To cut the losses. We are paying his salary and he is not playing. If we could sell him, we would have sold him already. What does extending by another year do? Why would we not be in the same exact position a year from now, just having payed millions in salary?
Or whoever wants him waits just 6 more months, until next January and still gets him for free. Or we play him meanwhile, he gets injured again and is not sellable. Given his track record - prospects are pretty bad.
Why do you think we are geniuses and everybody else is a dumb sucker? Extending by a year doesn't have the economic effect you think it does.