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July 13 To July 19, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 64sections 115-O to 115Q with effect from
1-6-1997 (Special Provisions) to achieve an
object. If any other view is taken, then the
Special Provisions under Chapter XIV would
become redundant and it would be open a
pandoras box. AO an’tc invokesec.41(1)totax
surplus arisingfromassignmentof
loan o t thirdpartyCable Corporation of India Ltd. v. DCIT
[2019] 106 taxmann.com 194 (Mumbai - Trib.)
Assessee borrowed loan of Rs. 12 crores
from a company. It assigned liability of
repayment of loan to third party CPPL by
making payment of Rs. 0.36 crores in terms
of present value of future liability. Surplus
of Rs. 11.64 crores resulting from assignment
of loan liability in terms of present value
of future liability was credited to profit &
loss account under head income from other
sources but while computing total income,
said income was reduced from income on
ground that such surplus represented capital
receipt and, therefore, not taxable.
Assessing Officer (AO) was of view that
liability of assessee to repay loan had ceased/
extinguished, thus, amount of surplus resulting
from assignment of loan represented income
under section 41(1) or under section 28(iv).
The Mumbai ITAT held that since loan
amount was utilized by assessee for purchase
of shares and same was not used in relation
to trading activity of assessee in its line of
business, said surplus could not be treated
as revenue receipt. Further, surplus resulting
from assignment of loan was not cessation or
extinguishment of liability as loan was to be
repaid by third party and, therefore, could
not be brought to tax in hands of assessee
under section 41(1). Direct agreementwithspecified
authoritywasn’trequiredtoavailof
benefitofsec.80-IACIT v. Chettinad Lignite Transport Services
(P.) Ltd. [2019] 107 taxmann.com 12 (Madras)
Assessee-company under an agreement captioned
as Lignite Transport System with principal
contractor company (ST-CMS) had undertaken
the work of developing the railway sidings
and was operating and maintaining the same.
It claimed relief under section 80-IA.
Assessing Officer (AO) rejected the claim for
relief on the ground that the assessee had
not satisfied the requirement of section 80-
IA(4), as it had not entered into an agreement
with the Central or State Government, local
authority or any statutory body for developing
or operating or maintaining new infrastructure
facility.
The Madras High Court held that the Legislature
intended to extend the benefit under section
80-IA to an enterprise involved in (i) developing
or; (ii) operating and maintaining or; (iii)
developing, operating and maintaining any
infrastructure facility.
The proviso to sec. 80-IA(4) intends to
extend the benefit of the deduction even to
a transferee or a contractor who is approved
and recognised by the concerned authority
and undertakes the work of the development
of infrastructure facility or only operating
or maintaining the same. The proviso to
sub-section (4) stipulates that subject to the
fulfilment of certain conditions, the transferee
will be entitled to the said benefit, as if the
transfer in question had not taken place. It
does not require that there should be a direct
agreement between the transferee enterprise
and the specified authority for availing of
the benefit under section 80-IA.WEEKLY REVIEW