Law:

Section:

Section 28(iv) of the Income-tax Act, 1961 - Business income - Value of any benefit or perquisite, arising from business or exercise of profession - Assessment year 1976-77 - Assessee entered into an agreement to purchase Toolings from KJC of America for manufacture of heavy vehicles - Since assessee could not secure foreign exchange, KJC agreed to provide loan repayable in 10 years in instalments with interest at 6 per cent, free from income-tax - Said loan was approved by RBI and Ministry of Industries (MOI) - Cost of Tools was amortised and Tools at their amortised value were transferred to fixed assets - In respect of interest, assessee never took deduction under section 36(1)(iii) or section 37 - KJC was later taken over by AMC and, as part of takeover, AMC agreed to waive principal amount of loan, not interest - In return of income, assessee showed amount of waiver of loan as cessation of liability towards AMC - However, Assessing Officer found that with waiver of loan credits became part of business income under section 28 - Commissioner (Appeals), while confirming that action, also held that it could be assessed under section 41(1) also - Tribunal held that neither section 28(iv) nor section 41 was applicable - Whether since Toolings in question were in nature of dies required for manufacturing heavy vehicles, their import was that of plant and machinery and, therefore, section 28(iv) was not attracted - Held, yes Section 41(1) of the Income-tax Act, 1961 - Remission or cessation of trading liability - Assessment year 1976-77 - Whether in view of stated under heading 'Business income - Value of any benefit or perquisite, arising from business or exercise of profession' and since Toolings constituted capital asset and not stock-in-trade, and no deduction was availed of in earlier years in respect of loss, expenditure or trading liability incurred by assessee, section 41(1) was not attracted - Held, yes FACTS The assessee-company had plans to expand Jeep product line. Therefore, it entered into an agreement with KJC of America, in terms of which KJC agreed to sell dies, welding equipments and die models (Toolings) for production of special type of Jeeps…

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