Cimmissioner V Mahindra
Cimmissioner V Mahindra
Cimmissioner V Mahindra
Versus
WITH
Digitally signed by
ASHA SUNDRIYAL
Date: 2018.05.03
CIVIL APPEAL No. 7951 OF 2012
16:05:56 IST
Reason:
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CIVIL APPEAL No. 4442 OF 2018
(Arising out of Special Leave Petition (C) No.
4008 OF 2014)
JUDGMENT
R.K. Agrawal, J.
1) Leave granted.
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2) These appeals have been filed against the impugned judgment and
the Division Bench of the High Court while giving answers to the
Along with this, there are certain other connected appeals also. Since
the question of law is same in all these appeals, all the appeals would
3) Brief facts:-
(a) For the proper appreciation of the issue in the case at hand, we
deem it apposite to mention the gist of the facts. The appellant herein is
the Department of Income Tax (for brevity ‘the Revenue), on the other
hand, respondent herein is Mahindra & Mahindra Ltd. (for brevity ‘the
(b) The Respondent, way back, decided to expand its jeep product line
(for short ‘the KJC’) based in America wherein KJC agreed to sell the
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dies, welding equipments and die models to the assessee. The final price
(c) However, for the procurement of the said toolings and other
Reserve Bank of India (RBI) for the approval of the said loan agreement.
The RBI and the concerned Ministry approved the said loan agreement.
(d) Later on, it was informed to the Respondent that the American
Motor Corporation (AMC) had taken over the KJC and also agreed to
Respondent and to cancel the promissory notes as and when they got
dated 17.02.1976.
(e) On 30.06.1976 the Respondent filed its return and shown Rs.
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57,74,064/- as cessation of its liability towards the American Motor
Corporation. After perusal of the return, the Income Tax Officer (ITO)
concluded that with the waiver of the loan amount, the credit
represented income and not a liability. Accordingly, the ITO, vide order
under Section 28 of the Income Tax Act, 1961 (for brevity ‘the IT Act’).
appeals being Nos. 2007 (Bomb.) of 1981 and 2132 of 1981 respectively
before the Tribunal. The Tribunal, vide order dated 16.08.1982, set
aside the order passed by learned CIT (Appeals) and decided the case in
(h) Being aggrieved, the Revenue filed a Reference before the High
by the assessee and rest two by the Revenue. Vide impugned common
judgment and order dated 29.01.2003, the High Court confirmed certain
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findings of the Tribunal in favour of the Respondent.
(i) Hence, these instant appeals have been filed by the Revenue.
4) Heard learned senior counsel for parties and perused the factual
the present facts and circumstances of the case the sum of Rs.
Respondent or not?
Rival contentions:-
that the Respondent had received the amount of Rs. 57,47,064/- from
to purchase dies, tools etc. for manufacture of jeeps. The waiver of loan
was done by the American Motor Corporation, who took over the Kaiser
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credited by the Respondent to its account but was claimed as exemption
result, the case of the Revenue falls within the ambit of Section 28(iv)
toolings and the loan was given by the Kaiser Jeep Corporation (KJC),
lender and borrower. The purchase of toolings was not a transaction for
9) Further, it was also submitted that it is very clear that the amount
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being paid regularly from time to time. It is also pointed out that in the
books of account of the Respondent, this loan has been shown in the
submitted that the said sum could not be brought to tax as it represents
the waiver of a loan liability which was on the capital amount and is not
in the nature of income. Accordingly, the High Court rightly upheld the
Discussion:-
a sum of cash that is to be paid back along with the interest decided
pay back the principal amount along with the agreed rate of interest
of waiver. The waiver may be a partly waiver i.e., waiver of part of the
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the debtor having extra cash in his hand. It is receipt in the hands of
the debtor/assessee. The short but cogent issue in the instant case
12) The first issue is the applicability of Section 28 (iv) of the IT Act in
appears that for the applicability of the said provision, the income which
can be taxed shall arise from the business or profession. Also, in order
to invoke the provision of Section 28 (iv) of the IT Act, the benefit which
loan. Therefore, the very first condition of Section 28 (iv) of the IT Act
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which says any benefit or perquisite arising from the business shall be
any previous year, if the creditor remits or waives any such liability,
then the assessee is liable to pay tax under Section 41 of the IT Act. The
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objective behind this Section is simple. It is made to ensure that the
assessee does not get away with a double benefit once by way of
deduction and another by not being taxed on the benefit received by him
had been paying interest at 6 % per annum to the KJC as per the
interest under Section 36 (1) (iii) of the IT Act. In the case at hand,
learned CIT (A) relied upon Section 41 (1) of the IT Act and held that the
16) Moreover, the purchase effected from the Kaiser Jeep Corporation
purchase amount had not been debited to the trading account or to the
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profit or loss account in any of the assessment years. Here, we deem it
‘other liability’. Section 41 (1) of the IT Act particularly deals with the
find no force in the argument of the Revenue that the case of the
17) To sum up, we are not inclined to interfere with the judgment and
(a) Section 28(iv) of the IT Act does not apply on the present case
money.
(b) Section 41(1) of the IT Act does not apply since waiver of loan does
that the Respondent has not claimed any deduction under Section
previous year.
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18) In view of above discussion, we are of the considered view that
Accordingly, the appeals are dismissed. All the other connected appeals
are disposed off accordingly, leaving parties to bear their own cost.
…….....…………………………………J.
(R.K. AGRAWAL)
…….…………….………………………J.
(ABHAY MANOHAR SAPRE)
NEW DELHI;
APRIL 24, 2018.
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