Commissioner Of Income Tax-I, Jodhpur v. M/S Kansara Modler Ltd., Jodhpur, A-41 (B), Mia 2[Nd] Phase,Jodhpur (Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR 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) For Respondent(s) : Mr. K.K.Bissa : Mr. Anjay Kothari HON'BLE MR. JUSTICE SANGEET LODHA HON'BLE MR. JUSTICE ABHAY CHATURVEDI 24/04/2019 Order This appeal preferred by the Revenue under Section 260-A ofthe Income Tax Act, 1961, is directed against the judgment dated11.2.13 passed by the Income Tax Appellate Tribunal, JodhpurBench, Jodhpur in ITA No.196/JU/2011 for the Assessment Year2006-07. The appeal was admitted by this Court vide order dated15.10.14 on the following substantial question of law: “Whether the Income Tax Appellate Tribunal in theinstant facts is justified in holding that the waiver ofinterest amount relating to loan borrowed foracquisition of assets and capitalization under priorperiod expenditure on which depreciation has alreadybeen claimed is not liable to be assessed as perSection 41 (1) of the Income Tax Act, 1961 ?” Learned counsel appearing for the parties submit that thequestion of law arising in the matter stands settled by the decision of the Supreme Court in the matter of “Commissioner Vs.Mahindra and Mahindra Ltd.” (2018 SCC OnLine SC 534). In thesaid decision, the Supreme Court while considering similarquestion arising in the matter, held as under:- “15. On a perusal of the said provision, it is evidentthat it is a sine qua non that there should be anallowance or deduction claimed by the assessee in anyassessment for any year in respect of loss,expenditure or trading liability incurred by theassessee. Then, subsequently, during any previousyear, if the creditor remits or waives any such liability,then the assessee is liable to pay tax under Section41 of the IT Act. The objective behind this Section issimple. It is made to ensure that the assessee doesnot get away with a double benefit once by way ofdeduction and another by not being taxed on thebenefit received by him in the later year withreference to deduction allowed earlier in case ofremission of such liability. It is undisputed fact thatthe Respondent had been paying interest at 6 % perannum to the KJC as per the contract but theassessee never claimed deduction for payment ofinterest under Section 36 (1) (iii) of the IT Act. In thecase at hand, learned CIT (A) relied upon Section 41(1) of the IT Act and held that the Respondent hadreceived amortization benefit. Amortization is anaccounting term that refers to the process ofallocating 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 assetover time, in particular, to wear and tear. Therefore,the deduction claimed by the Respondent in previousassessment years was due to the deprecation of themachine and not on the interest paid by it. 16. Moreover, the purchase effected from the KaiserJeep Corporation is in respect of plant, machinery andtooling equipments which are capital assets of theRespondent. It is important to note that the saidpurchase amount had not been debited to the tradingaccount or to the profit or loss account in any of theassessment years. Here, we deem it proper tomention that there is difference between ‘tradingliability’ and ‘other liability’. Section 41 (1) of the ITAct particularly deals with the remission of tradingliability. Whereas in the instant case, waiver of loanamounts to cessation of liability other than tradingliability. Hence, we find no force in the argument of the Revenue that the case of the Respondent wouldfall under Section 41 (1) of the IT Act. 16. Moreover, the purchase effected from the KaiserJeep Corporation is in respect of plant, machinery andtooling equipments which are capital assets of theRespondent. It is important to note that the saidpurchase amount had not been debited to the tradingaccount or to the profit or loss account in any of theassessment years. Here, we deem it proper tomention that there is difference between ‘tradingliability’ and ‘other liability’. Section 41 (1) of the ITAct particularly deals with the remission of tradingliability. Whereas in the instant case, waiver of loanamounts to cessation of liability other than tradingliability. Hence, we find no force in the argument of the Revenue that the case of the Respondent wouldfall under Section 41 (1) of the IT Act. 17. To sum up, we are not inclined to interfere withthe judgment and order passed by the High court inview of the following reasons: (a) Section 28(iv) ofthe IT Act does not apply on the present case sincethe receipts of Rs 57,74,064/- are in the nature ofcash or money. (b) Section 41(1) of the IT Act doesnot apply since waiver of loan does not amount tocessation of trading liability. It is a matter of recordthat the Respondent has not claimed any deductionunder Section 36 (1) (iii) of the IT Act qua thepayment 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 MahindraLtd.’s case (supra). (ABHAY CHATURVEDI),J (SANGEET LODHA),J 34-RP/-