ACIT, CENTRAL CIRCLE- 1, NEW DELHI vs. SAHARA INDIA FINANCIAL CORPORATION LTD., LUCKNOW

It was further explained that the amount of Rs. 1,24,12,036/- represented provisions made as per Prudential Norms Direction of RBI in earlier years which has been written back as the provision made on long term investment was as per the RBI guidelines and was never claimed as a deduction from the taxable income. Therefore, write back has not been offered to tax.

The ld. CIT(A), after verifying the facts, came to the conclusion that there is no claim of deduction u/s 35AC of the Act. Therefore, there is no question of any disallowance or addition.

Before us, the ld. DR could not bring any factual error or infirmity in the findings of the ld. CIT(A).

On appreciation of facts brought on record, we decline to interfere. Ground No. 2 is dismissed.

Ground No. 3 relates to the deletion of addition of Rs. 1,43,63,802/- being interest on loans and advances.

During the course of scrutiny assessment proceedings and referring to the following chart:

A show cause notice was issued to the assessee asking it to explain as to why interest @ 12% may not be imputed on the average of opening and closing loans outstanding against the aforementioned related parties.

The assessee filed detailed reply which did not find any favour with the Assessing Officer who proceeded by imputing interest @ 12% and made addition of Rs. 1,43,63,802/-.

When the matter was agitated before the ld. CIT(A), it was explained that the transactions mentioned in the chart are self explanatory and are business transactions entered into in normal course of business and are certainly not loans and advances.

Before us, the ld. counsel for the assessee vehemently stated that the ld. DR could not bring any evidence to show that the impugned amounts are loans and advances given to the sister concern.

On the contrary, on proper appreciation of facts, we find that the outstanding balances are outcome of business transactions and certainly not loans and advances and further, the Assessing Officer has erred in imputing an imaginary income which neither accrued nor arose to the assessee. We, therefore, decline to interfere. Ground No. 3 stands dismissed.

Ground No. 4 relates to the deletion of addition of Rs. 6,13,17,433/- on account of addition/disallowance u/s 14A of the Act.

While scrutinizing the return of income, the Assessing Officer noticed that there was huge investment under the head “Non-current investment”. Invoking the provisions of section 14A of the Act r.w.r.

Before the ld. CIT(A), it was explained that the assessee was carrying on business of residuary non-banking company registered with RBI and in pursuance of RBI guidelines, ‘Directed Investments” are required to be made which are “business investments’. Whatever income is accruing from these investments, the same is being offered under the head “Profits and gains of business or profession”, meaning thereby, that there is no exempt income claimed by the assessee in its return of income.

Before us, the ld. DR vehemently supported the findings of the Assessing Officer and placed strong reliance on the CBDT Circular and referred to the amendment brought in the Act by Finance Act, 2022.

Per contra, the ld. counsel for the assessee reiterated that it has not claimed any exempt income.

We have carefully considered the orders of the authorities below.

In so far as applicability of amendment brought in the Statute by the Finance Act, 2022 is concerned, the Hon'ble High Court of Delhi in the case of Era Infrastructure [India] Ltd 448 ITR 674 has held that amendment by the Finance Act, 2022 to section 14A of the Act will take effect from 01.04.2022 and cannot be presumed to have retrospective effects.

Respectfully following the decision of the Hon'ble Jurisdictional High Court [supra], Ground No. 4 is dismissed.

Ground No. 5 relates to the deletion of addition of Rs. 2,72,76,707/- on account of interest income from Sahara India

The basis for making this addition is that Sahara India Commercial Corporation Ltd. has shown to have paid interest of Rs. 17,36,68,046/- whereas the assessee has shown interest of Rs. 14,63,91,339/-. It was explained before the Assessing Officer that Sahara India Commercial Corporation Ltd. has shown an amount of Rs. 2.73 crores as prior period expenses and rest Rs. 14.63 crores pertains to the relevant F.Y which has been shown by the assessee as income.

This plea was rejected by the Assessing Officer who proceeded to make the impugned addition.

Before the ld. CIT(A), the assessee reiterated its claim.

After verifying the facts from the ledger account and after being satisfied with the entries/narrations, the ld. CIT(A) deleted the impugned addition.

Before us, the ld. DR could not bring any factual error in the findings of the ld. CIT(A).

After verifying the facts, we are of the considered view that the Assessing Officer has not properly appreciated the facts in true perspective and on proper appreciation of facts, we decline to interfere. Ground No. 5 is also dismissed.

In the result, the appeal of the Revenue in is dismissed.