Surplus arising on prepayment of deferred sales tax loan at net present value (NPV) – Whether a capital receipt which cannot be termed as remission on cessation of a trading liability under section 41(1)?

 

 

– Held Yes

 

Surplus arising on prepayment of deferred sales tax loan at net present value (NPV)

 

– Whether a capital receipt which cannot be termed as remission on cessation of a trading liability under section 41(1)?

 

 

– Tribunal held that decision of the Bombay High Court in Sulzer India Limited [2014 (12) TMI 267 – BOMBAY HIGH COURT] squarely covered the issue and that the first appellate authority made no mistake in holding that the surplus arising on prepayment of deferred sales tax loan at NPV was a capital receipt which could not be termed as remission or cessation of a trading liability so as to invite section 41(1)

 

 

 

– HELD THAT:- Value (NPV) should be treated as a capital or a revenue/trading receipt and applicability of section 41(1) of the Act thereto came up for consideration before the Supreme Court in Balkrishna Industries Limited [2017 (11) TMI 1626 – SUPREME COURT] in which the decision of this Court in Sulzer India Limited [2014 (12) TMI 267 – BOMBAY HIGH COURT] was also considered.

 

 

Supreme Court noted that the main judgment out of which the appeals arose and were considered in the said case was rendered in Sulzer India Limited (supra). Supreme Court referred to the decision of this Court in Sulzer India Limited (supra), more particularly to

 

 

paragraph 40 thereof which has been extracted above, and held that the aforesaid approach of the High Court was without any blemish. Accordingly, the appeals were dismissed.

 

No error or infirmity in the view taken by the Tribunal.

 

This issue is squarely covered by the decisions in Sulzer India Limited (supra) and Balkrishna Industries Ltd. (supra) and Tribunal rightly followed the same.

 

 

Consequently, we see no reason to interfere with the same. Question No.1 so framed is accordingly answered against the Revenue and in favour of the assessee