Edelweiss Financial Services Limited’s subsidiary, Edelweiss Rural & Corporate Services Ltd., has received a tax demand notice amounting to Rs. 2.61 crores from the Income Tax Department. The company disclosed this development in a recent filing with the stock exchange.
The tax demand notice, received on May 31, 2024, pertains to the assessment year 2016-17 and includes certain disallowances. Edelweiss Rural & Corporate Services Limited, in its statement, mentioned that the notice was issued following a search operation and is based on the assessment order under Section 143(3) of the Income Tax Act, 1961.
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“We wish to inform that Edelweiss Rural & Corporate Services Limited, a subsidiary of the Company, has, pursuant to search, received the assessment order and demand notice on May 31, 2024, under Section 143(3) of the Income Tax Act, 1961, for the assessment year 2016-17 and a tax demand of Rs. 2.61 crores (including interest) on account of certain disallowances,” the company stated.
Edelweiss Rural & Corporate Services Ltd. has expressed that the demand is not sustainable and will not significantly impact its financials, operations, or other activities. The company is currently examining the order and is considering appropriate steps, including filing appeals, to address the tax demand.
RBI’s Action on Edelweiss Group Entities
In a related development, the Reserve Bank of India (RBI) recently imposed stringent business restrictions on two other entities of the Edelweiss Group: ECL Finance Limited (ECL) and Edelweiss Asset Reconstruction Company Limited (EARCL).
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Restrictions on ECL Finance Limited
The RBI, invoking its authority under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and the Reserve Bank of India Act, 1934, ordered ECL Finance Ltd. to immediately cease and desist from engaging in any structured transactions involving wholesale exposures. This order allows exceptions only for the repayment or closure of accounts in the normal course of business. The RBI’s decision was based on supervisory concerns identified during recent examinations.
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Restrictions on Edelweiss Asset Reconstruction Company Limited
Similarly, Edelweiss Asset Reconstruction Company Limited (EARCL) has been directed to stop acquiring financial assets, including security receipts (SRs), and to refrain from reorganizing existing SRs into senior and subordinate tranches. The RBI’s actions stem from findings that the Edelweiss Group entities had engaged in structured transactions aimed at ever-greening stressed exposures of ECL.
