itxa-896-2017 IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 896 OF 2017 Pr. Commissioner of Income Tax-12 Appellant. v/s. M/s. Colour Roof (India) Ltd., .. Respondent. Mr. N. C. Mohanty, for Appellant. Dr. K. Shivram, Sr. Advocate i/b. Mr. Rahul Hakani, for Respondent. CORAM: M.S.SANKLECHA & NITIN JAMDAR, JJ. DATE : 25th SEPTEMBER, 2019. P.C:- This Appeal under Section 260-A of Income Tax Act, 1961 (the Act), challenges order dated 10 th August, 2016, passed by Income Tax Appellate Tribunal (the Tribunal). impugned order dated 10th August, 2016 is in respect of Assessment Year 2009-10. 2 Revenue urges following questions of law, for our consideration: (a) Whether on facts and in circumstances of case and in law, Tribunal was justified in law in deleting addition of Rs.4,11,27,086/- as income under Section 41(1) of Act? (b) Whether on facts and in circumstances of case and in law, Tribunal has erred in not upholding addition of Rs.4,11,27,086/- as taxable income under Section 28 of Act on account of cessation of loan liability in view of decision of this Court in case of Solid Containers Ltd. v/s. DCIT 308 ITR 471? S.R.JOSHI 1 of 6 ::: Uploaded on - 30/09/2019 ::: Downloaded on - 01/10/2019 09:30:05 ::: itxa-896-2017 (c) Whether on facts and in circumstances of case and in law, Tribunal being final fact finding authority, is justified in not examining unproven credit entries in Balance-Sheet and in not invoking correct provision of Section 28(iv) of Act, if Section 41(1) invoked by Assessing Officer, was found by Tribunal not to be appropriate provision to tax impugned amount of Rs.4,11,27,086/-? Brief facts leading to this Appeal are as under:- 3 Respondent is engaged in business of manufacturing steel profiles and coils. For subject Assessment Year, Respondent filed its return of income on 29 th September, 2019, declaring loss of Rs.13.07 Crores. Assessment was taken up for scrutiny and Assessing Officer found that loan amounting to Rs.4.11 Crores had been waived and added same to income of Respondent under Section 41(1) of Act. Thus, determined Appellant s income by Assessment Order dated 23rd December, 2011 at Rs.14.68 Crores. \ 4 Being aggrieved, Respondent filed Appeal to Commissioner of Income Tax (Appeals) [CIT(A)]. By order dated 23 rd July, 2012, CIT (A) held on fact that loan taken were on capital account and not on account of purchase of merchandise. It further held Section 41(1) of Act, would have no application. This as un- secured loan taken by Respondent, was not on account of trading transaction and neither same was claimed as deduction in any earlier return of income i.e. no benefit in tax was obtained in respect of loan waived. In these circumstances, it deleted addition of Rs.4.11 Crores made under Section 41(1) of Act. 5 Being aggrieved with order dated 23 rd July, 2012 of CIT(A), Revenue filed appeal to Tribunal. impugned order S.R.JOSHI 2 of 6 ::: Uploaded on - 30/09/2019 ::: Downloaded on - 01/10/2019 09:30:05 ::: itxa-896-2017 dated 10th August, 2016 of Tribunal while dismissing appeal of Revenue, records fact that, loan transactions are on capital account and not on purchase of any merchandise from any of parties. It refers to Section 41(1) of Act and hold that it could only apply in respect of remission or cessation of trading liabilities, allowance or deduction of which had been made in earlier Assessment Year. In fact, Revenue had before Tribunal, conceded/ accepted fact that Section 41(1) of Act will have no application to present facts. Thus, Tribunal held waiver of loan in these facts is not covered under Section 41(1) of Act. 6 Being aggrieved with impugned order dated 10 th August, 2016 of Tribunal, Revenue is in appeal before us. We shall now deal with each of questions urged in seriatum. 7 Re. Question (a):- (i) Mr. Mohanty, learned Counsel for Revenue states that on waiver of loan, its character undergone change and it becomes on revenue account. Therefore, taxable under Section 41(1) of Act. In support, reliance was placed upon decision of this Court in Solid Containers Ltd., v/s. Dy. Commissioner of Income Tax [2009] 308 ITR 417. It is submitted that loan was taken from agents/ dealers has necessarily to be on revenue account; (ii) Firstly we note that Revenue had conceded position before Tribunal that Section 41(1) of Act will have no application in these fact. Thus, in view of decision of this Court in CIT v/s. Mahalaxmi Glass Works Ltd., 318 ITR 116, it is not open to Revenue to urge this issue as substantial question of law. In any S.R.JOSHI 3 of 6 ::: Uploaded on - 30/09/2019 ::: Downloaded on - 01/10/2019 09:30:05 ::: itxa-896-2017 case, decision of Solid Containers Ltd., (supra) relied upon by Revenue was not in context of Section 41(1) of Act but rendered in respect of Section 28 (iv) of Act. In fact, Solid containers Ltd. (supra) does not even remotely deal with Section 41(1) of Act. Besides on fact, Tribunal has rendered finding therein that amount which were received by Assessee therein were on trading account. Thus, it would have no application to present case. In this case, we are dealing with Section 41(1) of Act. Supreme Court in case of Commissioner v/ s. Mahindra and Mahindra Ltd., [2018] 404 ITR 1 has held that sine-qua-non for application of Section 41(1) of Act, is that there should have been allowance or deduction claimed by Assessee in any Assessment Year as loss, expenditure or trading liability incurred by Assessee. Subsequently, if any remission or waiver is granted in respect of which such allowance/deduction has been claimed, then Assessee is liable to pay t ax on amount waived/ remitted under Section 41(1) of Act. This, as Court held is only to ensure that Assessee does not keep double benefit one by way of deduction and another by waiver of amount, which has already been deducted in computing tax; (iii) In this case admittedly, no benefit in respect of loan has been claimed by Respondent in respect of Rs.4.11 Crores, in earlier Assessment Year; (iv) In view of above, question as framed does not give rise to any substantial question of law. Thus, not entertained. S.R.JOSHI 4 of 6 ::: Uploaded on - 30/09/2019 ::: Downloaded on - 01/10/2019 09:30:05 ::: itxa-896-2017 8 Re. Questions (b) & (c):- (i) We find that these two questions are being urged for first time only before us. At no point of time before authorities under Act, was it Revenue s case that waiver of loan should be brought to tax under Section 28 (iv) of Act. No such claim was made either as principal submission or even in alternative. Therefore, it is not open for Revenue to urge issue which was not urged before Tribunal. On this limited ground, two questions as proposed are liable to be dismissed; (ii) In any case, it must be pointed out that decision of this Court in Solid Container Ltd., (supra), will have no application to this case. In above case, Tribunal had come to finding of fact that transaction was on Revenue s account and not on capital account. Therefore, waiver of loan was chargeable to tax. In this case, CIT(A) as well as Tribunal have both come to finding of fact that loan taken was on capital account and not on trading account. Thus, decision of Solid Container Ltd., (supra) would have no application; (iii) In any view of matter, issue now stands concluded by decision of Apex Court in Mahindra and Mahindra (supra). In above case, Apex Court has held that, Section 28 (iv) of Act can only apply where any benefit arises from business or profession and such benefit is received other then in shape of money; S.R.JOSHI 5 of 6 ::: Uploaded on - 30/09/2019 ::: Downloaded on - 01/10/2019 09:30:05 ::: itxa-896-2017 (iv) In this case, waiver of loan is, in fact, found is on capital account. Thus, these two questions as proposed do not give rise to any substantial questions of law. Thus, not entertained. 9 Accordingly, Appeal dismissed. No order as to costs. (NITIN JAMDAR,J.) (M.S.SANKLECHA,J.) S.R.JOSHI 6 of 6 ::: Uploaded on - 30/09/2019 ::: Downloaded on - 01/10/2019 09:30:05 ::: Pr. Commissioner of Income-tax-12 v. Colour Roof (India) Ltd