I.T. Act. 7. Then, argument is with regard to loan liability. It is stated that loan liability having been written off, real effect is cost of assets reimbursed under one time settlement scheme. Therefore, cost of assets and plant and machinery was reduced from opening written down value which will give value of actual cost of assets to assessee. assessee's claim for depreciation was disallowed and added to total income of assessee and closing written down value of depreciable asset is determined at Nil. 8. Then, argument is that Assessing Officer while assessing revised return of income filed on 31 10 2007, computed net profit at Rs.29,08,56,591/ from which adjustments on account of depreciation and on account of Page 5 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc Sections 28 to 44 have been made setting it off against loss and reducing total income to Nil. In that regard, it is stated that this claim for additional deduction which has been made and to extent of Rs.19,43,73,928/ is by not filing revised return but only in form of letter. That cannot be entertained. 9. Finally, argument before Assessing Officer was that company, based on BIFR order, may have arrived at one time settlement of loan with Banks and financial institutions, but out of credit which assessee made in same year of principal and interest to tune of Rs.17,34,01,111/ in profit and loss account, and in computation of income reduced same. There is no dispute that interest amounting to Rs.8,97,01,648/ was disallowed. As regards this component of principal amount of loan, assessee credited sum of Rs.8,36,99,463/ in profit and loss account and also showed it in revised return of income. Subsequently, during course of assessment proceedings claim was made that receipt is of capital nature and not taxable income of assessee and requested that same be Page 6 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc allowed as deduction. Assessing Officer called upon respondent/assessee to substantiate its claim that remission of principal amount of Rs.8.37 crores approximately and loans from Banks and financial institutions credited to profit and loss account are not chargeable to tax. 10. detailed note was submitted and it was contended that remission is capital receipt since it is remission of loan liability. Then, reliance was placed upon Judgment of this Court in case of Mahindra and Mahindra Ltd. Vs. Commissioner of Income Tax, {(2003) 261 ITR 501}. That was distinguished by Assessing Officer by holding that in case of Mahindra and Mahindra (supra), there was no one time settlement. In case of one time settlement for waiver of loan and interest, position would be different. Assessing Officer relied upon Section 28(iv) and Section 41(1). Assessing Officer held as under: provisions of section 41 are in conformity with provisions of section 28(iv) and deals with certain specific receipts with reference to allowance/deduction or any other benefit availed by Page 7 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc assessee in earlier years. assessee has availed benefit of deduction of interest expenses in earlier years. In earlier assessment years, assessee has also availed depreciation on entire WDV of assets of which cost was met by loans from banks/financial corporations which have now been written off. In view of explanation 10 to section 43, cost to assessee should be reduced by such written off amounts. This also proves that assessee received benefit in earlier years of claiming higher depreciation which needs to be charged to tax u/s.41(1) of I.T. Act, 1961 during year on account of cessation of liability. Thus, writing off of loans payable by assessee due to one time settlement with Bank and financial institution amounts to benefit obtained by assessee arising out of business and therefore such benefit becomes income of assessee by virtue of definition of profit and gain of business as per provisions of section 28(iv) and also in view of section 41(1) of IT Act, 1961. These liabilities were shown in books of accounts payable to banks. However, these loan were written off by banks as result of one time settlement which undoubtedly amounts to benefit derived by assessee as result of extinguishments of liability to repay loan and this benefit has certainly arisen out of business and not from any where else. Further, in accordance with agreement of one time settlement with Banks/Financial corporations in whose hand debts would have written off by debiting equal amount of principal and interest to its profit and loss accounts. Consequently benefit received by assessee becomes taxable under provisions of section 28(iv) and also in view of section 41(1) of I.T. Act, 1961. Page 8 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc In view of above discussion it is clear that contention of assessee that benefit received by assessee in form of extinguishments of liability by entering into agreement of one time settlement with banks not covered by provisions of section 28(iv) is totally devoid of merit and hence is not acceptable. I have no hesitation in holding that due to remission of principal amount of Rs.8,36,99,463/ payable by assessee, which were utilised during conduct of business, interest on fund so borrowed were also paid and debited to profit and loss account in earlier years, assessee has derived benefit as result of extinguishments of liability. assessee company owed to banks and benefit undoubtedly has arisen out of conduct of business. benefit derived by assessee is assessed to tax as offered in revised return of income filed by assessee. Considering provisions of section 28(iv) and sec.41(1) of I.T. Act, 1961 and decision of Hon'ble Supreme Court in case of Goetz (India) Ltd, additional claim of deduction of Rs.19,43,73,928/ made during assessment proceedings pertaining to benefits received on account of principal amount of loans liabilities written off and increase in value of land hire off is not allowed. Penalty proceedings u/s 271(1)(c) are initiated for concealment of income and furnishing inaccurate particulars of income. 11. It is correctness of these two findings, namely, on point of depreciation and applicability of Sections 28(iv) and 41(1) of I.T. Act that matter was carried in appeal Page 9 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc before Commissioner of Income Tax (Appeals). Commissioner of Income Tax (Appeals) vide his order allowed appeal in part but on other ground. He maintained Assessing Officer's observations. More or less same observations as made by Assessing Officer have been made in First Appellate Authority's order. 12. Further aggrieved, matter was carried by assessee in appeal to Tribunal, and Tribunal in considering three grounds: firstly, whether upholding of disallowance of conveyance expenses, Assessing Officer was directed to allow same. We do not think that we should bother ourselves with this ground of assessee and accepted by Tribunal for amount thereunder is Rs.1,31,999/ . 13. Then, as far as depreciation on account of goodwill is concerned, orders of authorities were perused, including Tribunal's order in assessee's own case for previous Assessment Years 2004 05 and 2005 06 wherein Tribunal has allowed claim of depreciation holding that assets Page 10 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc said to have been put to use as claim of depreciation allowed in earlier years and facts are no different in order under consideration. Thus, when Tribunal allowed claim of depreciation holding that assets said to have been put to use were identical, depreciation on assets was directed to be allowed. 14. As far as goodwill is concerned, specific observation is made in para 25 by relying on Judgment of Hon'ble Supreme Court in case of Smifs Securities Limited, which Judgment was relied upon by assessee. That Judgment of Hon'ble Supreme Court is reported in (2012) 348 ITR 302 (SC) [Commissioner of Income Tax Vs. Smifs Securities Ltd.]. ground No.2, therefore, of assessee's appeal pertaining to this claim was allowed. goodwill was held to be asset eligible for depreciation. 15. Then came Assessing Officer's observation and finding that claim of assessee for additional deduction was made otherwise than by filing revised return and, Page 11 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc therefore, it cannot be entertained. That was set aside by Tribunal by relying on Judgment of Hon'ble Supreme Court in case of Goetze (India) Ltd. Vs. Commissioner of Income Tax, reported in (2006) 284 ITR 323 (SC). 16. We have then remaining component of principal amount of Rs.8,36,99,463/ . In that regard, we have already culled out Assessing Officer's observations above. 17. argument of Revenue was that Sections 28(iv) and 41(1) of I.T. Act apply. Tribunal in that regard extensively referred to arguments on merits of this claim in paras 30, 31 and 32. Tribunal held that additional claim made by assessee is on account of surplus on one time settlement with Banks. Before us also, Mr. Pinto argued that this claim, said to be additional in nature, was not allowed on merits. 18. He would submit that Assessing Officer was right in urging that both Sections 28(iv) and 41(1) are attracted. Page 12 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc Mr. Pinto heavily criticised observations in para 34 of Tribunal's order. He would submit that Tribunal failed to appreciate that if principal amount of loan was waived, then, Tribunal could not return finding that no remission or cessation of liability takes place. Tribunal erroneously relied upon view taken by Hon'ble Rajasthan High Court in case of Commissioner of Income Tax Vs. Shree Pipes Limited {(2008) 301 ITR 240 (Raj)} and its own earlier view. Rajasthan High Court's view in Shree Pipes Limited (supra) was brought to notice of Tribunal and Tribunal's order in case of Rama Pulp & Paper Limited (ITA No.3573/M/2011), as also in other cases referred in para 31 of Tribunal's order. Mr. Pinto submits that facts of present case are distinguishable from these cases. amount was credited to profit and loss account. It is only during course of assessment that different plea or submission was canvassed and that could not have been accepted. reasoning of Tribunal, therefore, in paras 34 and 35 squarely raises substantial question of law. At least on that count appeal Page 13 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc should be admitted. 19. On other hand, Mr. Mistri, learned Senior Counsel appearing for assessee would submit that on undisputed facts Tribunal was right in refusing to apply both Sections 28(iv) and 41(1) of I.T. Act. He would submit that only three questions which survive in this appeal are ones pertaining to benefit that was allegedly accruing in terms of Sections 28(iv) and 41(1). Mr. Mistri would submit that first two questions are properly covered by Orders and Judgments of Hon'ble Supreme Court. There is no need to entertain this appeal. 20. Even on above surviving questions, Tribunal has rightly concluded that there was waiver of principal amount of loan of Rs.8,36,99,463/ . Mr. Mistri heavily relied on Judgment of Rajasthan High Court which held that treatment of such waiver by assessee in his books of account does not alter effect of order of BIFR. No remission or cessation of liability results as far as interest nor assessee Page 14 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc became entitled to waiver of interest and, therefore, Section 41(1) was not attracted, is only view which one can take. Section 41(1) has been interpreted in that Judgment to mean that remission can only be by act of creditor and cessation of liability can come by agreement or by law. principal amount of loan in this case has been waived. liability may have been reduced under scheme of BIFR. assessee has not enjoyed any actual benefit or remission of liability. In such circumstances, Mr. Mistri, relying upon Judgment of Division Bench of this Court in Mahindra and Mahindra would submit that Mr. Pinto's reliance on another Judgment of Division Bench of this Court is not well placed. Mr. Pinto had relied upon Judgment in case of Solid Containers Ltd. Vs. Deputy Commissioner of Income Tax and another, reported in (2009) 308 ITR 417 (Bom). 21. Section 28(iv) of I.T. Act reads as under: 28. Profits and gains of business or profession. following income shall be chargeable to income tax under head Profits and gains of business or Page 15 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc profession (i) to (iii) . . . (iv) value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession; Thus, plain reading of said section would reveal that income and which has been set out in clauses shall be chargeable to income tax under head, profits and gains of business or profession. Clause (iv) deals with value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession. 22. Then, Section 41(1) was relied upon and it is common ground that Section 41 deals with profits chargeable to tax. sub section (1), Clause (a) thereof reads as under: 41. Profits chargeable to tax. (1) Where allowance or deduction has been made in assessment for any year in respect of loss, expenditure or trading liability incurred by assessee (hereinafter referred to as first mentioned person) and subsequently during any previous year, Page 16 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc (a) first mentioned person has not obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, amount obtained by such person or value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as income of that previous year, whether business or profession in respect of which allowance or deduction has been made is in existence in that year or not; 23. bare perusal of same would indicate that where allowance or deduction has been made in assessment for any year in respect of loss, expenditure or trading liability incurred by assessee and subsequently during any previous year if assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, amount obtained by such person or value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as income of that previous year. Page 17 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc 24. On own showing of Revenue, in this case, liability towards payment of interest and on which assessee derived no benefit, has rightly been brought to tax. It is only waiver of principal amount of loan of Rs.8,36,99,463/ and increase in value of land hived off that issue survived. 25. It is common ground that before Assessing Officer as well, assessee had argued that these two provisions are not attracted. Assessing Officer gave his reasoning. Assessing Officer came to conclusion that these liabilities were shown in books of account as payable to Banks. If loans were written off by Banks as reason of one time settlement, it undoubtedly amounts to benefit derived by assessee as result of extinguishment of liability to repay loan and this benefit has certainly arisen from business and not from anywhere else. 26. In case of Mahindra and Mahindra (supra), Division Bench of this Court was concerned with somewhat Page 18 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc identical demand. There, Mahindra and Mahindra was proceeded against on facts which have been noted. facts were that, whether sum of Rs.57,74,064/ due by assessee Mahindra and Mahindra to one Kaiser Jeep Corporation of America and written off by lender constituted taxable income of assessee? and whether, on facts and circumstances of case, assessee having obtained deduction of certain sum by way of depreciation on cost of machinery and toolings, was taxable under Section 41(1) of I.T. Act as cost of machinery/toolings being forgone by Kaiser Jeep Corporation during Assessment Year 1976 77? Then related questions to these were questions 3 and 4. 27. facts were noted in detail by Division Bench on pages 504 to 506 and arguments from pages 507 to 509. Then findings, as far as Section 28(iv) are concerned, were rendered. After referring to Agreement, which was executed between parties, it was held that Agreement for purchase of tooling was entered into and that Agreement in its entirety was not obliterated by waiver. Division Bench held that Page 19 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc Section 28(iv) was not attracted. 28. In present case as well, we find that when Section 28(iv) was pressed into service on basis that assessee argued that benefit received by assessee in form of extinguishment of liability by entering into agreement of one time settlement does not attract Section 28(iv), Assessing Officer held that due to remission of principal amount payable by assessee, which was utilised during conduct of business, interest on funds so borrowed were also paid and debited to profit and loss account in earlier years, assessee has derived benefit as result of extinguishment of liability. This benefit is undoubtedly arising out of conduct of business. 29. Division Bench in Mahindra and Mahindra held that assessee has not received any benefit or perquisite in kind which could be valued and in any event such benefit should be in nature of income. Division Bench noted that loan was advanced to assessee Mahindra and Mahindra, Page 20 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc assessee paid interest at 6% per annum for ten years being period of contract, and it never got deductions for payment of interest under Section 36(1)(iii) or under Section 37 of Act. Division Bench held that there was waiver of principal amount and not interest. In that case also Assessing Officer held that when there was waiver of loan, credits became part of business income and that prior to such waiver, they represented liability. Here also these are findings and overlooking aspect of payment of interest which has not been waived and in regard to which no relief was claimed. loan agreement, in its entirety, was not obliterated in present case as well. Therefore, we are of opinion that in present case Section 28(iv) was not attracted. 30. As far as Section 41(1) is concerned, Division Bench in Mahindra and Mahindra came to conclusion that same circumstances and admitted position would enable it to hold that it was remission. remission is not income and in order to get over such Judgments rendered earlier, Section 41 came to be enacted. Division Bench held that most Page 21 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc fundamental fact that is to be borne in mind is that no deduction was given in earlier years and, therefore, loan waived could not be included as income under Section 41(1) of I.T. Act. 31. In case at hand, only observation of Assessing Officer and confirmed by Commissioner of Income Tax (Appeals) is that writing off of loans payable by assessee due to one time settlement with Banks and financial institutions amounts to benefits obtained by assessee arising out of business. Therefore, such benefit becomes income of assessee. 32. Mr. Pinto would rely upon Judgment of Division Bench of this Court in case of Solid Containers (supra). Solid Containers involved facts of addition made on ground that credit balance written back is income of assessee in view of fact that it is gain directly arising out of business activity and same was liable to tax under Section 28. Reliance was placed on Mahindra and Mahindra. Page 22 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc However, Division Bench, in Solid Containers, noted that loan of Rs.6,86,071/ was taken during previous year for business purposes. This was written back, as result of Consent Terms arrived at between M/s. P.S. Jain Motors on one hand and assessee on other. assessee claimed that said loan was capital receipt and has not been claimed as deduction from taxable income as expenses and, therefore, did not fall within purview of Section 41(1). Division Bench, deciding Solid Containers, referred to finding in previous orders. Tribunal in that case held that assessee company had obtained certain loans from M/s. P.S. Jain Motors. This amount was payable to them with interest of Rs.2,83,819/ . That party filed Suit for recovery and assessee filed counter claim. matter was settled out Court whereby assessee company was not to pay any amount. assessee company credited to profit and loss account interest amount and offered same for taxation. With regard to addition of Rs.6,86,071/ , assessee company directly credited amount to reserves account Page 23 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc considering same as capital receipt. Division Bench found that Tribunal should have relied on Judgment of Hon'ble Supreme Court in case of Commissioner of Income Tax Vs. T.V. Sundaram Iyengar and Sons Ltd. {(1996) 222 ITR 344}. Division Bench found that Judgment in Mahindra and Mahindra was distinguishable. amount which initially did not fall within scope of provision rendering it liable to tax, subsequently becomes assessee's income, being part of trading of assessee. This was clearly distinguishing factor and which prevailed upon Division Bench in Solid Containers to dismiss assessee's appeal. Before us, Tribunal relied on Division Bench Judgment of Rajasthan High Court in Shree Pipes Limited. There, on identical facts, assessee was sick industrial company and proceedings were pending before BIFR. Under scheme of its rehabilitation, interest liability in respect of certain debts of assessee due to Banks and financial institutions stood waived. With waiver of interest liability of assessee under scheme, it was also ordered that assessee would be entitled to exemption Page 24 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc from operation of Section 41(1) of I.T. Act. assessee had written off in its books of account its liability towards interest and payment of commission, expenses incurred and allowed as deduction in earlier years. Assessing Officer considered this unilateral action as remission or cessation of its liability and made additions for assessment year concerned, including under Section 41(1). As in our case, Tribunal deleted addition. Revenue was in appeal before Rajasthan High Court. Division Bench held that act of remission was attributable to creditor and it could not be unilaterally attributed to debtor himself declaring that he would not pay. There was no material which suggested any act or omission on part of creditor which resulted in extinguishment of liability of assessee on its account. Writing off such liability in books of account by debtor only conveyed intention of assessee not to pay. Revenue relied on circumstances stated by Income Tax Officer that claims had not been filed before Board by Creditors. However, as rightly observed by Division Bench of Page 25 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc Rajasthan High Court that, there is no provision in Sick Industrial Companies (Special Provisions) Act, 1985 permitting lodging or raising of claims by creditor before BIFR. Before us as well, BIFR issued notices to those whose debts are secured and equally those whose stakes are involved. As far as company is concerned, BIFR could have recommended winding up but it took on record scheme of rehabilitation and revival of company. In that process, arrangements as carved out have been made. Therefore, as held by Tribunal, in present case ingredients of sub section (1) of Section 41 are not attracted. liability remains and because under scheme of BIFR principal sum was waived, assessee has not enjoyed any actual benefit of remission of liability in nature of trading. It is in these circumstances that claim of deduction in respect of waiver of loan amounting to Rs.8,36,99,463/ was granted. Assessing Officer was directed to allow it. 33. We are not concerned with addition of Rs.11,07,74,465/ being increase in value of land hived off Page 26 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: suresh 13-ITXA-1803.2014.doc for that is restored to file of First Appellate Authority. To our mind, reliance placed by Mr. Pinto on Solid Containers is misplaced. Tribunal has neither misdirected itself in law nor its order can be termed as perverse when it took assistance of Division Bench Judgment of Rajasthan High Court, as also Division Bench Judgment of this Court in Mahindra and Mahindra. In facts and circumstances, view taken by Tribunal is imminently possible. 34. We are, therefore, of opinion that neither of questions and from paras 6.1 to 6.5 can be termed as substantial questions of law. appeal is, therefore, devoid of merits and is dismissed but without any order as to costs. (SMT. VIBHA KANKANWADI, J.) (S.C. DHARMADHIKARI, J.) Page 27 of 27 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 30/10/2017 12:21:23 ::: CommissionerofIncome-tax-9, Mumbai v. GrahamFirthSteelProducts(I)Ltd