Rajasthan High Court - Jodhpur
C.I.T. I Jodhpur vs M/S Kansara Modler Ltd on 24 April, 2019
Bench: Sangeet Lodha, Abhay Chaturvedi
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Income Tax Appeal No. 134/2013
Commissioner of Income Tax-I, Jodhpur
----Appellant
Versus
M/s Kansara Modler Ltd., Jodhpur, A-41 (B), MIA 2 nd Phase,
Jodhpur (Rajasthan).
----Respondent
For Appellant(s) : Mr. K.K.Bissa
For Respondent(s) : Mr. Anjay Kothari
HON'BLE MR. JUSTICE SANGEET LODHA
HON'BLE MR. JUSTICE ABHAY CHATURVEDI Order 24/04/2019 This appeal preferred by the Revenue under Section 260-A of the Income Tax Act, 1961, is directed against the judgment dated 11.2.13 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur in ITA No.196/JU/2011 for the Assessment Year 2006-07.
The appeal was admitted by this Court vide order dated 15.10.14 on the following substantial question of law:
"Whether the Income Tax Appellate Tribunal in the instant facts is justified in holding that the waiver of interest amount relating to loan borrowed for acquisition of assets and capitalization under prior period expenditure on which depreciation has already been claimed is not liable to be assessed as per Section 41 (1) of the Income Tax Act, 1961 ?"
Learned counsel appearing for the parties submit that the question of law arising in the matter stands settled by the decision (Downloaded on 28/06/2019 at 12:23:13 AM) (2 of 3) [ITA-134/2013] of the Supreme Court in the matter of "Commissioner Vs. Mahindra and Mahindra Ltd." (2018 SCC OnLine SC 534). In the said decision, the Supreme Court while considering similar question arising in the matter, held as under:-
"15. On a perusal of the said provision, it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during 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 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 in the later year with reference to deduction allowed earlier in case of remission of such liability. It is undisputed fact that the Respondent had been paying interest at 6 % per annum to the KJC as per the contract but the assessee never claimed deduction for payment of 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 Respondent had received amortization benefit. Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time, hence, it is nothing else than depreciation.
Depreciation is a reduction in the value of an asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the Respondent in previous assessment years was due to the deprecation of the machine and not on the interest paid by it.
16. Moreover, the purchase effected from the Kaiser Jeep Corporation is in respect of plant, machinery and tooling equipments which are capital assets of the Respondent. It is important to note that the said purchase amount had not been debited to the trading account or to the profit or loss account in any of the assessment years. Here, we deem it proper to mention that there is difference between 'trading liability' and 'other liability'. Section 41 (1) of the IT Act particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, we find no force in the argument of (Downloaded on 28/06/2019 at 12:23:13 AM) (3 of 3) [ITA-134/2013] the Revenue that the case of the Respondent would fall under Section 41 (1) of the IT Act.
17. To sum up, we are not inclined to interfere with the judgment and order passed by the High court in view of the following reasons: (a) Section 28(iv) of the IT Act does not apply on the present case since the receipts of Rs 57,74,064/- are in the nature of cash or money. (b) Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under Section 36 (1) (iii) of the IT Act qua the payment of interest in any previous year."
In this view of the matter, the appeal is dismissed in the light of the decision of the Supreme Court in Mahindra and Mahindra Ltd.'s case (supra).
(ABHAY CHATURVEDI),J (SANGEET LODHA),J 34-RP/-
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