Adarsh Developers Vs DCIT (ITAT Bangalore)
Bengaluru, India – The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has delivered a significant ruling affirming the right of Adarsh Developers, a prominent property development firm, to claim a substantial write-off of ₹468.80 crores as a business loss. The decision, pronounced on April 29, 2025, dismissed an appeal by the Deputy Commissioner of Income Tax (DCIT), upholding the initial allowance granted by the Commissioner of Income Tax (Appeals) [CIT(A)]. The case centered on the tax treatment of advances extended by Adarsh Developers to its wholly-owned subsidiary, Adarsh Realty and Hospitality Private Limited, which were subsequently deemed irrecoverable.
Adarsh Developers operates primarily in property development, encompassing construction, designing, and investment in special purpose vehicles (SPVs). The firm’s business scope includes creating diverse infrastructure, such as hotels, restaurants, technology parks, commercial offices, and residential properties. As part of its strategic expansion, Adarsh Developers invested in and extended significant loans and advances to SPVs, driven by commercial expediency to further its business objectives.
Background of the Dispute
One such SPV was Adarsh Realty and Hospitality Private Limited (ARHPL), established on August 26, 1996. Adarsh Developers holds a commanding 99.826% equity share in ARHPL as of March 31, 2020. This subsidiary initially had a share capital of ₹15 crores and was supported by loans from Adarsh Developers totaling ₹746.15 crores. ARHPL was created to develop infrastructure for hotels and had entered into branding tie-ups to enhance its business.
