TaxTMI 
TaxTMI 
2025 (12) TMI 1879
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....te submissions are made. For the sake of convenience in deciding these appeals, the appeals are taken up for adjudication in seriatim of assessment years. 2. The cross appeals for AY 2009-10 are taken as lead case, hence, facts are narrated from appeals for AY 2009-10. ITA No. 1977/Del/2013 (Assessee) (AY 2009-10) ITA No. 2620/Del/2013 (Revenue) (AY 2009-10) 3. The facts of the case in brief as emanating from records are: The assessee is a flagship company of Sahara Group. The assessee is engaged in the business of construction of housing/commercial complexes, infrastructure projects, broadcasting and telecasting of TV programs, films & songs, trading and production of jute products and intra group investment, etc. The assessee has 26 separate units at different locations pan India where separate books of account of the respective units are maintained. The assessee had filed its return of income for AY 2009-10 declaring loss of Rs. 205,53,32,506/-. The assessee filed revised return of income on 07.03.2010 declaring revised loss of Rs. 391,45,89,643/-. Owing to complexity of the accounts, the Assessing Officer (AO) directed for Special Audit u/s.142(2A) of the Income Tax....
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....spect of loans, advances and imprest given free of interest. The AO disallowed aforesaid interest as according to him the assessee failed to substantiate any business expediency for not charging interest. The imprest was given by the assessee to its associates/employees for procurement of land. The AO disallowed assessee's claim on the ground that the assessee failed to discharge its onus with substantive evidence with regard to imprest money. Thus, the AO imputed interest income of 11%. The CIT(A) after considering the submissions and documentary evidences placed on record by the assessee, including prevalent rate of interest sustained 11% rate of interest as benchmark. In so far as the advances and imprest to the following parties the CIT(A) found that it is related to business activities of the assessee. SI To whom given Amount in Rs. Crore Interest worked out by AO Nature of Advance / Imprest Remarks 1 Sahara Net Corp Ltd 9.54 5032728 Regular business advance for acquisition, installation and maintenance of IT and communications systems, particularly w.r.t. Sahara India TV owned by S1CCL. Verified from ....
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....est of Rs.7,13,23,982/-towards imprest money. In so far as loans advanced to following parties, the CIT(A) sustained the disallowance of interest as under :- ANNEXURE 2 (TOR - 2) (PART I) (LOAN) Details of Loans as on 31.03.2009 S No Party Name Party Amount (Rs.) Remarks SICCL Mumbai 1 Boney Kapoor Outside 23,37,00,000 Interest not recognised as per AS 9 as there was uncertainty regarding recovery of the amount. 2 B. Jeejeebhoy, Vakharia & Associates Outside 25,73,84,527 The amount was for development of land. It was under litigation, but the same has been settled. Now the land approx 106 acres is in the possession of the company. 3 Jayant Biswasa Outside 15,00,000 Amount was not recoverable, hence as per AS 9 no interest was charged. 4 Satyagiri Shipping Co. Ltd. Outside 10,00,000 interest not recognised as per AS 9 as there was uncertainty regarding recovery of the amount. 5 Surya Textile Outside 5,65,900 Payment was made for work done, it is wrongly classified as loan. 6 A....
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....98 The interest was not charged since 2007-08, and amount was written off in 2009-10. 20 RK Thukral Outside 2,28,07,838 Interest has been charged. Principal amount was 2,10,00.000/- and interest was 18,07,838/-. 21 S Bhattacharya Outside 36,00,000 This was a temporary loan given on 09/02/2009 and was received back on 04/04/2009. 22 Arren Consultants Pvt. Ltd. Outside 51,75,834 This is interest part of loan. Hence interest on interest is not charged. 23 Article Loan Franchaise Outside 51,75,834 This presents typographical error as actual amount was 1,96,715/- which was paid on behalf of Sahara India and later it was transferred to Sahara India. 24 Sahara Airlines (Jetlite Ltd) Outside 80,12,58,672 Interest was not charged as per Share Purchase agreement dated 18-01-2006. 25 Siddharth Awasthi Outside 20,25,546 The interest was charged up to 2007-08, and not being charged since 2008-09 as there was uncertainty of recovery. LKO RO (Subsidiaries) 26 Nalanda Electricity Udyog Group....
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....st to the extent of Rs. 229,22,22,552/- claimed by the assessee on account of no or low interest on capital introduced in partnership firm where the assessee was the partner. The CIT(A) while dealing with this issue observed that the assessee has not been consistent in its accounting including the firms in which the assessee is a partner. Different rates of interest are charged on capital employed. The CIT(A) after considering submissions of the assessee and the fact that the assessee had already offered interest, directed the AO to reduce the disallowance of Rs. 229,22,22,552/- by the amount already offered by the assessee. Thus, the CIT(A) granted relief of Rs.13,96,90,959/-. 9. Per contra, the claim of assessee is that it is fully eligible to claim deduction on interest expenses as the amounts were utilized by the assessee for its business purposes. We have examined findings of the AO and the CIT(A) on this issue, the disallowance was made by the AO primarily for the reason that the borrowed funds were invested for non-business purposes. No material is placed on record by the assessee to substantiate that the borrowed funds were in fact utilized for the business purposes. The....
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....s of rival sides and the impugned order, we are in agreement with the findings of the CIT(A) on this issue. Hence, we see no reason to interfere with the same. Accordingly, ground no. 3(a) & 3(b) of the assessee's appeal and ground no. 11 of the Revenue's appeal are dismissed. Disallowance of expenses unsupported by Bills :- 12. The Assessing Officer has disallowed the expenditure to the tune of Rs.13,13,39,957/- as the said expenditures were not supported by bills or the bills were not in the name of the assessee. During the First Appellate proceedings, the CIT(A) examined the documents furnished by the assessee and deleted the disallowance to the extent of Rs.12,92,20,127/-. The Revenue is in appeal against the deleting of aforesaid expenditure. We find that the CIT(A) has taken extensive exercise of examining the bills produced by the assessee to the extent of Rs.19,94,999/- The CIT(A) further observed that there were two expenses of Rs. 6,19,659/- and Rs. 6,05,999/- which are routine maintenance of civil work. Further, there are expenditure where the bills are in the name of assessee's sister concern. The said amounts have been paid by the assessee and the sam....
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....ldings vs. Addl. CIT, 100 taxmann.com 159 (Del. ITAT). 13.2. In so far as, total quantum of advertisement expenditure in the form of sponsorship fee paid to the BCCI, the same is not in dispute. It is only the apportionment of the expenditure amongst the Sahara Group entities which is subject matter of dispute. The assessee has claimed 90% of the total annual payment paid to the BCCI, whereas, the Revenue has allowed the expenditure in the hands of assessee to the extent of 31.79% based on total turnover of the assessee to the combined turnover of nine major companies of the Sahara Group. In any case, the proportionate expenditure is allowable in the hands of all the group concerns. Therefore, we see no reason to interfere with the findings of the CIT(A) on this issue. Hence, the same are upheld and ground no. 5(a) and 5(b) of the assessee's appeal and ground no. 14 of Revenue's appeal are dismissed. Deleting of Disallowance u/s.40A(3)-Hotel expenses and Shooting Charges of SITV :- 14. The Revenue in its appeal has assailed the deleting of addition of Rs.1,67,683/- u/s.40A(3) of the Act. The AO made disallowance of Rs.2,76,183/- u/s.40A(3) of the Act. The assessee ....
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....nagement during AY 2009-10, they became due for payment during AY 2009-10. The assessee has been consistently following the policy of claiming expenditure on the basis of crystallization. Hence, the same are allowable. The CIT(A) further observed that since the assessee is having several branches spread across the country, therefore, accounting and consolidation of bills may be a genuine problem. We find no error in the findings of the CIT(A), on this issue. The Hon'ble Jurisdictional High Court in the case of CIT vs. Exxon Mobil Lubricants P. Ltd., 328 ITR 17 (Delhi), allowed deduction of expenditure in the year in which it is crystalized and falls due for payment. Thus, ground no. 4 of Revenue's appeal is dismissed. Deleting of Disallowance u/s.40(a)(ia) of the Act :- 17. The AO made disallowance of Rs.36,33,493/- u/s.40(a)(ia) of the Act. The said amount comprises of three payments i.e. Rs. 28,090/- + Rs. 7,25,403/- +Rs. 28,80,000/-. The CIT(A) deleted disallowance of Rs.28,090/- as the payment was less than Rs.50,000/- and, hence, was covered by the provisions of section 194C of the Act. As regards, the amount of Rs.7,25,403/- the said amount was not claimed by th....
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....the result, ground no. 7 of Revenue's appeal is dismissed. Deleting of disallowance u/s.14A of the Act :- 20. The AO made disallowance of Rs.80,54,279/- u/s. 14A of the Act. The assessee made two fold submission. (i) The assessee was having sufficient interest free funds for making the investments; & (ii) the disallowance u/s. 14A of the Act cannot exceed the exempt income earned during the relevant period. The exempt income earned by the assessee during AY 2009-10 was Rs.14,36,257/-. The assessee made suo moto disallowance of Rs.30,96,90,959/- u/s.14A of the Act. This fact has not been disputed by the Revenue. Since, the assessee has already made suo moto disallowance of an amount much more than exempt income earned by the assessee, no further disallowance u/s.14A of the Act is called for. Thus, we find no merit in ground no. 9 of Revenue's appeal, hence, the same is dismissed. Expenses held to be Capital in Nature-Sahara Shahar Project :- 21. The assessee had claimed expenditure to tune of Rs.4,95,90,234/- which was held to be on capital account by the AO. Out of aforesaid total expenditure held to be on Revenue account, expenditure of Rs.4,86,35,174/- was in ....
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....ance expenses of car provided to Ms. Diana Hayden 1,39,697 Not related to business of assessee. Claimed to be employee of the appellant. Query not specifically put to the appellant. 4 Court fees along with expenses and professional fees for recovery of loan as part of carved out assets of Sahara Airlines 1,49,07,486 Not part of balance sheet, not related to business of assessee. Assets and business of Sahara Airlines taken over by appellant company. 5 Water tax expenses of Sahara Shahar, Lucknow 2,93,96,109 Capital expenditure Routine maintenance expenses of the unsold project, presently housing offices of Sahara and residence of Director. 6 Electricity expenses of Sahara Shahar, Lucknow 3,83,74,158 Capital expenditure Routine maintenance expenses of the unsold project, presently housing offices of Sahara and residence of Director. 7 Insurance premium for insurance coverage of the players and officials of Senior & Junior Indian Hockey Team. 5,09,834 No commercial benefit. Sponsorship of Indian cricket team allowed. This sponsorship has to be allo....
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....ention of the assessee is that no disallowance could have been made merely because final report of the Actuary was received post finalization of accounts. Further, the submissions of the assessee is that section 40B(3) of the Act is not applicable to the provision of leave encashment, as, the same is not a statutory liability. In so far as payment for gratuity is concerned, the same was made during the previous year itself, hence, section 40B(3) of the Act would not apply. 23.1. Per contra, the ld. DR reiterated findings of the AO and prayed for upholding the same. 24. The CIT(A) has deleted the disallowance holding that the provisions of section 40(3)B of the Act does not apply to the provisions for leave encashment as it is not a statutory liability, and the payment of gratuity was already made during the previous year itself. We are in agreement with the reason given by the CIT(A) for deleting the disallowance. Hence, ground no. 15 of the Revenue's appeal is dismissed being devoid of any merit. 25. In the result, appeal of the assessee and appeal of the Revenue both are dismissed. ITA 4728/Del/2017 (Assessee) for AY 2010-11 ITA 4855/Del/2017 (Revenue) for AY 2....
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....involved in disallowance u/s.14A of the Act. In so far as Revenue's ground of appeal, the Id. Counsel stated that during AY 2010-11, the assessee has earned exempt income of Rs. 2,53,830/- and the assessee has made suo moto disallowance of Rs.9,72,339/-. The AO enhanced disallowance u/s.14A by Rs.187,92,13,914/-. 28.1. The ld. DR has not disputed the quantum of exempt income earned and suo moto disallowance made by the AO. 28.2. In light of the statement made by ld. Counsel for the assessee, ground no. 2 in assessee's appeal is dismissed as not pressed. The corresponding ground in appeal of Revenue is ground no. 14. The suo moto disallowance made by the assessee is much more than exempt income earned. It is a settled legal position that disallowance u/s.14A of the Act cannot be more than exempt income earned. Hence, no further disallowance is warranted. Accordingly, ground no. 14 of Revenue's appeal is dismissed. Disallowance of Interest Expenses by the Assessing Officer (AO) :- 29. The AO had made disallowance of interest expenses of Rs.145,56,55,217/-. The advances were paid by the assessee to various subsidiary/group companies for acquisition of land. ....
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....he Revenue's appeal is dismissed. Disallowance u/s.40A(2)(b) of the Act :- 33. The AO made disallowance of Rs.4,20,21,924/- in respect of reimbursements made to SOMEL. The facts germane to this ground of appeal are identical to facts decided by us in appeal of the Revenue in AY 2009-10. Hence, the findings given by us while adjudicating ground no. 7 in AY 2009-10 would mutatis mutandis apply to the instant ground. Hence, for parity of reasons ground no. 9 of the Revenue's appeal is dismissed. Expenses held to be capital in nature-Sahara Sahar Project :- 34. The AO made disallowance of Rs.13,45,20,908/-. The facts germane to this ground of appeal are identical to facts decided by us in appeal of the Revenue in AY 2009-10. Hence, the findings given by us while adjudicating ground no. 10 in AY 2009-10 would mutatis mutandis apply to the instant ground. Hence for parity of reasons ground no. 12 of the Revenue's appeal is dismissed. Expenses un-related to business-Sahara Airlines Unit :- 35. The AO made disallowance of Rs.8,62,65,756/- in respect of salary payments and travelling expenses paid to employees of Sahara Airlines Unit and also disallowed Rs.34,6....
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....allowance u/s.40(a)(ia) of the Act can be made for short deduction of tax (RE: CIT vs. SK Tekriwal 90 DTR 26 (Cal.). Accordingly, ground no. 13 of the Revenue's appeal is dismissed. 38. In the result, appeal of the assessee and the revenue for AY 2010-11 are dismissed. ITA No. 2795/Del/2017 (AY 2011-12) Assessee's Appeal 39. The assessee in appeal has assailed the order of CIT(A) on three counts: (i) Disallowance u/s. 14A of the Act; (ii) Consultancy charges paid to Shiva Industries and Holdings Ltd. held as capital in nature; & (iii) Advertisement Expenses. Disallowance u/s. 14A of the Act :- 40. The AO made disallowance of Rs.156,41,02,130/- u/s.14A r.w.r 8D of the Act. The assessee has suo moto made disallowance of Rs.9,14,539/- u/s.14A of the Act. Admittedly, no exempt income was earned by the assessee during the relevant period. It is a well settled legal position that disallowance u/s.14A of the Act cannot exceed exempt income earned during the relevant period. Since, no exempt income is earned by the assessee during the relevant assessment year, no disallowance u/s.14A of the Act is warranted. [CIT vs. Winsome Textile Industr....
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....ature of Advertisement Expenses claimed in the impugned assessment year is identical to AY 2009-10. The ground no. 3 of assessee's appeal is identical to the ground of appeal no. 5 in AY 2009-10. 42.1. The issue relating to disallowance of Advertisement Expenses has already been adjudicated by us in the cross appeals for AY 2009-10 in para 13. Since, the facts germane to the issue in the present appeal are identical to the facts in AY 2009-10, the findings given by us while deciding the said issue would mutatis mutandis apply to the instant grounds of appeal. For parity of reasons, the ground no. 3(a) and 3(b) of the assessee's appeal are dismissed. 42.2. In the result, appeal of the assessee is partly allowed. ITA No. 4729/Del/2017 (Assessee) AY 2012-13 ITA No. 5504/Del/2017 (Revenue) AY 2012-13 43. The gist of grounds raised by the assessee and the Revenue in their respective appeals for AY 2012-13 is tabulated as under: Sr No Issue Ground no. in appeal of the assessee Ground no. in appeal of the Department 1 Disallowance of Advertisement Expenses 2(a) & 2(b) 4 2 Disallowance u/s.14A of the Act ....
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....e issue, the AO rejected reply of the assessee and computed disallowance u/s.14A r.w.r. 8D. A bare perusal of section 14A(2) of the Act would show that the Assessing Officer having regard to the accounts of assessee if not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred in relation to income which does not form part of total income under the Act, shall determine the amount of expenditure in relation to exempt income in accordance with Rule 8D. In the present case, the AO has failed to record satisfaction as mandated u/s.14A(2) of the Act. The Hon'ble Jurisdictional High Court in the case of HT Media Ltd. vs. PCIT, reported as 399 ITR 576 (Del.) has held that unless the AO records satisfaction as per section 14A(2) of the Act, the provisions of Rule 8D cannot be applied. Thus, in light of the above facts we find merit in ground no. 1 of assessee's appeal, hence, the same is allowed. The corresponding ground raised by the Revenue in its appeal i.e. ground no. 16 is consequently dismissed. Expenses held to be Capital in Nature- Spare parts for repair of cameras, equipments etc. 47. The assessee has claimed expenditure of Rs.....
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....o. in appeal of the Department 1 Disallowance of Advertisement Expenses 2(a) & 2(b) 4 2 Disallowance u/s.14A of the Act 1 17 3 Disallowance of interest expenses by the Assessing Officer (AO) -- 2, 3 & 13 4 Disallowance of rate of interest charged on circulating capital in partnership firm -- 14 5 Disallowance of Revenue expenditure on Work in Progress (WIP)/interest on WIP -- 5 6 Disallowance u/s.40A(3) of the Act - Advance/Imprest given to employees 11 7 Expenses held to be capital in nature- Sahara Sahar Project -- 15 8 Expenses un-related to business-Sahara Airlines Unit -- 9 & 10 9 Deleting of Disallowance on account of sundry balances return of -- 8 10 Prior Period Expenses -- 12 11 Expenses held to be Capital in Nature- Spare parts for repair of cameras, equipment's etc. -- 6 12 Disallowance on account of recoupment of loss of Employee Welfare Trust -- 7 13 Addition on a....
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....this issue are as under :- "These amounts receivable by the assessee from SIFCL were not in the nature of loan or advance; rather, these amounts represent reimbursement/sharing of expenses as per their mutual business understanding. Assessee is not a shareholder of SIFCL hence, provisions of section 2(22)(e) cannot be applied at the very threshold In this regard, reliance is placed on the following case laws wherein it was held that only a 'registered shareholder' of a company can be construed as a 'shareholder' of such company. (Refer: CIT v. C.P.Sarathy Mudaliar: (1972] 83 ITR 170 (SC), Rameshwarlal Sanwarmal v. CIT: 122 ITR 1 (SC)).Further, in line with the facts of the present case, reliance is placed on the decision of Hon'ble Delhi High Court in the case of CIT v. Ankitech (P.) Ltd .: 340 ITR 14 (Del.) where the Court was concerned with the application of second limb of section 2(22)(e) of the Act and was confronted with the issue as to whether deemed dividend would be taxed as income in the hands of the concern or the shareholder, where the payment is made to "a concern" in which the shareholder is a member or partner and has substantial interest....
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.... capital in partnership firm -- 13 5 Disallowance of Revenue expenditure on Work in Progress (WIP)/interest on WIP -- 5 6 Disallowance u/s.40A(3) of the Act - Advance/Imprest given to employees 10 7 Expenses held to be capital in nature- Sahara Shahar Project -- 14 8 Expenses un-related to business-Sahara Airlines Unit -- 8 & 9 9 Deleting of Disallowance on account of sundry balances return of -- 7 10 Prior Period Expenses -- 11 11 Expenses held to be Capital in Nature- Spare parts for repair of cameras, equipment's etc. -- 6 57. Both sides are unanimous in stating that the grounds of appeal at serial no. 1, 3 to 11 and the facts germane to the said grounds are identical to AY 2009-10, 2010-11, 2012-13 & 2013-14. Hence, the submissions made for AY 2009-10, 2010- 11, 2012-13 & 2013-14 would equally hold good for the said grounds in AY 2014- 15. 58. In light of the above submissions made by rival sides, the findings given by us in AY 2009-10, 2010-11, 2012-13 & 2013-14 while adjudicating th....
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....d to be Capital in Nature- Spare parts for repair of cameras, equipment's etc. -- 6 12 Disallowance on account of book debts written of 3(a) & 3(b) and 4 -- 61. Both sides are unanimous in stating that the grounds of appeal at serial no. 1, 3 to 5 & 7 to 11 and the facts germane to the said grounds are identical to AY 2009-10, 2010-11, 2012-13 & 2013-14. Hence, the submissions made for AY 2009- 10, 2010-11, 2012-13 & 2013-14 would equally hold good for the said grounds in AY 2015-16. 62. In light of the above submissions made by rival sides, the findings given by us in AY 2009-10, 2010-11, 2012-13 & 2013-14 while adjudicating the issues raised in the grounds of appeal by respective sides mentioned against serial no. 1, 3 to 5 & 7 to 11 of the above table would mutatis mutandis apply to the instant appeal. Accordingly, the said grounds are dismissed for parity of reasons. Disallowance u/s.14A of the Act :- 63. The assessee in ground no. 1 of its appeal has assailed the disallowance made by AO u/s.14A r.w.r 8D. On the ground that the AO has not recorded satisfaction u/s.14A of the Act as envisaged under sub section (2) of section 14....
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....dvertising Ltd. Rs.10,60,419/-; & ● Loans advances given by Mumbai Unit to various parties Rs.1,63,33,111/-. Further, assessee contended that in the past the CIT(A) has consistently on identical set of facts has decided this issue in favour of the assessee in AY 2010-11, 2012-13 to 2014-15. 64.1. A perusal of the impugned order reveals that the CIT(A) following the order of his predecessors in AY 2012-13, 2013-14 & 2014-15 has deleted the addition of Rs.81.85 crores in respect of 'death help' written of. Further, the CIT(A) has granted relief to the assessee to the extent of Rs.1,03,46,584/- in respect of loans advanced to Sahra India Corporation Investment Ltd. by Lucknow RO. The CIT(A) has further allowed assessee's claim to the extent of Rs.10,60,419/- in respect of amounts paid by SITV, Noida on full & final settlement with Crayons Advertising Ltd. Hence, the grievance of the assessee to the extent of aforesaid amounts is misplaced. The CIT(A) has confirmed the addition only to the extent of Rs.16,74,78,648/-. The CIT(A) after examining the ledger accounts, vouchers, etc. furnished by the assessee came to the conclusion that aforesaid amount ....
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....culating capital in partnership firm -- 5 4 Addition on Account of Notional Income 1 & 2 -- 68. Both sides are unanimous in stating that the grounds of appeal at serial no. 1 to 3 and the facts germane to the said grounds are identical to AY 2009-10, 2010-11, 2012-13 & 2013-14. Hence, the submissions made for AY 2009-10, 2010- 11, 2012-13 & 2013-14 would equally hold good for the said grounds in AY 2016-17. 69. In light of the above submissions made by rival sides, the findings given by us in AY 2009-10, 2010-11, 2012-13 & 2013-14 while adjudicating the issues raised in the grounds of appeal by the Revenue mentioned against serial no. 1 to 3 of the above table would mutatis mutandis apply to the instant appeal. Accordingly, the said grounds are dismissed for parity of reasons. Addition on Account of Notional Income :- 70. The solitary issue raised by the assessee in cross objections is against addition of Rs.94,83,439/- confirmed by the CIT(A) on account of Notional Interest. The contention of the assessee is that the assessee had advanced loans to M/s. Royal Refinery & Neha International Ltd. In so far as Royal Refinery is concerned ....