Emec Pvt. Ltd v. Commissioner Of Income Tax-Iii, Kolkata

O – 27 IN THE HIGH COURT AT CALCUTTA Special Jurisdiction [Income Tax] ORIGINAL SIDE ITA/52/2012 EMEC PVT. LTD.VSCOMMISSIONER OF INCOME TAX-III,KOLKATA BEFORE :THE HON’BLE JUSTICE SURYA PRAKASH KESARWANI AndTHE HON’BLE JUSTICE RAJARSHI BHARADWAJDate : 1[st] April, 2024 Appearance :Sri Agnibesh Sengupta, Adv.Sri Raghunath Ghose, Adv.Smt. Shusna Santra, Adv....for the appellant. Sri Tilak Mitra, Adv....for the respondent. 1.Heard Sri Agnibesh Sengupta, learned counsel for the appellant and SriTilak Mitra, learned senior standing counsel for the respondent.Tilak Mitra, learned senior standing counsel for the respondent. 2.This appeal has been admitted on the following substantial question oflaw :law : “Whether on a true and proper interpretation of the provisions ofsection 41(1) of the Income Tax Act, 1961, the Tribunal wasjustified in law in holding that interest of Rs.23,52,984/-waived by the Bank was chargeable to tax for theassessment year 2003-04, when the returns for the relevantassessment years 1991-92, 1992-93 and 1993-94 in whichinterest was debited were filed beyond the time allowed undersection 139(1)/139(3) and no carry forward or set off of thebusiness loss representing interest was claimed or allowed”. Facts 3.Briefly stated facts of the present case are that the assessee filedreturns of loss beyond limitation prescribed under Section139(1)/139(3) of the Income Tax Act, 1961 (hereinafter referred to asthe Act, 1961) for the assessment years 1991-92, 1992-93 and 1993-94. Section 143(3) provides that if any person who sustained a loss inany previous year under the head ‘profits and gains of business orprofession’ or under the head ‘capital gains’ claims that the loss or anypart thereof should be carried forward under Section 72[1] or Section73[2] or Section 74[1]/[3] or Section 74A[3], he may furnish within thetime allowed under sub-Section (1) return of loss in the prescribed formand verified in the prescribed manner and containing such otherparticulars as may be prescribed. Undisputably, the assessee has notfiled return of loss as prescribed. The return showing loss was filed byhim much beyond limitation. For the assessment year 1991-92 anintimation under Section 143(1)(a) of the Act, 1961 was sent by theassessing officer to the assessee wherein assessing officer has clearlywritten that ‘as the return was filed late as such loss will not beallowed to carry forward’. The assessments for the assessment years1992-93 and 1993-94 were completed by the assessing officer underSection 143(3) in which also the losses were not allowed to be carriedforward as the returns were filed beyond the prescribed time.Subsequently, during the assessment year in question, i.e., A.Y. 2003-2004, the assessee entered into a settlement with the lender bank for settlement of dues. The total loan dues of the assessee was stated to beRs.89,79,585/- out of which the bank agreed to waive a sum ofRs.44,70,585/-. The assessee paid the aforesaid agreed amount to thebank and thus, the loan liability of Rs.44,70,585/- was waived by thebank which included bank interest of a sum of Rs.23,52,984. settlement of dues. The total loan dues of the assessee was stated to beRs.89,79,585/- out of which the bank agreed to waive a sum ofRs.44,70,585/-. The assessee paid the aforesaid agreed amount to thebank and thus, the loan liability of Rs.44,70,585/- was waived by thebank which included bank interest of a sum of Rs.23,52,984. 4.For the assessment year 2003-2004, the assessee disclosed totalincome as “NIL”. The case was selected for scrutiny and an assessmentorder under Section 143(3) of the Act 1961 dated 17.03.2006 waspassed by the assessing officer making certain additions including anaddition of Rs.29,31,698/- allegedly being the deemed income onaccount of settlement of the bank loan. The income was assessed atRs.26,65,361/-. The assessee filed an appeal before the CIT(A) whichwas dismissed. Aggrieved, the assessee filed second appeal before theIncome Tax Appellate Tribunal, “B” Bench, Kolkata, which was allowedand the matter was remanded back to the assessing officer for de novoconsideration. Pursuant to the remand order, the assessing officerpassed an assessment order dated 06.05.2008 under Section 143(3) ofthe Act 1961 and assessed the total income of the appellant assessee atRs.27,37,980/- for the assessment year 2003-04. Aggrieved with theaforesaid assessment order, the appellant assessee filed an appealbefore the Commissioner of Income Tax (Appeals) – VIII, Kolkata, whichwas allowed by order dated 24.07.2008. Aggrieved with the order ofCIT(A), the Revenue filed an appeal being ITA No. 1887/Kol/2008 (AY2003-04) which was allowed by the impugned order dated 29.12.2011passed by the Income Tax Appellate Tribunal, Bench “A”, Kolkata. Aggrieved with this order, the appellant assessee has filed the presentappeal. Submissions 5.Learned Counsel for the appellants refers the findings recorded by theCIT(A) and submits that the impugned order of the ITAT is totallyerroneous and findings recorded therein are perverse. He submits thatwaiver of liability of the bank shall not fall under Section 41(1) of theAct, 1961 and hence the addition made by the ITAT is arbitrary andillegal.CIT(A) and submits that the impugned order of the ITAT is totallyerroneous and findings recorded therein are perverse. He submits thatwaiver of liability of the bank shall not fall under Section 41(1) of theAct, 1961 and hence the addition made by the ITAT is arbitrary andillegal. 6.Learned Counsel for the respondents supports the impugned order ofthe ITAT.the ITAT. Discussion and Findings 7.We have carefully considered the submissions of learned counsel for theparties and perused the paper books.parties and perused the paper books. 8.Learned counsel for the parties have not disputed the facts as afore-noted.noted. 9.The CIT(A) while allowing the appeal of the appellant assessee hasrecorded the following findings on the issue in question :-recorded the following findings on the issue in question :- “6. Decision on Grounds No. 2 & 3 I have gone through the submission of A/R of the appellantand also gone through the assessment order. The Ld. A/R of theappellant filed a coy of the order u/s 154 dated 15.01.1999 andcopy of the assessment order u/s 143(3) dated 29.03.1995 inrespect of Asstt. Year 1992-93 and intimation u/s 143(1) (a) for Asstt. Year 1991-92 wherein A.O. has written that, as returnwas filed late as such loss will not be allowed to be carriedforward. The Ld. A/R of the appellant drew my attention to the chartwhich was at Paper Book page 15 and stated that no benefit byway of carry forward of losses of the earlier year wereclaimed and the loss which was adjusted with the income ofAsstt. Year 1995-96 & 1996-97 was the loss of the Asstt. Year1994-95 only. The Ld. A/R of the appellant also pointed out that no loss wasallowed to be carried forward in the Asstt. Year 1992-93 for whichhe drew my attention to the order u/s. 143(3) dated 23.03.1995. Asstt. Year 1991-92 wherein A.O. has written that, as returnwas filed late as such loss will not be allowed to be carriedforward. The Ld. A/R of the appellant drew my attention to the chartwhich was at Paper Book page 15 and stated that no benefit byway of carry forward of losses of the earlier year wereclaimed and the loss which was adjusted with the income ofAsstt. Year 1995-96 & 1996-97 was the loss of the Asstt. Year1994-95 only. The Ld. A/R of the appellant also pointed out that no loss wasallowed to be carried forward in the Asstt. Year 1992-93 for whichhe drew my attention to the order u/s. 143(3) dated 23.03.1995. Section 41(1) provides that, “Where an allowance or deductionhas been made in the assessment for any year in respect of loss,expenditure or trading liability incurred by the assessee (hereinafterreferred to as the first-mentioned person) and subsequently duringany previous year.” 6.1. From the aforesaid facts it is very much clear thatno allowance or deduction has been made for any year inrespect of loss, expenditure or trading liability in the presentcase. The case cited by the ACIT reported in 271 ITR 17 are not onthe facts of the case and are distinguishable. This was a case of apartnership firm for Asstt. Year 1976-77 where loss was determinedand set off in the hands of the partners. Hence benefit was derivedby the partners who constitute the partnership. I have considered the explanations and documents on recordwhich were filed by the ld. A/R of the appellant as Paper Bookpages 1 to 70. I find force in the arguments of the Ld. A/R of theappellant. I find from the records filed before me that the appellant-company did not derive any benefit of the Bank interest waived for in any of the earlier years viz. Asstt. Years 1991-92, 1992-93 &1993-94. I also find from record that the returns for theAsstt. Years 1991-92, 1992-93 & 1993-94 were all filedbeyond time and were non-est returns as 139(4) does notallow filing of loss return. I find from the facts on record that theprovision of sec. 41(1)(a) of the I.T. Act 1961 is not applicable in theinstance case as the appellant did not derive benefit in the earlieryears. I have also considered the case cited by the Ld. A/R of theappellant reported in 65 ITR 370 (SC) at 377 and Hon’ble GauhatiHigh Court at 22 ITR 328 at pages 332/333 where the Hon’ble courthave held that the provision of section 139(4) does not apply to lossreturns and I agree with the Ld. A/R’s view that in such case thosereturns filed beyond time of loss are non-est. I find that the AOhas not been able to point out the factum that the assesseehas been allowed an allowance or deduction in anyassessment year in respect of loss, expenditure or tradingliability. After considering the Paper Book filed specially page 24 forthe quantum of Bank interest where the A/R of the appellantreferred to the chart of loss not to be carry forward of the 3 yearsi.e., A.Y. 1991-92, 1992-93 & 1993-94 as the returns were filedbeyond due dates. From the records I find that the amount of losswhich was on account of bank interest was a sum of Rs.23,52,987/-only. I have also considered the written submissions and the caselaws relied upon by the Ld. A/R of the appellant. I direct the AO notto add u/s 41(1) a sum of Rs.23,52,984/- instead of the claim of theappellant in the Grounds of Appeal of Rs.29,31,698/-. Accordingly,round nos. 2 & 3 is allowed.” 10.While setting aside the detailed order of the CIT(A), the only discussionwhich the Tribunal has made is in paragraphs 7, 8 and 9, arereproduced below :- “7. On the other hand, ld. Counsel on behalf of assessee hassubmitted that though it is a fact assessee has debited the interestin all the preceding three assessment years and the fact is thatassessee is running in losses and assessee has not been getting thecarry forwarding of the losses since in all the three years assesseehas filed the returns belatedly. Therefore he supported the orders ofthe ld. CIT(A) and requested to upheld the same. 10.While setting aside the detailed order of the CIT(A), the only discussionwhich the Tribunal has made is in paragraphs 7, 8 and 9, arereproduced below :- “7. On the other hand, ld. Counsel on behalf of assessee hassubmitted that though it is a fact assessee has debited the interestin all the preceding three assessment years and the fact is thatassessee is running in losses and assessee has not been getting thecarry forwarding of the losses since in all the three years assesseehas filed the returns belatedly. Therefore he supported the orders ofthe ld. CIT(A) and requested to upheld the same. 8.After hearing the rival submissions and on careful perusal ofmaterials available on record, we are of the view that when onceassessee has debited the interest in the profit and lossaccount assessee has already taken the benefit of theinterest in its accounts whether he has taken the benefit ofthe Income Tax Act it is not the relevant issue forconsideration. If we accept the contention of assessee and the ld.CIT(A) we are of the view that we are acting to the contrary to theprovision of the IT Act. Since in this case assessee himself hasadmitted that he has filed the returns of losses belatedly andnot entitled for carry forwarding of the losses then when weallow the interest component which was part of the losseswhich is not allowable to the assessee to set off because thesaid loss return has been filed belatedly by assessee then thiswill be contrary to the provisions of the IT Act. Therefore we areunable to accept the contention of the assessee as well as the ld.CIT(A). In the result we concur with the view of AO and upheld thesame by setting aside the orders of the ld. CIT(A). 9.In the result ground Nos.2 to 4 of the revenue are allowed.” 11.Section 41(1) of the Act 1961 provides as under:- “41. [(1) Where an allowance or deduction has been made in theassessment for any year in respect of loss, expenditure or tradingliability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a)the first-mentioned person has obtained, whether in cashor in any other manner whatsoever, any amount in respectof such loss or expenditure or some benefit in respect ofsuch trading liability by way of remission or cessation thereof,the amount obtained by such personor the value ofbenefit accruing to him shall be deemed to be profitsand gains of business or profession and accordinglychargeable to income-tax as the income of that previous year,whether the business or profession in respect of which theallowance or deduction has been made is in existence in thatyear or not; oror in any other manner whatsoever, any amount in respectof such loss or expenditure or some benefit in respect ofsuch trading liability by way of remission or cessation thereof,the amount obtained by such personor the value ofbenefit accruing to him shall be deemed to be profitsand gains of business or profession and accordinglychargeable to income-tax as the income of that previous year,whether the business or profession in respect of which theallowance or deduction has been made is in existence in thatyear or not; or (b)the successor in business has obtained, whether in cash or inany other manner whatsoever, any amount in respect ofwhich loss or expenditure was incurred by the first-mentionedperson or some benefit in respect of the trading liabilityreferred to in clause (a) by way of remission or cessationthereof, the amount obtained by the successor in business orthe value of benefit accruing to the successor in business shallbe deemed to be profits and gains of the business orprofession, and accordingly chargeable to income-tax as theincome of that previous year.any other manner whatsoever, any amount in respect ofwhich loss or expenditure was incurred by the first-mentionedperson or some benefit in respect of the trading liabilityreferred to in clause (a) by way of remission or cessationthereof, the amount obtained by the successor in business orthe value of benefit accruing to the successor in business shallbe deemed to be profits and gains of the business orprofession, and accordingly chargeable to income-tax as theincome of that previous year. [Explanation 1.- For the purposes of this sub-section, theexpression “loss or expenditure or some benefit in respect ofany such trading liability by way of remission or cessation thereof”shall include the remission or cessation of any liability by aunilateral act by the first mentioned person under clause (a) or thesuccessor in business under clause (b) of that sub-section by way ofwriting off such liability in his accounts.] [Explanation 2].- For the purposes of this sub-section, “successor inbusiness” means, - (i)where there has been an amalgamation of a companywith another company, the amalgamated company;with another company, the amalgamated company; (ii)where the first-mentioned person is succeeded by anyother person in that business or profession, the otherperson;other person in that business or profession, the otherperson; (iii)where a firm carrying on a business or profession issucceeded by another firm, the other firm;]succeeded by another firm, the other firm;] (iv)where there has been a demerger, the resultingcompany.]”company.]” 12.From bare reading of the afore-quoted provisions of Section 41(1)(a)read with the Explanation 1, it is evident that only those allowance ordeduction would fall within the purview of Section 41 which have beenmade in the assessment. Section 41(1)(a) comes into play where anallowance or deduction has been made in the assessment for any yearin respect of loss, expenditure or trading liability incurred by theassessee and subsequently during any previous year if such person hasobtained any amount, whether in cash or in any other manner, inrespect of such loss or expenditure or some benefit in respect of suchtrading liability by way of remission or cessation thereof, then theamount obtained by such person or the value of the benefit accruing tohim shall be deemed to be the profit and gains of business or professionand accordingly chargeable to income tax as income of the previousyear, whether the business or profession in respect of which theallowance or deduction has been made is in existence in that year or not. Thus, Section 41(1)(a) of the Act 1961 has been enacted toneutralise the benefit by way of deduction already obtained by anassessee, in the circumstances mentioned in Clause (a) of Sub-Section(1). The purpose is that an assessee should not be benefited twice,firstly, by reduction of income tax liability by way of deduction ofan allowance or a deduction of an expenditure etc. in theassessment and secondly, obtaining whether in cash or any othermanner whatsoever, any amount in respect of such loss orexpenditure (allowance or deduction), or some benefit in respect ofsuch trading liability by way of remission or cessation thereof. not. Thus, Section 41(1)(a) of the Act 1961 has been enacted toneutralise the benefit by way of deduction already obtained by anassessee, in the circumstances mentioned in Clause (a) of Sub-Section(1). The purpose is that an assessee should not be benefited twice,firstly, by reduction of income tax liability by way of deduction ofan allowance or a deduction of an expenditure etc. in theassessment and secondly, obtaining whether in cash or any othermanner whatsoever, any amount in respect of such loss orexpenditure (allowance or deduction), or some benefit in respect ofsuch trading liability by way of remission or cessation thereof. 13.Therefore, the real test to be applied for invoking Section 41(1)(a) of theAct 1961 is to see whether deduction of a loss or expenditure wasmade in the assessment and whether the assessee has obtained anyamount in respect of such loss or expenditure or some benefit inrespect of such trading liability. If allowance or deduction in respect ofloss, expenditure or trading liability incurred by the assessee has notbeen made in the assessment, then Section 41(1)(a) shall have noapplication inasmuch as there will be no question of neutralising thebenefit obtained by the assessee by way of deduction made from incomein the assessment. But, if the allowance or deduction has been made inthe assessment year in respect of loss, expenditure or trading liabilityincurred by the assessee and assessee has obtained any amount orsome benefit in respect thereof in subsequent year, then the amount soobtained shall be deemed to be the profit and gains of business orprofession and accordingly chargeable to income tax as the income of that previous year in which the benefit has been obtained. Thus, theobject and purpose of Section 41(1) of the Act, 1961 is to ensure that anassessee does not get away with a double benefit once by way ofdeduction and another by not being taxed on the benefit received byhim in the later year; vide Commissioner vs. Mahindra And Mahindra(2018)16 SCC 79 (Para 18). 14.Having explained the provisions of Section 41(1)(a) of the Act 1961, asabove, we turn to the facts of the present case. It is undisputed that inthe assessment years 1991-92, 1992-93 and 1993-94, the assesseefiled return disclosing loss on account of accrued bank interest. Thereturns were filed by it beyond the time prescribed under Section139(1)/139(3). Section 139(4) of the Act 1961 is an enabling provisionwhich permits the filing of a return within a definite time. The assesseehas not filed return pursuant to the provisions of Section 139(4) of theAct 1961. An intimation under Section 143(1)(a) of the Act 1961 andassessment orders under Section 143(3) for the assessment years 1992-93 and 1993-94 were issued to the assessee by the assessing officerspecifically mentioning that as the return was filed late, as such, losswill not allowed to be carried forward. The CIT(A) has perused therecords and come to the conclusion in afore-quoted paragraph 6.1 thatabove, we turn to the facts of the present case. It is undisputed that inthe assessment years 1991-92, 1992-93 and 1993-94, the assesseefiled return disclosing loss on account of accrued bank interest. Thereturns were filed by it beyond the time prescribed under Section139(1)/139(3). Section 139(4) of the Act 1961 is an enabling provisionwhich permits the filing of a return within a definite time. The assesseehas not filed return pursuant to the provisions of Section 139(4) of theAct 1961. An intimation under Section 143(1)(a) of the Act 1961 andassessment orders under Section 143(3) for the assessment years 1992-93 and 1993-94 were issued to the assessee by the assessing officerspecifically mentioning that as the return was filed late, as such, losswill not allowed to be carried forward. The CIT(A) has perused therecords and come to the conclusion in afore-quoted paragraph 6.1 that “no allowance or deduction has been made for any year in respectof loss, expenditure or trading liability in the present case”. Hefurther recorded a finding that the assessing officer has not been ableto point out the factum that the assessee has been allowed anallowance or deduction in any assessment year in respect of loss, expenditure or trading liability. He also recorded a finding that theamount of loss which was on account of bank interest was a sum ofRs.23,52,984/- only which was part of loss. 15.On perusal of the impugned order of the ITAT, it is evident that the ITAThas not set aside or reversed the aforesaid findings of the CIT(A). TheITAT has allowed the appeal of the Revenue merely on an observation inparagraph 8 of the impugned order that once the assessee has debitedinterest in the profit and loss account, then the assessee has alreadytaken benefit of interest in its account, whether he has taken thebenefit of the Income Tax Act is not the relevant issue for consideration.has not set aside or reversed the aforesaid findings of the CIT(A). TheITAT has allowed the appeal of the Revenue merely on an observation inparagraph 8 of the impugned order that once the assessee has debitedinterest in the profit and loss account, then the assessee has alreadytaken benefit of interest in its account, whether he has taken thebenefit of the Income Tax Act is not the relevant issue for consideration. 16.This finding of the Tribunal is totally misconceived and is in completeignorance of the express provisions of Section 41(1)(a). The firstrequirement of Section 41(1) is that the allowance or deduction is madein respect of the loss, expenditure or a trading liability incurred bythe assessee. The other requirement is that the assessee hassubsequently obtained any amount in respect of such loss orexpenditure or obtained a benefit in respect of such trading liabilityby way of a remission or cessation thereof. Even if for argument sakeit is assumed that the aforesaid first requirement is satisfied, yet theother requirement in assessee’s case is not satisfied as the appellantassessee has neither subsequently obtained any amount in respecet ofthe bank interest debited in his books of account in the A.Y. 1991-92,1992-93 and 1993-94 nor waiver of interest on bank loan in the A.Y.2003-04 is remission or cessation of a trading liability. The view beingignorance of the express provisions of Section 41(1)(a). The firstrequirement of Section 41(1) is that the allowance or deduction is madein respect of the loss, expenditure or a trading liability incurred bythe assessee. The other requirement is that the assessee hassubsequently obtained any amount in respect of such loss orexpenditure or obtained a benefit in respect of such trading liabilityby way of a remission or cessation thereof. Even if for argument sakeit is assumed that the aforesaid first requirement is satisfied, yet theother requirement in assessee’s case is not satisfied as the appellantassessee has neither subsequently obtained any amount in respecet ofthe bank interest debited in his books of account in the A.Y. 1991-92,1992-93 and 1993-94 nor waiver of interest on bank loan in the A.Y.2003-04 is remission or cessation of a trading liability. The view being taken by us is also supported by the law laid down by Hon’ble SupremeCourt in Commissioner of Income Tax-6, Mumbai vs. BalkrishnaIndustries Ltd. (2018)15 SCC 608 (Para 9&10), Polyflex (India) Pvt. Ltd.,Bangalore vs. Commissioner of Income Tax, Karnataka (2002)7 SCC188 (Para 5&9) and Nector Beverages Pvt. Ltd. vs. DeputyCommissioner of Income Tax (2009)15 SCC 374 (Para 17). 17.In Commissioner vs. Mahindra And Mahindra Ltd. (2018)16 SCC 79(Para 18&19) Hon’ble Supreme Court explained Section 41(1) of the Act,1961 and held as under :- taken by us is also supported by the law laid down by Hon’ble SupremeCourt in Commissioner of Income Tax-6, Mumbai vs. BalkrishnaIndustries Ltd. (2018)15 SCC 608 (Para 9&10), Polyflex (India) Pvt. Ltd.,Bangalore vs. Commissioner of Income Tax, Karnataka (2002)7 SCC188 (Para 5&9) and Nector Beverages Pvt. Ltd. vs. DeputyCommissioner of Income Tax (2009)15 SCC 374 (Para 17). 17.In Commissioner vs. Mahindra And Mahindra Ltd. (2018)16 SCC 79(Para 18&19) Hon’ble Supreme Court explained Section 41(1) of the Act,1961 and held as under :- “18. On a perusal of the said provision, it is evident that it is a sinequa non that there should be an allowance or deduction claimedby 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 orwaives any such liability, then the assessee is liable to pay taxunder Section 41 of the IT Act. The objective behind this section issimple. It is made to ensure that the assessee does not get awaywith a double benefit once by way of deduction and another bynot being taxed on the benefit received by him in the later yearwith reference to deduction allowed earlier in case of remission of suchliability. It is an undisputed fact that the respondent had been payinginterest at 6% p.a. to KJC as per the contract but the assessee neverclaimed deduction for payment of interest under Section 36(1)(iii) of the IT Act. In the case at hand, the learned CIT(A) relied upon Section41(1) of the IT Act and held that the respondent had receivedamortisation benefit. Amortisation is an accounting term that refers to theprocess of allocating the cost of an asset over a period of time, hence, it isnothing else than depreciation. Depreciation is a reduction in the value ofan asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the respondent in previous assessment years wasdue to the deprecation of the machine and not on the interest paid by it. 19. Moreover, the purchase effected from Kaiser Jeep Corporation is inrespect of plant, machinery and tooling equipments which are capitalassets of the respondent. It is important to note that the said purchaseamount had not been debited to the trading account or to the profit or lossaccount in any of the assessment years. Here, we deem it proper tomention that there is difference between “trading liability” and“other liability”. Section 41(1) of the IT Act particularly dealswith the remission of trading liability. Whereas in the instantcase, waiver of loan amounts to cessation of liability other thantrading liability. Hence, we find no force in argument of theRevenue that the case of the respondent would fall under Section41(1) of the IT Act.” 18.Law laid down in Mahindra And Mahindra (Supra) is applicable on factsof the present case that waiver of loan amounts to cessation of liabilityother than trading liability. Hence Section 41(1)(a) of the Act, 1961 isnot attracted on facts of the present case.of the present case that waiver of loan amounts to cessation of liabilityother than trading liability. Hence Section 41(1)(a) of the Act, 1961 isnot attracted on facts of the present case. 18.Law laid down in Mahindra And Mahindra (Supra) is applicable on factsof the present case that waiver of loan amounts to cessation of liabilityother than trading liability. Hence Section 41(1)(a) of the Act, 1961 isnot attracted on facts of the present case.of the present case that waiver of loan amounts to cessation of liabilityother than trading liability. Hence Section 41(1)(a) of the Act, 1961 isnot attracted on facts of the present case. 19.For all the reasons afore-stated, we are of the view that the Tribunalhas committed manifest error of law to hold that the interest ofRs.23,52,984/- waived by the bank was chargeable to tax in the handsof the appellant assessee for the assessment year 2003-04 underSection 41(1) of the Act, 1961. Consequently, the impugned order ofthe ITAT deserves to be set aside and the order of the CIT(A) dated23/24.07.2008 in Appeal No.47/CIT(A)-VIII/08-09/C-9 deserves to beaffirmed and the question of law as framed above deserves to beanswered accordingly.has committed manifest error of law to hold that the interest ofRs.23,52,984/- waived by the bank was chargeable to tax in the handsof the appellant assessee for the assessment year 2003-04 underSection 41(1) of the Act, 1961. Consequently, the impugned order ofthe ITAT deserves to be set aside and the order of the CIT(A) dated23/24.07.2008 in Appeal No.47/CIT(A)-VIII/08-09/C-9 deserves to beaffirmed and the question of law as framed above deserves to beanswered accordingly. 20.For all the reasons afore-stated, the appeal is allowed. The substantialquestion of law as framed above, is answered in favour of the assesseeand against the revenue. The impugned order dated 29.12.2011 in ITANo.1887/Kol/2008 (assessment year 2003-04) passed by the IncomeTax Appellate Tribunal, Bench ‘A’, Kolkata is set aside and the aforesaidorder of the CIT(A) dated 24.07.2008 is affirmed.question of law as framed above, is answered in favour of the assesseeand against the revenue. The impugned order dated 29.12.2011 in ITANo.1887/Kol/2008 (assessment year 2003-04) passed by the IncomeTax Appellate Tribunal, Bench ‘A’, Kolkata is set aside and the aforesaidorder of the CIT(A) dated 24.07.2008 is affirmed. (SURYA PRAKASH KESARWANI, J.) (RAJARSHI BHARADWAJ, J.)