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Income Tax Appellate Tribunal, DELHI BENCH “A”, DELHI
Before: SHRI VIKAS AWASTHY & SHRI S RIFAUR RAHMAN
Assessee by : Shri Ajay Vohra, Senior Advocate with S/Shri Saksham Singhal, Advocate & Shivam Gupta, Chartered Accountant Department by: Shri Javed Akhtar, CIT-DR & Ms. Garima Mathur, Sr. DR सुिवाई की निथर्थ/ Date of hearing : 26/09/2025 घोषणा की निथर्थ/ Date of pronouncement : 23/12/2025 आदेश/ORDER PER VIKAS AWASTHY, JM:
These cross appeals by the assessee and the Revenue for AY 2009-10 to AY 2016-17 are taken up together as some of the issues raised in these appeals are common for all the impugned assessment years. Both the sides have unanimously stated that since the some of the issues are common in the appeals, the submissions made for one assessment year would equally hold good for the subsequent assessment years. Wherever, the facts are distinguishable separate submissions are made. For the sake of convenience in deciding these appeals, the appeals are taken up for adjudication in seriatim of assessment years.
4 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals 2. The cross appeals for AY 2009-10 are taken as lead case, hence, facts are narrated from appeals for AY 2009-10.
(Assessee) (AY 2009-10)
(Revenue) (AY 2009-10)
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 Act,1961(hereinafter referred to as ‘the Act’). The AO while competing the assessment made certain additions/disallowance in income returned by the assessee and determined the total income of the assessee for AY 2009-10 as Rs.670,49,52,486/-. Aggrieved by the assessment order dated 17.08.2012 passed u/s.143(3)/142(2A) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) granted part relief to the assessee deleting certain additions/disallowances. Now, both the assessee and the Revenue are in appeal before the Tribunal assailing the additions confirmed/deleted by the First Appellate Authority in their respective appeals for the impugned assessment year.
5 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals
The issues raised by the assessee and the Revenue in their respective appeals are tabulated herein under:-
Sr No Issue Ground no. in Ground no. in appeal of the appeal of the assessee Department 1 Disallowance of interest expenses by 1(a) to 1(c) 6 the Assessing Officer (AO)
2 Disallowance of rate of interest 2(a) & 2(b) 8 charged on circulating capital in partnership firm 3 Disallowance of Revenue 3(a) & 3(b) -- expenditure on Work In Progress (WIP)/interest on WIP 4 Income on sale of WIP -- 11 5 Disallowance of expenses 4 12 unsupported by bills 6 Disallowance of advertisement 5(a) & 5(b) 14 expenses 7 Deleting of disallowance u/s.40A(3)- -- 2 Hotel expenses and shooting charges of SITV 8 Future period expenses (prepaid -- 3 expenses) allowed by the CIT(A) 9 Prior period expenses allowed by -- 4 the CIT(A) 10 Deleting of disallowance -- 5 u/s.40(a)(ia) of the Act 11 Disallowance u/s.40A(2)(b) of the -- 7 Act 12 Deleting of disallowance u/s.14A of -- 9 the Act 13 Expenses held to be capital in -- 10 nature-Sahara Shahar Project 14 Expenses not related to business- -- 13 Sahara Airlines Unit 15 Disallowance of provisions of -- 15 employee related benefits
6 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals Disallowance of Interest Expenses:-
The Assessing Officer disallowed assessee’s claim of interest amounting to Rs.280,51,10,168/- in respect 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.
To whom Amount Interest Nature of Advance / Remarks SI given in Rs. worked out Imprest Crore by AO 1 Sahara 9.54 5032728 Regular business advance Verified from record Net Corp for acquisition, installation and found correct. Ltd and maintenance of IT and communications systems, particularly w.r.t. Sahara India TV owned by S1CCL. 2 SPCL 887.78 302395565 Figure is incorrect. Amount Verified from record (earlier is 478.69 cr out of which and found correct. SIICL) 473.3 cr is for booking of Advance was for flats and 5.39 cr is routine purchase of flats. business advance.
7 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals
3 SIFCL 268.27 53237368 Verified from record Figure is incorrect. Amount and found correct. is 138.67 cr out of which 120 cr is for purchase of building and 18.67 cr is BCC1 payment outstanding. 4 Sahara 22.50 11047780 Wrongly classified. Interest Verified from record QED Pvt. charged and recovered. and found correct. Ltd. 5 Sahara 0.66 643358 Interest not charged as Verified from record Adventur amount given to and found correct. e Sports subsidiary. Ltd. 6 Jet 43.83 48171588 Interest not charged as per Part of agreement Airlines share purchase agreement to transfer airline Ltd. dated 18.01.2006. business. 7 SIRECL 4784.24 823890 Debt against WIP Interest not charged transferred as per by AO on WIP debt, agreement. Recovered in only on balance. the subsequent year. 8 SITDL 6.45 7094199 Business advance against Project was in Sunderban Project. collaboration with WB Govt. : owned WBSTDC. Did not take off. Verified and found correct. 9 10 wholly 1301.90 1432075330 Business advance as per For purchase of land owned agreement. in seven states for subsidiari the real estate es of the business. appellant 10 10 68.69 742475762 Business advance as per For purchase of land different agreement. in different states entities for the real estate of the business. Sahara group 11 19 3.44 3689886 Business advance as per For purchase of land different agreement. in Tier-11 towns in; entities different states for of the the real estate Sahara business. group
8 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals
12 Imprest 64.84 71323982 Advance for purchase and Verified from record to Staff expenses relating to land. and found correct.
Thus, the CIT(A) deleted disallowance of interest to the extent of Rs.260,66,87,452/- in respect of advances to associate concerns and interest 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 Party Name Party Amount (Rs.) Remarks No SICCL Mumbai Interest not recognised as per AS 9 as there was uncertainty 1 Boney Kapoor Outside 23,37,00,000 regarding recovery of the amount. The amount was for development of land. It was under B. Jeejeebhoy, 2 Vakharia & Associates Outside 25,73,84,527 litigation, but the same has been settled. Now the land approx 106 acres is in the possession of the company. Amount was not recoverable, hence as per AS 9 no interest 3 Jayant Biswasa Outside 15,00,000 was charged. Satyagiri Shipping Co. interest not recognised as per AS 9 as there was uncertainty 4 Outside 10,00,000 Ltd. regarding recovery of the amount. Payment was made for work done, it is wrongly classified as 5 Surya Textile Outside 5,65,900 loan. Amount was advanced for Vasai Project, hence no interest 6 Ashok Shukla Outside 1 45,15,000 was charged, Champion Engg Advance was given tor construction of office as per the 7 Outside 1,70,50,000 Works P Ltd. agreement. The amount was given to solicitor for expenses. It is wrongly 8 Wadia Gandhi & Co. Outside 2,30,51,000 classified as loan, Paldoor Picture Amount given for acquisition of distribution rights of 9 Outside 6,32,00,000 Private Ltd. movies. Investment Division M/s Flex Industries I he amount represents Rescheduled* Loan Amount 10 Ltd. Outside 6,16.30,000 repayable in instalments. No Interest was charged as per AS 9 due to uncertainty. This amount was under dispute, and later on one time settlement was done, after which this amount was reduced 11 Ratan Kadia Outside 2,80,00.000 to Rs. 1.7 crore. After receipt of one instalment the balance as on 31.03.2009 was Rs. 1.1 crore. Thus, no interest was charged. Ms. Sapna Mukharjee Retainer As the loan was in continuous default, due to uncertainty of 12 18,00.000 the amount, no interest was recognised on it as per AS 9. LKO RO 13 DS Thapa Employee 31.56,722 The interest was not charged since 2007-08 as person died
9 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals and amount was written off in 2009-10. The amount was given in 2007-08 and there was uncertainty 14 K.N Moitra 4.00.000 regarding collection of amount hence interest was not Employee recognized. Lckh Raj Kumar, The interest was not charged since 2007-08, and amount 15 67,74,601 Kolkata Outside was written off in 2009-10. The interest was charged up to 2007- OS, and not being 16 Munni Devi, Jaiswal 3,30.000 Outside charged since 2008-09 as there was uncertainty of recovery. There is no such party. However this amount pertains to Om 17 Ambika Vijhar 45,09,262 Outside Era Engg, on which regular interest is charged. The interest was charged up to 2007- 08. and not being 18 Prem Jaisw'al 3,69,398 Outside charged since 2008-09 as there is uncertainty of recovery. The interest was not charged since 2007-08, and amount 19 Ram Sumiran 45,16,398 Outside was written off in 2009-10. Interest has been charged. Principal amount was 20 RK Thukral 2,28,07,838 Outside 2,10,00.000/- and interest was 18,07,838/-. This was a temporary loan given on 09/02/2009 and was 21 S Bhattacharya 36,00,000 Outside received back on 04/04/2009. Arren Consultants This is interest part of loan. Hence interest on interest is not 22 51,75,834 Pvt. Ltd. Outside charged. This presents typographical error as actual amount was Article Loan 23 51,75,834 1,96,715/- which was paid on behalf of Sahara India and Franchaise Outside later it was transferred to Sahara India. Sahara Airlines (Jetlite Interest was not charged as per Share Purchase agreement 24 80,12,58,672 Ltd) Outside dated 18- 01-2006. The interest was charged up to 2007- 08, and not being 25 Siddharth Awasthi 20,25,546 Outside charged since 2008-09 as there was uncertainty of recovery. LKO RO (Subsidiaries) Nalanda Electricity Group Interest was not charged as this was given to group 26 45,00,629 Udyog Company company. LKO HO (Subsidiaries) 27 Kabir Projects Limited Subsidiary 1,22,83,919 Interest not charged as amount was given to subsidiary. TOTAL 157,02,81,080
The CIT(A) held that on loan advanced to serial no. 1, 3, 4, 10, 15, 16, 18, 19 & 25, the assessee should have charged interest and then written off in accounts as bad debts u/s.37(1)(vii) of the Act. In so far as the remaining parties i.e. at serial no. 2, 5 to 9, 11, 12, 17 and 21 to 24, the CIT(A) held that the loans advanced were for business purposes, hence, deleted the disallowance. Accordingly, the CIT(A) sustained the disallowance to the extent of Rs.3,61,45,836/- and deleted the addition to the extent of Rs.9,09,52,899/-.
10 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals 7. The rival sides have furnished their respective written submissions on the issue. The contention of the assesses is that no interest was recognized by the assessee for loans and advances amounting to Rs.157,02,81,080/- since these loans advances had become bad and there was no certainty regarding their realization. In so far as assessee’s claim that the loan had become bad, hence, the same was not reflected can be accepted only if in the first instance the assessee could discharge its onus that the loan was advanced during the normal course of business and was on account of business expediency. If, the loan was unconnected to the business of the assessee there is no question of allowing the same and even if it has become irrecoverable, the same would have made no impact on the treatment now given by the CIT(A) i.e. upholding the disallowance. Since, the assessee has failed to show that the loan was advanced for business expediency, we find no reason to interfere with findings of the CIT(A). The Revenue has assailed the order of CIT(A) in deleting the disallowance of interest expenditure, however, no material has been referred to controvert findings of the CIT(A). We find no infirmity in the findings of the CIT(A) on this issue, hence, the same are confirmed. Accordingly, ground no. 1(a) to 1(c) of the assessee’s appeal and ground no. 6 of Revenue’s appeal are dismissed.
Disallowance of Rate of Interest Charged on Circulating Capital in Partnership Firm:-
The AO disallowed interest 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 11 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals 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/-.
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. There is no dispute to the settle position as envisaged by the Hon’ble Apex Court in various decisions including DCIT vs. Core Health Care Ltd., 298 ITR 194 (SC); CIT vs. Walchand & Company P. Ltd., 65 ITR 381; J.K. Woollen Manufacturers vs. CIT, 72 ITR 612; & SA Builders Ltd. vs CIT 288 ITR 1. However, in the first-place onus is on the assessee to show that the interest- bearing funds were advanced for business purposes and for commercial expediency. Thus, in light of uncontroverted findings of the First Appellate Authority, we see no reason to interfere with findings of the CIT(A), hence, the same are upheld.
In the result, ground no. 2(a) and 2(b) of the assessee’s appeal and ground no. 8 of Revenue’s appeal are dismissed.
12 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals Disallowance of Revenue Expenditure on Work in Progress (WIP)/Interest on WIP and Income on Sale of WIP:-
Both the issue relating to WIP are taken up together. In assessment proceedings the AO made addition of income on sale of WIP amounting to Rs.249,80,07,213/-. Further, the AO made disallowance of expenditure of Rs.175,46,52,624/- towards Finance Charges holding it to be on Revenue account. The assessee had transferred WIP at book value to M/s. SIRECL and M/s. Sahara Prime City Ltd. and no profit was recognized on such transfer. The CIT(A) after analyzing entire matrix of the transaction and the approach of the AO concluded that the AO has invoked the principles of Transfer Pricing to domestic related party transactions. Such approach cannot be adopted in the impugned assessment year i.e. AY 2009-10, The domestic transfer pricing provisions were introduced by the Finance Act 2012 that is w.e.f AY 2013-14 onwards. The CIT(A) held that real income only is taxable. The profit attributable on hypothetical basis cannot be taxed. Thus, the addition of Rs.249,80,07,213/- on account of purported income on sale of working progress was deleted.
Further, on the issue of disallowance of Rs.175,46,52,624/- holding the said expenditure on Revenue account, the CIT(A) observed that since the assessee recognizes expenditure on crystallization basis, ascertained expenditure on accrual basis and unascertained expenditure on presentation of claim or payment basis, the assessee could very well have added the value of ascertained expenses to the WIP and thus upheld the AO’s view. After having gone through the submissions 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 13 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals 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:-
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 same have been claimed in the P&L account of the assessee. Since, the expenditure has been claimed only in the books of the assessee, the same was allowed by the CIT(A). The CIT(A) has categorically observed that disallowance to the extent of Rs 61950992/- is in relation to Sahara TV Channels owned by the assessee, therefore, the said disallowance was deleted by the CIT(A). No material is placed before us, to controvert findings of the CIT(A). Hence, we see no reason to interfere with findings of the CIT(A) on this issue. Accordingly, ground no. 4 of the assessee’s appeal and ground no. 12 of Revenue’s appeal are dismissed.
14 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals Disallowance of Advertisement Expenses: -
The assessee has made annual payment of Rs.92,64,81,417/- to the Board for Control of Cricket in India (BCCI) as sponsorship fee of Indian National Cricket Team. The assessee claimed 90% of the annual payment i.e. Rs.83,38,33,275/- towards advertisement expenses. The AO disallowed Rs.74,11,85,133/- and held that only 10% (i.e. Rs.9,26,48,142/-) of the total amount paid to the BCCI is allowable, hence, disallowed the remaining amount claimed by the assessee. The question for consideration in respect of advertisement claimed by the assessee is: What portion of the amount paid by the assessee to BCCI would be allowable as expenditure incurred wholly and exclusively for the purpose business of the assessee under the provisions of the Income Tax Act? The CIT(A) held that the benefit of sponsorship accrues to all the entities of the Sahara Group. The said expenditure was thus apportioned between the group companies with substantial turnover (of about Rs.100 crore or more). The AO had determined that the turnover of the assessee company constitutes 31.79% of the combined turnover of the nine major group companies. Accordingly, the CIT(A) allowed aforesaid advertisement expenditure to the extent of Rs.29,45,28,442/- i.e. Rs.83,38,33,275/- x 9/10 x 31.79%.
13.1. The contention of the assessee is that the terms agreed between the group concerns could not have been re-written by the Revenue. No disallowance of advertisement expenses could have been made in the hands of the assessee and even if some indirect benefits have occured to the third party. In support of the submission, the reliance is placed on following decision CIT vs. Chandulal
15 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals Keshavlal & Co, 38 ITR 601 (SC); & Pepsico India Holdings 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:-
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 suo-moto agreed for disallowance of Rs.1,08,500/-. In so far as payment of remaining amount of Rs.1,57,683/-, the assessee explained that the payments were made towards hotel stay charges, hiring space for shooting purpose. The aforesaid payments were made either on Sunday or on Saturday post banking hours. Hence, the said payments fall under the exception provided under Rule 6DD. The Revenue has assailed deleting of such disallowance on the ground that the assessee failed to explain as to why
16 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals payments were made after banking hours. We find no merit in the objection raised by the Revenue on this issue. Miniscule payments were made by the employees of the assessee after check out from the hotel. It is well accepted fact that the payments are generally made at the time of checkout from the hotel. 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. 2 of the Revenue’s appeal is dismissed.
Future Period Expenses (Prepaid Expenses) allowed by the CIT(A):-
The AO made disallowance of Rs.47,84,228/- on account of Future Period Expenses claimed by the assessee. The assessee suo-moto agreed for disallowance of Rs.32,66,667/-. From the balance amount of Rs.15,17,561/-, the CIT(A) held that Rs.14,60,000/- pertains to advertisement expenses against bill dated 21.05.2008 raised by Leisure Sports Management for which payments were made in Financial Year 2008-09 relatable to AY 2009-10. Hence, the CIT(A) allowed the same. The balance expenditure of Rs.57,561/- represents petty expenses claimed on crystallization basis. Hence, the CIT(A) allowed the same. We see no infirmity in the findings of the CIT(A) on this issue, hence, the same are upheld and ground no. 3 of the Revenue’s appeal is dismissed.
Prior Period Expenses allowed by the CIT(A):-
During the course of assessment, the AO disallowed Rs.5,36,12,708/- on account Prior Period Expenses. The AO made disallowance of aforesaid expenses as the assessee had only furnished tabular chart of the bills without conclusive evidence. Further the Special Auditor had pointed that these expenses pertain to Prior Period. The CIT(A) deleted the disallowance holding that most of the 17 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals expenses claimed were booked on crystallization as per AS-5. Since, the bills pertaining to these expenditures were verified and approved by the management 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:-
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 the assessee in P&L account. The TDS thereon was deducted by the AOP, hence, no disallowance was warranted. As regards the payment of Rs.28,80,000/- the assessee was required to deducted TDS @10% u/s.194J whereas the assessee deducted tax at source @2% only. It is a well-accepted legal proposition that no disallowance u/s.40(a)(ia) of the Act can be made for short deduction of TDS. The findings of the CIT(A) on this issue deleting disallowance
18 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals are well reasoned, hence, require no interference. Accordingly, ground no. 5 of the Revenue’s appeal is dismissed.
Disallowance u/s.40A(2)(b) of the Act:-
The AO made disallowance of Rs.4,98,38,594/- in respect of two payments i.e. expenditure of Rs.1,67,60,279/- paid as salary to the employees of Sahara One Media Entertainment Ltd. (SOMEL) and payment of Rs.3,30,78,315/- on the ground that the assessee did not provide any details or nature of the expenditure. Further, the TDS was required to be deducted u/s.194J of the Act instead of section 194C of the Act. The CIT(A) deleted the disallowance holding that the factum of expenditure or its relation to the assessee’s business was not disputed by the AO. The AO made disallowance primarily for noncompliance of TDS provisions or deduction of tax at source under wrong section. It is an undisputed fact that expenditure of Rs.1,67,60,279/- was in respect of reimbursement of salary of employees of SOMEL who were working on deputation with the assessee. The said employees continue to remain on the payrolls of SOMEL and the salary payments were made by SOMEL. The assessee reimbursed salary expenditure to SOMEL. As regards expenditure of Rs.3,30,78,315/- the same was towards advertisement and publicity and office maintenance expenses which were also in the nature of reimbursement made to SOMEL. Since, the CIT(A) held that both the expenditure were in the nature of reimbursements, the disallowance cannot be made u/s.40A(2)(b) of the Act. We are in agreement with the findings of the CIT(A) on this issue. The Hon’ble Allahabad High Court in the case of CIT vs. Modi Xerox Ltd. 344 ITR 411 held that reimbursement of actual expenditure to sister concern cannot be disallowed u/s.40A(2) of the Act. Thus, in 19 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals the facts of the case and the aforesaid decision, we find no reason to interfere with findings of the CIT(A) on this issue. Hence, the same are upheld.
In the result, ground no. 7 of Revenue’s appeal is dismissed.
Deleting of disallowance u/s.14A of the Act:-
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:-
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 the nature of administrative expenses incurred for day to day running of the business pertaining to Sahara Shahar Project. The balance amount of Rs.9,55,060/- was in respect of upgradation of Sahara’s Website. Thus, aforesaid expenditure was claimed by the assessee as Revenue in nature. The CIT(A) after examining the 20 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals details of the expenditure observed that the payments were made to M/s. Runway International Express for cleaning, housekeeping and maintenance of the office building, health center, etc. and does not relate to WIP of Sahara Shahar Project. Further, the payments were made to various parties for work related to civil maintenance, horticulture, painting, pest control, etc. in respect of the office building complex of Sahara Shahar. In the same office complex, part of the building is occupied by the office of the assessee and the residence of the Director. The CIT(A) found the claim of the assessee in order and deleted the disallowance of Rs.4,86,35,174/-. As regards the claim of expenditure of Rs.9,55,000/- the same was found to be in connection with upgradation and maintenance of Sahara’s Website. No material has been placed by the Revenue to controvert findings of the CIT(A) on this issue. Hence, we see no reason to interfere with the findings of the CIT(A). Consequently, ground no. 10 of Revenue’s appeal is dismissed.
Expenses un-related to business-Sahara Airlines Unit:-
During the course of assessment, the Assessing Officer disallowed expenditure to the tune of Rs.20,80,95,410/- holding it to be unrelated to assessee’s business. The details of the expenditure claimed and the reasons for disallowance by the AO and the explanation furnished by the assessee is tabulated herein under:-
SI. Nature of Expenditure Amount in Rs. Reason for Explanation given on behalf of appellant disallowance by AO 1 1,97,98,329 On helicopters received Not part of balance Expenditure is not related to ownership of as carved out assets sheet, not related to an asset. Assets and business of Sahara business of assessee. Airlines taken over by appellant company.
21 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals 2 10,06,18,484 On employees of Sahara Not related to Assets and business of Sahara Airlines taken Airlines reemployed business of assessee. over by appellant company. 3 1,39,697 Vehicle maintenance Not related to Claimed to be employee of the appellant. business of assessee. Query not specifically put to the appellant. expenses of car provided to Ms. Diana Hayden 4 1,49,07,486 Court fees along with Not part of balance Assets and business of Sahara Airlines taken expenses and sheet, not related to over by appellant company. professional fees for business of assessee. recovery of loan as part of carved out assets of Sahara Airlines 5 2,93,96,109 Capital Water tax expenses of Routine maintenance expenses of the expenditure Sahara Shahar, Lucknow unsold project, presently housing offices of Sahara and residence of Director. 6 3,83,74,158 Capital Electricity expenses of Routine maintenance expenses of the expenditure Sahara Shahar, Lucknow unsold project, presently housing offices of Sahara and residence of Director. 7 Insurance premium for 5,09,834 No Sponsorship of Indian cricket team allowed. insurance coverage of commercial This sponsorship has to be allowed on same the players and officials benefit. analogy. of Senior & Junior Indian Hockey Team. 8 Professional fee paid to 41,50,334 No details / Ms. Maria Agius, Sanjay document To attract NRI investors j / buyers of Sahara Kulkami and Art World furnished. projects. Query' was not ' specifically put to Media. the appellant. 9 Foreign travel expenses 1,24,654 No details / To attract NRI investors / buyers of Sahara of Ms. Maria Agnis and document projects. Query was not specifically put to Ms. Diana Hayden. furnished. the appellant. 10 Misc expenses on gift, 76,325 No details / For business purposes. Query was not boarding and lodging. document specifically put to the appellant. furnished.
The CIT(A) while dealing with this issue held that the expenditure at serial no. 1, 2 and 4 of the table are undisputedly remaining assets and business of Sahara Airlines which were agreed to be taken over by the assessee. It is undisputed fact that the expenditure was actually incurred. Thus, the CIT(A)
22 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals allowed the aforesaid expenditure. In respect of expenditure at serial no. 3, 8, 9 and 10, the CIT(A) held that the sufficient opportunity was not allowed to the assessee to explain the said expenditure with evidence. The expenditure at serial no. 5 and 6 of the above table, is in respect of Sahara Shahar Complex located in Lucknow which also has assessee’s office and the residences of Managing Director for which rent is received by the assessee. The expenditure at serial no. 7 of the table is in respect of sponsorship of the Indian Hockey Team. The said expenditure is akin to advertisement expenditure claimed for payments made to BCCI for sponsorship of Indian Cricket Team. The Revenue has not been able to furnish any material to controvert findings of the CIT(A) on this issue. Hence, we see no reason to interfere with the reasoned finding of the CIT(A) on this issue. Hence, ground no. 13 of the Revenue’s appeal is dismissed.
Disallowance of provisions of employee related benefits:-
The said disallowance was made by the AO, in respect of provision of gratuity Rs.14,58,674/-, provision of leave encashment Rs.60,60,013/-. The sole reason for disallowance made by the AO is Actuary Valuation Report which was the basis for creation of such provisions which was received after finalization and signing of financial statement. The contention 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 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals 23.1. Per contra, the ld. DR reiterated findings of the AO and prayed for upholding the same.
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.
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 2010-11
The gist of grounds raised by the assessee and the Revenue in their respective appeals is tabulated herein under:-
Sr No Issue Ground no. in appeal Ground no. in appeal of the assessee of the Department 1 Disallowance of Advertisement 2(a) & 2(b) 3 Expenses 2 Disallowance u/s.14A of the Act 1 14 3 Disallowance of interest expenses by -- 2 & 10 the Assessing Officer (AO) 4 Disallowance of rate of interest charged -- 11 on circulating capital in partnership firm 5 Disallowance of Revenue expenditure -- 04 on Work In Progress (WIP)/interest on WIP 6 Disallowance u/s.40A(3) of the Act – 8 Advance/Imprest given to employees 7 Disallowance u/s.40A(2)(b) of the Act -- 9
24 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals
8 Expenses held to be capital in nature- -- 12 Sahara Shahar Project 9 Expenses un-related to business-Sahara -- 6 & 7 Airlines Unit 10 Deleting of Disallowance on account of -- 5 sundry balances written off 11 Deleting of disallowance on account of -- 13 proportionate Distribution of expenses- Carriage Fees Disallowance of Advertisement Expenses: -
Both the sides unanimously stated that the nature of Advertisement Expenses claimed in the impugned assessment year is identical to AY 2009-10. The ground no. 2 of assessee’s appeal is identical to the ground of appeal no. 5 in AY 2009-10. Likewise, ground no. 3 in Revenue’s appeal is identical to ground no. 14 in Revenue’s appeal for AY 2009-10.
27.1. 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, 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 in cross appeals. For parity of reasons, the ground no. 2(a) and 2(b) of the assessee’s appeal and ground no. 3 of the Revenue’s appeal are dismissed.
Disallowance u/s.14A of the Act:-
The ld. Counsel for the assessee submitted that the assessee is not pressing ground of appeal no. 2 for the smallness of the amount involved in disallowance u/s.14A of the Act. In so far as Revenue’s ground of appeal, the ld. Counsel stated that during AY 2010-11, the assessee has earned exempt income of Rs.2,53,830/-
25 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals 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):-
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. This issue was considered by the Tribunal in Revenue’s appeal for AY 2009-10 (para 5 to 7). The findings given in AY 2009-10 would mutatis mutandis apply to the issue in present appeal. For parity of reasons, ground no. 2 & 10 of the Revenue’s appeal are dismissed.
Disallowance of Rate of Interest Charged on Circulating Capital in Partnership Firm:-
The AO made addition of Rs.76,81,56,385/-. The CIT(A) decided the issue in AY 2010-11 in identical manner as were decided in AY 2009-10. The Revenue
26 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals carried the issue in appeal before the Tribunal for AY 2009-10 in ground no. 8 of appeal. Since, the facts are identical, the findings given by us while adjudicating ground no. 8 of appeal for AY 2009-10 would mutatis mutandis apply to the present appeal. Hence, ground no. 11 of the Revenue’s appeal is dismissed, for parity of reasons.
Disallowance of Revenue Expenditure on Work In Progress (WIP)/interest on WIP:-
The AO disallowed interest expenditure of Rs.144,38,68,360/- qua WIP of Sahara Shahar Project and held it to be capital in nature. The issue is identical to ground no. 3(a) and 3(b) of the assessee’s appeal in AY 2009-10. It has been further contended that similar issue was decided in assessee’s favour by the CIT(A) for AY 2011-12 vide order dated 29.03.2017. No appeal was filed by the Revenue against the findings of the CIT(A) for AY 2011-12. This fact is not rebutted by the ld. DR. The CIT(A) deleted the disallowance made by AO following its own order for AY 2011-12. The Revenue failed to distinguish facts in the impugned assessment year. We see no reason to interfere in the findings of CIT(A) on this issue, hence, ground no. 4 of the Revenue’s appeal is dismissed.
Disallowance u/s.40A(3) of the Act – Advance/Imprest given to employees:-
The AO made disallowance of Rs.1,02,600/- u/s.40A(3) of the Act. The assessee had given cash imprest to the employees (reporters) of Sahara India TV Network for official travel expenses. At the time of payment of advance, no expenses were claimed in P&L Account. Subsequently, these amounts were adjusted on submissions of bills and vouchers by the employees. The CIT(A) after examining the facts deleted the disallowance made by the AO u/s.40A(3) of the 27 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals Act in respect of cash imprest. We find no reason to interfere with findings of the CIT(A), hence, ground no. 8 of the Revenue’s appeal is dismissed.
Disallowance u/s.40A(2)(b) of the Act:-
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:-
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:-
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.34,62,958/- Professional Charges paid to Ms. Maria Agius under Sahara Care International Business Division. The assessee has pointed that similar charges were disallowed by the AO in AY 2011-12. The CIT(A) deleted the disallowance. No further appeal was filed by the Revenue against the order of CIT(A). Hence, the issue attainted finality. In the impugned assessment year the 28 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals CIT(A) has decided the issue following his own order for AY 2011-12. Further, 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. 13 in AY 2009-10 would mutatis mutandis apply to the instant grounds. Hence for aforesaid reasons ground no. 6 & 7of the Revenue’s appeal are dismissed.
Deleting of Disallowance on account of Sundry Balances Written of:-
The AO made disallowance of Rs.18,60,838/- relating to interest charge on loan given to Shri R K Thukral, Rs.1,48,82,242/- loans given to Shri D.S Thapa, Shri AR Tripathi, Shri Lekhraj Kumar, Shri Ram Sumiran & Shri Prem Jaiswal written off and Rs.2,89,899/- relating to lease rent of vehicle. The only reason given by the AO for disallowing aforesaid amount is that the assessee failed to substantiate its claim by documentary evidences that the amounts written off had become unrecoverable. It is no more res integra that after amendment to section 36(1)(vii) of the Act, the assessee need not substantiate that the amounts are irrecoverable. The Hon’ble Apex Court in the case of TRF Ltd. vs CIT, 323 ITR 397 has held that it is sufficient that the assessee has written off the amounts in its books. Thus, in the light of settled legal position, we find no reason to interfere with the findings of the CIT(A) in deleting the disallowance. Hence, ground no. 5 of the Revenue’s appeal is dismissed.
Deleting of Disallowance on Account of Proportionate Distribution Expenses- Carriage Fees:-
The AO made disallowance of Rs.28,96,40,128/- u/s.40(a)(ia) of the Act in respect of distribution expenses. The AO held that the assessee ought to have 29 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals deducted tax at source at the rate of 10% u/s.194J of the Act, instead the assessee has deducted tax at the rate of 2% u/s.194C of the Act. Thus, the AO made proportionate disallowance of the expenses. It is no more res integra that no disallowance or proportionate disallowance 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.
In the result, appeal of the assessee and the revenue for AY 2010-11 are dismissed.
(AY 2011-12) Assessee’s Appeal
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:-
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 Industries Ltd., 319 ITR 204 (P&H)]. The assessee has already made suo moto disallowance
30 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals of Rs.9,14,539/- no further disallowance u/s.14A is required to be made. In First Appellate proceedings, the CIT(A) has restricted the disallowance to Rs.38,143/- under Rule 8D(2)(iii). In light of the settled legal position the disallowance confirmed by the CIT(A) is directed to be deleted. In the result, the assessee succeeds on ground no. 1 of the appeal.
Consultancy charges paid to Shiva Industries and Holdings Ltd. held as capital in nature:-
The assessee had paid Rs.46,57,40,905/- consultancy charges to Shiv Industries and Holdings Ltd. (SIHL) for procurement of land, project management and construction management in respect of Lonavala project. The contention of the assessee is that the SIHL failed to carry out any work pursuant to the consultancy agreement dated 01.10.2009. However, the assessee had already released the payment for the work to be done by SIHL. Since, no enduring benefit was derived by the assessee from the said payment, the expenditure cannot be said to be capital in nature. The assessee had made an alternate prayer that since no work was carried out by the SIHL. The said expenditure be allowed as business loss. In support of this argument reliance is placed on the decision in the case of ACIT vs. OSN Infrastructure and Projects P. Ltd. 346/Del/2015 decided on 20.04.2018. In First Appellate Proceedings, the CIT(A) held that since no services were rendered by SIHL there was no justification for payment of consultancy charges. The addition made by AO was confirmed and the issue was restored to the AO for the limited purpose to determine as to whether the expenditure is allowable as capital or revenue after necessary verification.
31 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals 41.1. We have examined the issue, the short prayer of the assessee before us is that the aforesaid expenditure be allowed as Revenue or business loss. Since this issue has already been remanded back to the AO to examine the nature of expenditure, the assessee is at liberty to raise all pleas in support of its claim before the AO. The AO shall decide the issue after affording reasonable opportunity of making submissions to the assessee, in accordance with law.
41.3. In the result, ground no. 2 of appeal is allowed for statistical purpose.
Advertisement Expenses: -
Both sides unanimously stated that the nature 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.
(Assessee) AY 2012-13 (Revenue) AY 2012-13
The gist of grounds raised by the assessee and the Revenue in their respective appeals for AY 2012-13 is tabulated as under:
32 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals
Sr No Issue Ground no. in appeal Ground no. in appeal of the assessee of the Department 1 Disallowance of Advertisement 2(a) & 2(b) 4 Expenses 2 Disallowance u/s.14A of the Act 1 16 3 Disallowance of interest expenses by -- 2, 3 & 13 the Assessing Officer (AO) 4 Disallowance of rate of interest charged -- 14 on circulating capital in partnership firm 5 Disallowance of Revenue expenditure -- 5 on Work in Progress (WIP)/interest on WIP 6 Disallowance u/s.40A(3) of the Act – 11 Advance/Imprest given to employees 7 Expenses held to be capital in nature- -- 15 Sahara Shahar Project 8 Expenses un-related to business-Sahara -- 9 & 10 Airlines Unit 9 Deleting of Disallowance on account of -- 8 sundry balances return of 10 Prior Period Expenses -- 12 11 Expenses held to be Capital in Nature- -- 6 Spare parts for repair of cameras, equipments etc. 12 Disallowance on account of recoupment -- 7 of loss of Employee Welfare Trust
Both sides are unanimous in stating that the grounds of appeal at serial no. 1, 3 to 10 and the facts germane to the said grounds are identical to AY 2009-10 and 2010-11. Hence, the submissions made for AY 2009-10 and 2010-11 would equally hold good for the said grounds in AY 2012-13.
In light of the above submissions made by rival sides, the findings given by us in AY 2009-10 and AY 2010-11 while adjudicating the issues raised in the grounds of appeal by respective sides mentioned against serial no. 1, 3 to 10 of the above table would mutatis mutandis apply to the instant appeal. Accordingly, the said grounds are dismissed for parity of reasons.
33 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals Disallowance u/s.14A of the Act
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 14A of the Act.
46.1. We have perused the assessment order. The assessee has made suo moto disallowance of Rs.8,87,483/- u/s.14A of the Act. The AO in para 15 of the order has dealt with the issue of disallowance u/s.14A of the Act in a cryptic manner. A perusal of the same reveals that the AO has reproduced the extract of the questionnaire which refers to disallowance u/s.14A. Thereafter, the AO has reproduced reply of the assessee. While concluding the 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.
34 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals Expenses held to be Capital in Nature- Spare parts for repair of cameras, equipments etc.
The assessee has claimed expenditure of Rs.8,93,646/- on following items:-
(i) consumable item for minor repair of existing assets Rs.2,97,818/-; (ii) repairs of camera Rs.2,96,318/-;& (iii) material purchased for repair of camera Rs.2,99,329/-. The AO held aforesaid expenditure as Revenue in nature on premise that the said expenditure would enhance life of asset. The CIT(A) deleted the addition holding that the expenditure incurred does not bring into existence any new asset, the expenditure was incurred as result of damage to the camera in normal course, hence, the expenditure towards repairs is in nature of Revenue. We find no infirmity in the view taken by the CIT(A), we uphold the same. In the result, ground no. 6 of the Revenue’s appeal is dismissed.
Disallowance on account of recoupment of loss of Employee Welfare Trust:-
The assessee has claimed expenditure of Rs.7,93,965/- under the head employer contribution towards loss of funds. The assessee along with its group companies had created a trust viz. Sahra India Employees Contributary PF trust to manage the provident fund of Sahra Group of Companies. As per the Provident Fund Rules, the assessee compensated the Trust for the losses. The AO disallowed the said payment holding that the payment was not statutory liability of the assessee. The CIT(A) decided in favour of the assessee following the order of CIT(A) for AY 2011-12. It is contended that no appeal was filed by the Revenue before the Tribunal against the said issue, hence, the findings of the CIT(A)
35 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals attained finality. No material is placed on record by the Revenue to contend that the findings of the CIT(A) on the similar issue in AY 2011-12 were on different set of facts or the same was assailed before the higher appellate authority. Following the rule of consistency, we see no reason to interfere with the findings of the CIT(A) on this issue in the impugned assessment year. Hence, ground no. 7 of the Revenue’s appeal is dismissed.
In the result, appeal of the assessee is partly allowed and appeal of the Revenue is dismissed.
(Assessee) AY 2013-14 (Revenue) AY 2013-14
The gist of grounds raised by the assessee and the Revenue in their respective appeals for AY 2013-14 is tabulated as under:-
Sr No Issue Ground no. in appeal Ground no. in appeal of the assessee of the Department 1 Disallowance of Advertisement 2(a) & 2(b) 4 Expenses 2 Disallowance u/s.14A of the Act 1 17 3 Disallowance of interest expenses by -- 2, 3 & 13 the Assessing Officer (AO) 4 Disallowance of rate of interest charged -- 14 on circulating capital in partnership firm 5 Disallowance of Revenue expenditure -- 5 on Work in Progress (WIP)/interest on WIP 6 Disallowance u/s.40A(3) of the Act – 11 Advance/Imprest given to employees 7 Expenses held to be capital in nature- -- 15 Sahara Sahar Project 8 Expenses un-related to business-Sahara -- 9 & 10 Airlines Unit 9 Deleting of Disallowance on account of -- 8 sundry balances return of 36 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals
10 Prior Period Expenses -- 12 11 Expenses held to be Capital in Nature- -- 6 Spare parts for repair of cameras, equipment’s etc. 12 Disallowance on account of recoupment -- 7 of loss of Employee Welfare Trust 13 Addition on account of deemed -- 16 dividend u/s.2(22)(e) of the Act
Both sides are unanimous in stating that the grounds of appeal at serial no. 1, 3 to 12 and the facts germane to the said grounds are identical to AY 2009-10, 2010-11 & 2012-13. Hence, the submissions made for AY 2009-10, 2010-11 & 2012-13 would equally hold good for the said grounds in AY 2013-14.
In light of the above submissions made by rival sides, the findings given by us in AY 2009-10, 2010-11 and 2012-13 while adjudicating the issues raised in the grounds of appeal by respective sides mentioned against serial no. 1, 3 to 12 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:-
In ground of appeal
no. 1, the assessee has assailed disallowance made by AO u/s.14A of the Act. During the period relevant to assessment year under appeal, the assessee has earned exempt income of Rs.7,29,040/-. The assessee has made suo moto disallowance of Rs.10,09,841/- u/s.14A of the Act. It is a well settled legal position that disallowance u/s.14A cannot exceed the exempt income earned during the relevant period. Since, the assessee has already made suo moto disallowance of more than the exempt income earned during AY 2013- 14, hence, no further disallowance is warranted. The assessee succeeds on 37. Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals ground no. 1 of appeal. Consequently, the corresponding ground raised by the Revenue in its appeal in ground no. 17 is dismissed.
Deemed Dividend u/s.2(22)(e) of the Act:-
The AO made addition of Rs.70,61,83,347/- u/s.2(22)(e) of the Act in respect of the amounts received by the assessee from Sahra India Financial Corporation Ltd. (SIFCL). The AO held that the amount received by the assessee from SIFCL was chargeable to tax as Deemed Dividend u/s.2(22)(e) of the Act as Mr. Subrata Roy held majority share holding in both the companies. The CIT(A) deleted the addition holding that the provisions of section 2(22)(e) of the Act are not attracted. The CIT(A) observed that SIFCL was holding only 0.002% shareholding in the assessee company, thus, the condition of holding not less than 10% of the voting power is not satisfied. Further, it is immaterial that there was another share holder holding more than 10% in each company.
54.1. The submissions of the assessee on 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? The High Court held that the provisions
38 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals of the said section were not applicable to such concern (not being the registered shareholder of the payer company which had received the payment.” 54.2. The provisions of section 2(22)(e) of the Act are triggered if: i. Any payment is made by a closely held company (in which the public are substantially interested) by way of advance or loan to a shareholder; ii. The recipient of the payment is a shareholder and a beneficial owner holding not less than 10% of the voting power; & iii. The company making payment has accumulated profits, the payment made is considered as deemed dividend only to the extent of the accumulated profits of the company at the time of payment.
In the instant case, the AO has held the payments received by the assesse from SFICL as deemed dividend u/s. 2(22)(e) of the Act as there is a common shareholder i.e. Shri Subrata Roy holding 75.65% of equity shares in the assessee company and 58.19% in SIFCL. Whereas, the shareholding of the assessee in SIFCL is only to the extent of 0.002% of the total shares. Thus, we find that the necessary condition for invoking provision of section 2(22)(e) of the Act are not satisfied. The payments advanced cannot be treated as deemed dividend merely for the reason that there is a common shareholder of the two companies holding substantial shareholding of both the companies. Thus, in light of the above, we find no infirmity in findings of the CIT(A) in deleting addition made u/s. 2(22)(e) of the Act, hence, ground no. 16 in Revenue’s appeal is dismissed being devoid of any merit.
39 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals
In the result, appeal of the assessee is partly allowed and appeal of the Revenue is dismissed.
(Assessee) AY 2014-15 (Revenue) AY 2014-15
The gist of grounds raised by the assessee and the Revenue in their respective appeal for AY 2014-15 is tabulated as under:-
Sr No Issue Ground no. in appeal Ground no. in appeal of the assessee of the Department 1 Disallowance of Advertisement 2(a) & 2(b) 4 Expenses 2 Disallowance u/s.14A of the Act 1 15 3 Disallowance of interest expenses by -- 2, 3 & 12 the Assessing Officer (AO) 4 Disallowance of rate of interest charged -- 13 on circulating capital in partnership firm 5 Disallowance of Revenue expenditure -- 5 on Work in Progress (WIP)/interest on WIP 6 Disallowance u/s.40A(3) of the Act – 10 Advance/Imprest given to employees 7 Expenses held to be capital in nature- -- 14 Sahara Shahar Project 8 Expenses un-related to business-Sahara -- 8 & 9 Airlines Unit 9 Deleting of Disallowance on account of -- 7 sundry balances return of 10 Prior Period Expenses -- 11 11 Expenses held to be Capital in Nature- -- 6 Spare parts for repair of cameras, equipment’s etc.
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,
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(A.Y.2009-10) & Other Appeals 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.
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 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:-
In ground of appeal no. 1, the assessee has assailed disallowance made by AO u/s.14A of the Act. During the period relevant to assessment year under appeal, the assessee has earned exempt income of Rs.7,16,460/-. The assessee has made suo moto disallowance of Rs.11,62,964/- u/s.14A of the Act. It is a well settled legal position that disallowance u/s.14A cannot exceed the exempt income earned during the relevant period. Since, the assessee has already made suo moto disallowance of more than the exempt income earned during AY 2014- 15, hence, no further disallowance is warranted. The assessee succeeds on ground no. 1 of appeal. Consequently, the corresponding ground raised by the Revenue in its appeal in ground no. 15 is dismissed.
59.1. In the result, appeal of the assessee is partly allowed and appeal of the Revenue is dismissed.
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(A.Y.2009-10) & Other Appeals (Assessee) AY 2015-16 (Revenue) AY 2015-16
The gist of grounds raised by the assessee and the Revenue in their respective appeal for AY 2015-16 is tabulated as under:-
Sr No Issue Ground no. in appeal Ground no. in appeal of the assessee of the Department 1 Disallowance of Advertisement 2(a) & 2(b) 4 Expenses 2 Disallowance u/s.14A of the Act 1 14 3 Disallowance of interest expenses by -- 2, 3 & 11 the Assessing Officer (AO) 4 Disallowance of rate of interest charged -- 12 on circulating capital in partnership firm 5 Disallowance of Revenue expenditure -- 5 on Work in Progress (WIP)/interest on WIP 6 Disallowance u/s.40A(3) of the Act – 5 -- Advance/Imprest given to employees 7 Expenses held to be capital in nature- -- 13 Sahara Shahar Project 8 Expenses un-related to business-Sahara -- 8 & 9 Airlines Unit 9 Deleting of Disallowance on account of -- 7 sundry balances return of 10 Prior Period Expenses -- 10 11 Expenses held to be Capital in Nature- -- 6 Spare parts for repair of cameras, equipment’s etc. 12 Disallowance on account of book debts 3(a) & 3(b) and 4 -- written of
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.
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(A.Y.2009-10) & Other Appeals 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:-
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 14A of the Act.
63.1. We have perused the assessment order. The assessee has made suo moto disallowance of Rs.10,15,083/- u/s.14A of the Act. The AO in para 16 of the order has dealt with the issue of disallowance u/s.14A of the Act in a cryptic manner. A perusal of the findings of AO on this issue would show that they are identical to the findings given in assessment order for assessment year 2012-13. Thus, findings given by us for AY 2012-13 on the issue would mutatis mutandis apply to the same issue in instant appeal as well. 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. 14 is consequently dismissed.
Disallowance on Account of Book Debts Written of:-
The assessee during the period relevant to assessment year under appeal has written of Rs.93,70,94,478/- as bad debts. The AO disallowed entire claim of 43 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals the assessee. In First Appellate proceedings, the CIT(A) enhanced the addition to Rs.15,11,45,537/- by holding that proper details were not furnished by the assessee. The contention of the assessee is that an amount of Rs.81,51,73,028/- written of represents amounts given to the nominees of OFCD Investors as death help. Whenever, any investor dies the company was supposed to pay a certain amount as ‘death help’ for a particular period of time. Subsequently, the said amount was recoverable. However, the assessee was unable to recover the amount advanced as death help to the nominees of deceased investors. Likewise, loans and advances which became subsequently irrecoverable were written of. The contention of the assessee is that complete details of loans and advances were furnished by the assessee before the CIT(A). However, without giving any cogent reason, the CIT(A) has rejected the same and has upheld the addition made by AO. The details given by the assessee with regard to loans and advances written of is as under:-
• Loan to Sahra India Corporation Investments Ltd. Rs.1,03,46,584/- including interest thereon; • Loans/advances given to various parties that become irrecoverable Rs.9,41,79,336/-; • Addition made by CIT(A) of credit entries Rs.5,69,66,204/-; • Amount written of by SITV, Noida on full & final settlement with Crayons Advertising Ltd. Rs.10,60,419/-; & • Loans advances given by Mumbai Unit to various parties Rs.1,63,33,111/-.
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(A.Y.2009-10) & Other Appeals 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 cannot be allowed. No material is placed before the Tribunal to controvert the findings of the CIT(A). The First Appellate Authority has given a reasoned and detailed findings on the issue. Hence, we see no reason to interfere with the same. In the result ground no. 3(a) and 3(b) & 4 of the assessee’s appeal are dismissed.
Disallowance u/s.40A(3) of the Act – Advance/Imprest given to employees:-
The AO made disallowance of Rs.2,60,000/- u/s.40A(3) of the Act in respect of imprest money given to Shri Subhash Sharma (Rs.1,00,000/-) and Shri Anurag Mishra (Rs.1,60,000/-). Since, the assessee failed to furnish supporting bills/vouchers the amount was disallowed. The contention of the assessee is that 45 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals since these amounts were disbursed as advances they were not claimed as expenditure by the assessee in P&L account. The ld. Counsel submits that since the aforesaid amounts were not claimed as expenditure no disallowance of the said amounts could have been made.
65.1. We find that in preceding assessment years, the AO made similar disallowance u/s.40A(3) of the Act. The CIT(A) consistently allowed the assessee’s claim on similar set of facts. Nevertheless, in the instant appeal the stand of the assessee is that the amounts advanced as imprest were never claimed as expenditure by the assessee in P&L account. If, the amounts have not been claimed as expenditure by the assessee in the P&L account, no disallowance could have been made u/s.40A(3) of the Act of the such amounts. The issue is restored to AO for the limited purpose of verification, in light aforesaid observation. In the result, ground no. 5 of the assessee’s appeal is allowed for statistical purpose.
In the result, appeal of the assessee for AY 2015-16 is partly allowed and appeal of the Revenue is dismissed.
(AY 2016-17) (Revenue)
CO No. 149/Del/2019 (AY 2016-17) (Assessee)
The gist of grounds raised by the Revenue in its appeal for AY 2016-17 and the assessee in Cross Objection is tabulated as under:-
Sr No Issue Ground no. in appeal Ground no. in appeal of the assessee of the Department 1 Disallowance u/s.14A of the Act 6 2 Disallowance of interest expenses by -- 2, 3 & 4 the Assessing Officer (AO)
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(A.Y.2009-10) & Other Appeals 3 Disallowance of rate of interest charged -- 5 on circulating capital in partnership firm 4 Addition on Account of Notional Income 1 & 2 --
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.
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:-
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 entire loan amount was recovered. Only accrued interest receivable by the assessee was outstanding. As per the agreed terms between assessee and Royal Refinery no interest was chargeable on outstanding interest. As regards loans to Neha International Ltd., the loan and the interest thereon was outstanding for quite some time. There was remote possibility of recovery, hence, no further interest was charged by the assessee on the outstanding amount. The 47 Sahara India Commercial Corporation Ltd. (A.Y.2009-10) & Other Appeals assessee placed reliance on the decision in the case of CIT vs. Goyal MG Gases P. Ltd., 303 ITR 159 (Del.) to contend that where the realization of principle amount was itself in jeopardy, no real accrual of interest income could have taken place in the hands of the assessee. Further, to buttress the submissions that only real income and not hypothetical income can be taxed in the hands of the assessee reliance was placed on following decisions:
(i) Godhra Electricity Company Ltd. vs. CIT, 225 ITR 746 (SC); & (ii) CIT vs. Excel Industries Ltd., 385 ITR 295 (SC). 70.1. A perusal of the impugned order shows that the AO and the CIT(A) have made addition of Rs.94,83,439/- by imputing interest @12% per annum in respect of outstanding loans from Neha International Ltd. and M/s. Royal Refinery. The CIT(A) in para 8.10 of the impugned order has recorded finding of fact that the Terms & Conditions for extending advances were not furnished by the assessee before the AO and the CIT(A), hence, it was assumed that the Terms and Conditions provide for charging interest @12% per annum on these loan amounts. We are of considered view that without examining the contents of agreement, the addition cannot be made merely on presumptions and assumptions. Neither, the AO nor the CIT(A) has examined that the loan advanced to M/s. Royal Refinery have been received back in full and it is only the interest amount which is outstanding. Likewise, the authorities below have failed to examine that the loans advanced to Neha International Ltd. were irrecoverable. The Hon’ble Supreme Court of India in the case of Godhra Electricity Company Ltd. vs. CIT (supra) has held that real accrual of income to the assessee in respect of enhanced charges was to be considered by taking the probability or improbability of realization in realistic manner. If it is not possible to hold that 48 Sahara India Commercial Corporation Ltd.
(A.Y.2009-10) & Other Appeals there was real accrual of income to the assessee in respect of enhanced charges, no tax could have been levied by the AO on such income which had really not accrued to the assessee. Thus, in facts of the case and the aforesaid decision of the Hon’ble Supreme Court of India, we find merit in the submissions of the assessee accordingly, ground no. 1 & 2 of the Cross Objections are allowed. In the result, appeal of the Revenue is dismissed and CO of the assessee is allowed.
To sum up,
AY Assessee’s Appeal/CO Revenue’s Appeal 2009-10 Dismissed Dismissed 2010-11 Dismissed Dismissed 2011-12 Partly Allowed - 2012-13 Partly Allowed Dismissed 2013-14 Partly Allowed Dismissed 2014-15 Partly Allowed Dismissed 2015-16 Partly Allowed Dismissed 2016-17 Allowed Dismissed
Order pronounced in the open court on Tuesday the 23rd day of December, 2025.