INCOME TAX ACT, 1961

Section 28(iv)

Business income - Benefit or perquisite - Taxability of wavier of loan under section 28(iv) -

AO found that assessee had taken loan jointly with his brother. Total outstanding balance in the loan account was Rs. 1532.79 lakh which comprised of principal of Rs. 1342.52 lakhs and unpaid interest of Rs. 190.27 lakhs. AO further noticed that bank had given offer to pay a sum of Rs. 706.23 lakh in full and final settlement of complete outstanding amount. According to AO, the total outstanding balance of the loan related to the assessee was Rs. 384,91 lakhs and it transferred/waived off amount of Rs. 2,31,98,954 in the capital account, therefore, assessee was asked to explain as to why the waived amount should not be treated as income under section 28(iv). Held: Supreme Court in the case of Mahindra & Mahindra Mills Ltd. [(2003) 261 ITR 501 (Bom) : 2003 TaxPub(DT) 0995 (Bom-HC)] had held that section 28(iv) would apply only when a benefit or perquisite is received in kind and has no application where benefit is received in cash or money. Considering the totality of facts in the light of ratio laid down by Supreme Court in case of Mahindra & Mahindra Mills Ltd. (supra), AO was directed to delete addition under section 28(iv).

Followed:CIT v. Mahindra & Mahindra Ltd. (2003) 261 ITR 501 (Bom) : 2003 TaxPub(DT) 0995 (Bom-HC) CIT v. TV Sundaram Iyengar & Sons Ltd. (1996) 222 ITR 344 (SC) : 1996 TaxPub(DT) 1245 (SC) and CIT v. Ramaniyam Homes (P.) Ltd. (2016) 384 ITR 530 (Mad) : 2016 TaxPub(DT) 2061 (Mad-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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