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Tax Publishers One time Loan waiver arising out of BIFR order - AO taking the stand that the same should go to offset the WDV of the block of assets under section 43(1) Explanation 10 thereby denying depreciation thereafter on the block of assets *Facts:* Asseessee, arising out of a BIFR order got a one time settlement waiver of their loans which were taken for acquiring fixed assets. It was the stand of the AO that the waiver of loan should go to reduce the WDV (which was only partly existent at that point of time) as per Section 43(1) Explanation 10 thus denied depreciation in toto thereafter by making the WDV as zero due to the waiver of loan and denied depreciation thereafter for future assessment years as well. An alternate plea was also taken by revenue that this should be seen in the realm of Section 43(6c) where in the waiver should go to reduce the WDV in the computation of depreciation thereafter if not under section 43(1) Explanation 10. The appeal was dismissed by the CIT(A). On higher appeal the ITAT for the relevant assessment year has remanded the case back to the CIT(A). Meanwhile in these batch of appeals the assessee pleaded that the stand of the revenue was incorrect - Held in favour of the assessee that the one time loan waiver was a capital receipt and it cannot be read in a manner to offset cost of the asset as per Explanation 10 to Section 43(1) nor are the provisions of Section 43(6c) to apply. *Applied:* CIT v. Tata Iron & Steels Co. Ltd. (1998) 2 SCC 366 CIT v. Cochin Co. (P) Ltd. (1990) 184 ITR 230 (Kerala HC) : 1990 TaxPub(DT) 0662 (Ker-HC) Akzo Nobel Coatings India Private Ltd. v. DCIT (2012) 139 ITD 612 (Bang-Trib) : 2013 TaxPub(DT) 0159 (Bang-Trib); Aditya Oil & Chemicals Ltd, ITA No. 4878/Mum/2010, dated 08-02-12 (Mumbai ITAT) *Case:* STI India Ltd. v. DCIT/ACIT 2023 TaxPub(DT) 5566 (Ind-Trib)

Tax Publishers

One time Loan waiver arising out of BIFR order - AO taking the stand that the same should go to offset the WDV of the block of assets under section 43(1) Explanation 10 thereby denying depreciation thereafter on the block of assets

Facts:

Asseessee, arising out of a BIFR order got a one time settlement waiver of their loans which were taken for acquiring fixed assets. It was the stand of the AO that the waiver of loan should go to reduce the WDV (which was only partly existent at that point of time) as per Section 43(1) Explanation 10 thus denied depreciation in toto thereafter by making the WDV as zero due to the waiver of loan and denied depreciation thereafter for future assessment years as well. An alternate plea was also taken by revenue that this should be seen in the realm of Section 43(6c) where in the waiver should go to reduce the WDV in the computation of depreciation thereafter if not under section 43(1) Explanation 10. The appeal was dismissed by the CIT(A). On higher appeal the ITAT for the relevant assessment year has remanded the case back to the CIT(A). Meanwhile in these batch of appeals the assessee pleaded that the stand of the revenue was incorrect -

Held in favour of the assessee that the one time loan waiver was a capital receipt and it cannot be read in a manner to offset cost of the asset as per Explanation 10 to Section 43(1) nor are the provisions of Section 43(6c) to apply.

Applied:

CIT v. Tata Iron & Steels Co. Ltd. (1998) 2 SCC 366

CIT v. Cochin Co. (P) Ltd. (1990) 184 ITR 230 (Kerala HC) : 1990 TaxPub(DT) 0662 (Ker-HC)

Akzo Nobel Coatings India Private Ltd. v. DCIT (2012) 139 ITD 612 (Bang-Trib) : 2013 TaxPub(DT) 0159 (Bang-Trib);

Aditya Oil & Chemicals Ltd, ITA No. 4878/Mum/2010, dated 08-02-12 (Mumbai ITAT)

Case: STI India Ltd. v. DCIT/ACIT 2023 TaxPub(DT) 5566 (Ind-Trib)