APPLICABILITY OF SECTION 194R ON AMOUNT WAIVED BY BANK IN OTS

This query is : Resolved

SANJEEV GUPTA (Querist)
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19 July 2022 The bank is waiving Rs. 2.00 crores out of Total outstanding of Rs. 5.00 crores in OTS on working capital/Term loan and wishes to deduct TDS under section 194R on Rs. 2.00 crores. Can anyone clarify if section 194R is applicable on it and if not, how to convince the bank that it is not applicable. The assessee doesn't intend to take this amount to income as there are judgements of Supreme Court that amount waived is not taxable as business income and the assessee has carried forward business losses also sufficient to cover the amount of Rs. 2.00 crores.

Further, whether certificate under section 197 can be got for nil deduction under section 194R.

Can we apply for advance ruling for the non taxability of income and nil deduction of TDS in this case.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 July 2022 The taxability of the waiver of loan has been a highly debated issue and there have been contradictory judgements. For instance, the Madras High Court in one of its judgement had held that a sum of principal loan amount waived by a bank in the one time settlement scheme would constitute as income under section 28(iv) of the Act.
Advance ruling will not be favorable to you.
File ITR adjust 2 crore against business loss claim refund of TDS.

SANJEEV GUPTA

SANJEEV GUPTA (Querist)
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20 July 2022 whether certificate under section 197 can be got for nil deduction under section 194R.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 July 2022 I think it's not possible.

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