JCIT (OSD) Vs Sahara India Real Estate Corporation Ltd. (ITAT Delhi)
The Revenue filed appeal against CIT(A)’s order deleting additions of ₹52.65 Cr (notional interest) & ₹20.18 Cr (theft loss). Assessee filed cross-objection seeking allowance of ₹12.09 Cr flood-loss disallowed by lower authorities.
Background
AO completed assessment u/s 143(3) adding ₹52.65 Cr as notional interest on interest-free advances @ 12% and disallowing ₹32.28 Cr claimed as loss of inventory due to theft, flood & expiry. CIT(A) deleted the notional interest and partly allowed the loss claim-accepting theft loss (₹20.18 Cr) but disallowing flood loss (₹12.09 Cr). Both sides appealed.
Issue 1 – Notional interest on advances
AO alleged that interest-free advances of ₹438 Cr warranted notional interest addition. CIT(A) observed that such sums represented recoverable TDS from debenture-holders and not loans; hence no interest was chargeable.
Tribunal concurred-holding that only real income can be taxed, not hypothetical income. It relied on Shoorji Vallabhdas & Co. (46 ITR 144 SC), Godhra Electricity Co. (225 ITR 746 SC) & E.D. Sassoon & Co. (26 ITR 27 SC). Further, AO had not invoked any specific provision such as s.36(1)(iii). Hence, addition of ₹52.65 Cr was unsustainable
Issue 2 – Loss of stock by theft, expiry & flood
