JSW Steel Limited v ACIT (ITA No.923/Bang/2009 dated 13.01.2017) (Mumbai ITAT) BACKGROUND: – Assessee had availed term loans from various Indian and foreign financial institutions and banks for setting up of integrated steel plants. The assessee had utilized the above loans to pay the purchase price of the imported plant and machinery for setting up of the Steel plants. The loans were repayable over various maturity dates up to 2010. – After setting up the steel plants, the assessee had incurred huge loss due to economic recession in general and steel industry in particular and was under severe financial crisis. Accordingly, the assessee entered into a financial restructuring package. – After negotiations with the foreign lenders, the assessee entered into agreements to settle the dues, pursuant to which the principal and interest payable were reworked and part of the principal and interest amounts were waived. – Accordingly, the entire sum of was credited to the Profit and Loss account as an exceptional item on account of waiver of the principal and interest payable thereon with a specific note in ‘Notes to Account’ that the exceptional item represents waiver of dues on settlement. – During the course of assessment proceedings, the assessee contended that since the waiver of principal amount of borrowing was utilized on capital account, therefore, it is a capital receipt not taxable while computing the income of the assessee and hence the amount waived has not been offered to tax as per section 41(1). – Further, the assessee by way of a note in the computation gave a caveat that the amount of Rs.314.14 crores which represents capital receipt is not in the nature of profit and gains of business and therefore, is not includable in the book profit under section 115JB. – The Assessing Officer, however, while computing the book profit in the assessment order considered the figure as given in the profit & loss account and did not agree to reduce the aforesaid waiver of dues.