Highlight: Case study of CIT Vs. Mahindra & Mahindra (2018) 404 ITR 0001 (SC) Waiver of Term Loan waiver wherein loan is taken for: Capital Asset Non Business Purpose Trading or regular business purpose .
The Expansion Deal - 18.06.1964: FC 150 FC 170 Agreement with KJF Kaiser Jeep Corporation Facts of the case Subsidiary KJIC Kaiser Jeep International Corporation - dies, welding equipment and die models RBI Approval Takeover American Motor Corporation (AMC) Principal Waiver Case law Taxpayer view The purchase of tooling was not a transaction for purchase of goods on credit in the ordinary course of business and it could neither be equated with unpaid purchase consideration to be liquidated over a period of time. Issue under Consideration Whether waiver of loan would be taxable under section 28(iv) or 41(1) of the Act?
Ruling of the Supreme Court conclusion section 28(iv) is N/A in the present case, as the amount waived is receipt in the nature of cash/ money Section 41(1) is also N/A n this case as waiver of loan does not amount to cessation of trading liability Benefit to be in form rather than in the shape of money No deduction was claimed under section 36(1)(iii) of the Act.
Capital Asset purchase amount had not been debited to P&L A/c Section 41(1) specifically talks of cessation of trading liability https://www.youtube.com/channel/UCpLA1d2SabkUKkrlzg4AOqA?view_as=subscriber
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