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

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. 3 | P a g e

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.