TAXABILITY OF BENEFIT OF WAIVER OF LOANS AND UNPAID INTEREST FOR BORROWER

The ITAT ruled that waiver of unpaid interest, which was not allowed as deduction in the past, is not liable to tax under the specific provisions of Indian Tax Laws (ITL) which provide for taxation of remission of trading liability. The ITAT also ruled that waiver of term loans used for acquiring capital assets is not liable to tax under the specific provisions of the ITL which provide for taxation of benefit or perquisite arising from business. The ITAT further held that waiver of cash credit facility used for trading operations is liable to tax since the benefit bears revenue character and, therefore, in the nature of benefit or perquisite arising from business.