The main legal point established is that a loan waiver used for acquiring capital assets is not taxable under Section 28(iv) of the Income Tax Act.

1. This appeal by the revenue challenges the order dated 18th October, 2012 of the Income Tax Appellate Tribunal, Bench at Mumbai in Income Tax Appeal No.4263 of 2011. The assessment year is 2007-08.

2. The revenue had filed an appeal in the tribunal challenging the order dated 25th February, 2011 of the Commissioner of Income Tax (Appeals) Mumbai.

3. The grounds of appeal as raised before the tribunal and pressed before us relate to deletion of addition made on account of loan waived by the banks in favour of the respondent assessee in one time settlement amounting to Rs.4,40,22,653/-.

4. The argument was that the Commissioner erred in not appreciating the fact that the principal amounts of loans retained by the assessee on account of one time settlement, constituted its income as per section 28(iv) of the Income Tax Act, 1961 though not under Section 41(1) of the said Act.

5. Before us, however, Mr.Pinto submits that the appeal raises substantial questions of law. They are formulated by Mr.Pinto as under :

Whether in law and on the facts of the instant case, was the Tribunal right in holding that the waiver of the loan was not taxable, when Section 28(iv) seeks to bring to tax the value of any benefit arising from any business ?

Whether in law and on the facts of the instant case, was the Tribunal right in holding that loan waived was of capital content, without appreciating that fact of the waiver accrued as a taxable benefit in the hands of the firm ?

Whether in law and on the facts of the instant case, was the Tribunal right in ignoring the fact that the loan used to purchase assets on which depreciation was claimed, thereby this waiver represented an allowance or deduction as per the provisions of Section 41(1) ?"

6. Mr. Pinto invites our attention to section 28(iv) of the Income Tax Act and submits that this section enumerates the income which shall be chargeable to tax under the head business or profession and that inter alia includes value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. In his submission, the benefit is derived by the waiver granted to the assessee and in the present case waiver of loan to the extent of Rs.3.06 crores by the ICICI bank is in issue. The tribunal has held that insofar as the other bank is concerned, namely, Abu Dhabi Commercial Bank (ADCB), there, the amount is taxable as it was advanced by the bank for stock in trade. In the present case, the amount may have been advanced for purchasing machinery but that amount was eventually waived off. In the circumstances, it would not be treated as capital receipt. He, therefore, contends that the tribunal's approach raises above questions of law and which are substantial in nature.

7. On the other hand Mr.Jhaveri appearing on behalf of the assessee submits that the tribunal has in the peculiar facts and circumstances of the case, when the ADCB waived loan of Rs.1.33 crores which was offered to tax, had came to the conclusion that in the case of ICICI bank, the waiver of loan of Rs.3.06 crores is for the asset revival of a sick company. The loan may have been availed for the capital assets like machinery but as held by this Court, the cessation of liability to repay the loan to purchase a capital asset does not result in a revenue receipt and it is not taxable under section 28(iv) of the Income Tax Act. It is this consistent view of this Court which is followed and applied in the given facts and circumstances. Hence, the appeal does not raise any substantial question of law and should be dismissed.

8. We have heard both sides and with their assistance perused the paper book. It is not the argument of Mr. Pinto that the ground as noted in paragraph 1 of the tribunal's order and particularly at Page 40 ground no.5 was not the one which was forming part of the memo of appeal before the tribunal. There, the revenue specifically argued that the amount of loan retained by the