EPACK POLYMERS PRIVATE LIMITED,GAUTAM BUDH NAGAR vs. ACIT CIRCLE-8(2), NEW DELHI

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ITA 3403/DEL/2023Status: DisposedITAT Delhi09 July 2025AY 2017-18Bench: SHRI SATBEER SINGH GODARA (Judicial Member), SHRI S. RIFAUR RAHMAN (Accountant Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had availed credit facilities at 13.5% interest and advanced funds to a sister concern at 8% interest. Considering the assessee's substantial non-interest-bearing funds (share capital, reserve and surplus), it was presumed that the advance to the sister concern was made from interest-free funds.

What were the facts?

The assessee's appeal for AY 2017-18 arose from an order involving proceedings under Section 143(3) of the Income-tax Act. The lower authorities disallowed an interest expenditure of Rs.90,20,116 under Section 36(1)(iii), holding that the assessee had diverted interest-bearing funds to group concerns for non-business purposes.

What were the issues?

Whether the disallowance of interest expenditure under Section 36(1)(iii) was justified when the advance was made to a sister concern from the assessee's own non-interest-bearing funds.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN

For Appellant: Adv. Ms. Uma Upadhyay, CA
Hearing: 23.06.2025Pronounced: 09.07.2025

Assessment Year: 2017-18 Vs. ACIT, E PACK Polymers Pvt. Ltd., 61-B, Udyog Vihar Surajpur, Circle-8(2), Kasna Road, Greater Noida, Delhi Gautam Budh Nagar PAN: AAACE5175D (Appellant) (Respondent) Assessee by Sh. Ved Jain, Adv. Ms. Uma Upadhyay, CA Department by Sh. Rajesh Kumar Dhanesta, Sr. DR Date of hearing 23.06.2025 Date of pronouncement 09.07.2025 ORDER

PER SATBEER SINGH GODARA, JM

1.

This assessee’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2023-24/1057492551(1), dated 30.10.2023 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.

2.

It emerges during the course of hearing that both the learned lower authorities have invoked section 36(1)(iii) interest expenditure disallowance of Rs.90,20,116/- in the assesse’s case; in the assessment order dated 25.12.2019 and upheld in the lower appellate discussion thereby holding it to have diverted interest- bearing funds to the group concerns for non-business purposes.

3.

Faced with this situation, both the learned representative inter alia invited out attention to the CIT(A)/NFAC’s discussion at page six para 5.1.2 onwards that the assessee had availed credit facility and term loans carrying interest @ 13.5% and charged interest @ 8% only is for sister concern whilst advancing them an amount of Rs.16,40,02,105/- in question.

4.

It is at this stage Mr. Jain takes us to the assessee’s balance- sheet at page 18 of the paper-book indicating its non-interest- bearing funds including share capital with a reserve and surplus of Rs.50,90,67,601/- as against the above loan advanced to the sister concern totaling to Rs.16.40 crores hereinabove. This clinching facts and figures have gone unrebutted from the Revenue side.

5.

We thus conclude in light of CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) as well as South Indian Bank Ltd. Vs. CIT [2021] 438 ITR 1 (SC) that necessary presumption which would arise in such an instance would be that of advancement of interest free funds only to the assessee’s sister concern. We thus find no reason to sustain the impugned section 36(1)(iii) disallowance of Rs.90,20,116/- which is directed to be deleted in very terms. No other ground or argument has been pressed before us.

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