Sec. 41(1)(a) of Income Tax Act, 1961 – Business Income – The AO had, for the relevant AY 2004–05 brought to tax Rs. 4,74,77,000/– treating it as income under Section 41(1)(a) of the Act, 1961. The assessee, a Cooperative Society had secured a loan from NDDB for which the Government of Rajasthan stood guarantor subject to payment of commission of Rs. 25 Lacs per annum. This was claimed as expenditure for several years upto the assessment year in question. The State of Rajasthan wrote off that liability of Rs. 4,74,77,000/- allowing it to be treated as a capital grant to be used only for capital and rehabilitation purposes. The AO disallowed it. On assessee’s appeal, CIT(A) deleted the addition made by AO. ITAT rejected the appeal of the revenue. High Court dismissed the appeal of the revenue holding that:- the record also supports the findings of the CIT(A) and ITAT, in that the loan utilized by the assessee was for the capital purposes; the loan was in–fact given by the NDDB. The assessee continues to remain liable to repay those amounts. In these circumstances, the State instead of fully writing off the amounts, (repayable by the assessee) imposed an important condition that they would be utilized only for capital/rehabilitation purposes. This was therefore a significant factor i.e. the writing off was conditional upon use of the amount in the hands of the assessee which was for the purpose of capital – CIT Vs. RAJASTHAN CO–OPERATIVE DAIRY FEDERATION LTD.  [2020] 423 ITR 89 (RAJ)