Waiver of Loan Cannot be Considered to be a ‘Benefit’ Without Specific Acknowledgement from Lenders: ITAT

The present appeal has been filed by DCIT, ACIT (OSD) against Global Emerging Markets India Ltd in the ITAT Delhi, challenging an order dated July 18, 2025, passed by the National Faceless Appeal Centre (NFAC) under section 143 (3) of the Income Tax Act, 1961.

The assessee is a company incorporated on March 18, 1994 with the main goal of investment in shares and securities. The company filed its return for the relevant year, showing a loss of about Rs 55,96,589.

However, during the investigation, the AO observed that the company had taken unsecured loans of about Rs 29,329,8683 from 24 parties. Although the company submitted documents to prove the loans and stated that they were still shown as payable in its books and not written off. However, the AO was not satisfied and made an addition of Rs 20,23,30,682.

The assessee filed an appeal before the CIT(A). The assessee submits that provisions of Section 28(iv) of the Income Tax Act have been applied incorrectly. As a result, CIT(A) deleted the addition.

Aggrieved by the CIT(A) order, the Revenue filed an appeal before the Tribunal. During the hearing, DR submitted that CIT(A) has made a deletion without properly considering the facts. He added that the loans could not have remained unpaid for such a long time, and therefore the AO was right in treating them as no longer payable.

After considering all the arguments and documents on record, the tribunal said it is clear that most of the loans were raised by the assessee in earlier years, except one loan from M/s Zoom Communication Ltd. There is no evidence anywhere in the assessment order or records to show that any of these loans were ever waived off. The company’s financial statements also clearly show that the assessee has not written off these loans in its books.

The AO mainly made the addition based on an assumption that since more than 12 years had passed, the loans were no longer payable or must have been waived. Tribunal said “law of limitation merely bars the remedy but does not extinguishes the debt itself”.

Previously, the AO had added Rs 10,33,41,996 to the assessee’s income under Section 68 for loans taken from six parties in Assessment Year 2013-14. However, this addition was deleted by the CIT(A) after accepting that the loans were genuine.

The assessee also submitted loan confirmations for Rs 42,10,515 received from six foreign entities. The director of M/s Gem Management Ltd, Shri Manraj Singh Bindra, clarified that these six companies were merged into M/s Gem Management Ltd. The AO wrongly treated this merger as a waiver of loans, which is incorrect. After amalgamation, the loans continue to exist as a liability but are now payable to the resulting company.

Tribunal said “we are of the considered that invoking of provision of Section 28(iv) of the Act is completely beyond legal comprehension as assessee had not received any ‘benefit’ but the cash receipts in earlier years in the form of loan still exists in the balance sheet of the assessee and waiver of loan cannot be considered to be a ‘benefit’ without specific acknowledgement from the lenders. Though, it is also not acceptable that the waiver of the loan would result in a ‘benefit’ so as to be deemed income u/s 28(iv) of the Act. It is unjust to make an addition of deeming income on presumption alone.”

Tribunal said, applying Section 28(iv) of the Act in this case is not legally correct. The assessee has not received any “benefit” but the cash receipts in the form of a loan still exist in the balance sheet. There has been no clear or confirmed waiver of these loans by the lenders. Without such confirmation, it cannot be assumed that the loan has been waived or that the assessee has gained any benefit. Accordingly, the addition made by the AO is invalid. In conclusion, the tribunal allows the assessee’s appeal by deleting the Rs 20,23,30,682 addition.