CIT vs Adya Oil and Chemicals Ltd.

Objections waived. None for the respondent-assessee though served.

In this appeal the revenue has proposed the following question of law for consideration of this court.

(a) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the reduction of liability on account of the principal amount of term loan payable to the financial institutions under one term settlement scheme does not result into income to the assessee either u/s 28(iv) of u/s 41(1) of the Act?

(b) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the reduction of liability on account of the principal amount of term loan payable to the financial institutions under one term scheme does not result into income to the assessee either u/s 28(iv) or u/s 41(1) of the Act?

(c) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in following the judgment of Bombay High Court in the case of Mahindra and Mahindra Ltd. Vs. Commissioner of Income Tax, and holding that the reduction of liability on account of principal and interest amount of term loan payable to the financial institution under one terms scheme does not result into income to the assessee either u/s 28(iv) or u/s 41(1) of the Act, without appreciating the decision of the Apex Courts decision in the case of Commissioner of Income Tax, Madurai Vs. T.V. Sundaram Iyengar and Sons Ltd., which was later followed by the Bombay High Court in the case of Solid Containers Ltd. Vs. The Deputy Commissioner of Income Tax, Spl. Range I and The Commissioner of IncomeTax I, after considering the judgment in the case of Mahindra & Mahindra v. CIT (supra)?

(d) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the cessation of liability pertaining to capital asset would not partake the character of income without appreciating the fact that loan taken for the purpose of business irrespective of the fact whether it was taken for purposes of acquisition of capital asset or for day-to-day carrying on business, is a loan taken for business purpose referred to in the case of Solid Containers Ltd. v. DCIT & Ors. (supra) and cessation of liability thereof is assessable income?

(e) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in directing the assessing officer not to reduce the written down value of the cost of assets by the principal amount of loan waived amounting to of Rs. 4,91,16,833 even though the waived principal amount of loan was rightly reduced by the assessing officer from the written down value of building, plant machinery in accordance with section 43(1) of the Income Tax Act read with Explanation 10 therein?

(f) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in allowing the claim of the assessee to write off stock of finished products amounting to Rs. 1,93,28,886 without appreciating the facts explained by the assessing officer in his assessment order?

So far as question (b) is concerned, the Tribunal recorded that the assessee has not claimed interest payable as an expenditure. Consequently, any reduction of the claim by the bank would not attract to section 24(iv) or 41 of the said Act. However, as the facts were not clear from the records the Tribunal has directed the assessing officer to re-examine the facts. In these circumstances, we see no reason to entertain the proposed question (b).

So far as question (c) and (d) are concerned these are arguments with regard to question (a) and (b) and therefore, not entertained.

So far as question (f) is concerned, the Tribunal has upheld the order of the CIT(A) by recording the fact that the goods produced during the trial run are unusable and that some of it were also rejected by the buyers. Consequently, write off of such goods valued at Rs. 1.93 crores was based on finding on a concurrent finding of fact by the authorities. Consequently, we are not inclined to entertain the proposed question (f). The appeal is admitted on question (a) and (e) only.