BEAUTY ETOILE PRIVATE LIMITED ,MUMBAI vs. ADDL/JOINT /DY/ACIT/ITO , MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH: MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER ITA No. 6456/Mum/2025 (Assessment Year: 2022-23)

Beauty Etoile Private Limited ADDL/JOINT /DY/ACIT/ITO The Icon, 61/2A Opp. Highland ACIT Circle 4(1)(1), Aayakar Residency Circle, Dhokali vs. Bhavan. M.K.Road. Mumbai, Village, Kolshet Road, Highland Mumbai, Maharashtra, 400020 Park, Thane West, Thane, Maharashtra, 400607

PAN: AAHCB0752G (Appellant) (Respondent) For Assessee : Mrs. Hemlata Bhungare & Ms. Ankita Sakhle For Revenue : Shri Bhagirath Ramawat (Sr. DR) Date of Hearing : 30.03.2026 Date of Pronouncement : 25.06.2026 O R D E R PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the Assessee against the order of the Assessing Officer passed u/s. 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (‘the Act’), dated 21.08.2025, pertaining to Assessment Year (AY) 2022-23, wherein the Assessee has taken the following grounds of appeal:

“1. On the facts and circumstances of the case and in law, the Appellant not being an 'eligible assessee' within the meaning of section 144C(15)(b) of the Act, the Learned Assessing Officer (Ld. AO) erred in passing a draft order under section 143(3) r.w.s. 144C(11) of the Act instead of an assessment order under section 143(3) of the Act.

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited 2. On the facts and circumstances of the case and in law, the Ld. AO erred in passing the assessment order under section 143(3) r.w.s. 144C(13) of the Act, which is barred by limitation, bad in law and ought to be quashed. 3. On the facts and circumstances of the case and in law, the impugned final assessment order passed by the Ld. AO in pursuance of the directions of the Dispute Resolution Panel (hereinafter referred to as 'DRP') under section 143(3) read with section 144C read with section 144B of the Act, is bad in law and void ab-initio as learned AO failed to consider direction of DRP to avoid double disallowance of amount already disallowed by Appellant under section 948 of the Act and thereby bad in law and out to be annulled or quashed. 4. On the facts and circumstances of the case, the learned Transfer Pricing Officer 1(2)(1), (TPO) erred in proposing upward adjustment on account of interest on Non-Convertible Debentures ('NCDs') amounting to INR 24,30,00,000 as Arm's length Price ('ALP') merely placing reliance on provisions of section 948 of the Act, thereby acting without jurisdiction, order ought to be quashed being bad in law. 5. On the facts and circumstances of the case and in law, the Ld. AO erred in not considering the interest expenditure of INR 10,88,53,669 suo moto disallowed by the Appellant in the return of income while passing the impugned assessment order section 143(3) r.w.s. 144C(13) r.w.s 144B of the Act. 6. On the facts and circumstances of the case and in law, the Ld. AO and TPO erred in computing disallowances under section 94B of the Act amounting to INR 24,30,00,000 being total interest on NCD without considering the fact that such interest claimed as deductible expenses as per provisions of section 94B of the Act have been duly disallowed in Return of Income. 7. On the facts and circumstances of the case and in law, the Hon'ble DRP erred in confirming the disallowance of the expenses to the tune of INR 13,41,46,331 which have not been claimed as allowable expenses as not debited to the statement of profit and loss as such interest on NCD pertaining to on-going project debited to cost of inventory under head "Work-in-progress" without considering the fact that such interest have been disallowed in subsequent year in which it was debited to profit and loss account resulting in double disallowance of same expenditure in different AY, thereby requested to allow specific direction to delete such disallowance or allow to rectify the return of income of subsequent year. 8. On the facts and circumstances of the case and in law, the Ld. AO erred on facts and in law in computing the income of the Appellant at INR 9,51,66,890 against the income of 'Nil' returned by the Appellant. 9. On the facts and circumstances of the case and in law, the Ld. AO erred on facts and in law in non-granting set off of brought forward business losses of INR 15,85,72,565.

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited TPO held that the thin capitalization has been used as a profit shifting technique and various groups are using intra-group financing to fund the generation of tax exempt income and in particular, the deductibility of interest expense can give rise to double non-taxation in both inbound and outbound investment scenarios, wherein, the interest payments are deducted against the taxable profits of the operating entities while the interest income is taxed at comparatively lower tax rates or not at all at the level of the recipient entities despite the fact that the multinational group may have little or no external debt. It was further held by the TPO that the restriction imposed by Section 94B of the Act is being taken as a reference for benchmarking the transaction of payment of interest on NCDs and arriving at the ALP and therefore, the method used by the assessee to benchmark the transaction was rejected and the interest paid on NCD was benchmarked using “other method”. Thereafter, referring to the working of the EBIDTA of the assessee which was computed at a loss of Rs. 15,58,50,930/-, the total interest amounting to Rs.24,30,00,000/- was proposed as adjustment to the ALP of the transaction of the assessee and an upward adjustment on account of interest on NCD amounting to Rs. 24,30,00,000/- was made. Separately, the Assessing Officer was also asked to independently examine the applicability of Section 94B of the Act. Thereafter, the Assessing Officer passed the draft assessment order on 18.03.2025 making an upward adjustment on account of interest on NCDs u/s. 92C of the Act as so held by the TPO. The assessee thereafter filed objections before the Dispute Resolution Panel, Mumbai (‘DRP’) and which have been disposed off vide its directions passed u/s. 144C(5) dated 10.07.2025. The ld. DRP held that the facts of the present case are similar to the facts in the earlier A.Y. 2020-21, wherein, the matter was examined by it and following its orders for A.Y.2020-21, the objections so raised by the assessee were rejected and disallowance u/s. 94B was upheld. At the same time, the Assessing Officer was

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited directed to give credit to voluntary disallowance made u/s. 94B of the Act and only conduct further disallowance of the excess amount due as per the earlier directions for A.Y. 2020-21. The discussion and the directions of the DRP are contained at para 6.4 and 6.5 of its order which reads as under: “6.4.1 We have considered the submissions of the assessee. We have also perused the draft assessment order. It is noted that the issues involved in the Grounds of Objection No. 1 to 6 also came up for directions before the DRP in AY 2020-21. Therefore, the basis of the Panel's order for AY 2022-23 shall be the directions issued by the Panel for AY 2020-21 mutatis mutandis. The DRP has issued directions in the order for AY 2020-21, as under: The Panel finds that this action is a possible attempt to avoid the application of section 94B of the Income Tax Act which has a limited carry forward time horizon of 8 years, while the project of the applicant is long-term. As per proviso to sub-section 94B(4) - "Provided that no interest expenditure shall be carried forward under this sub-section for more than eight assessment years immediately succeeding the assessment year for which the excess interest expenditure was first computed.", the deductions have to be claimed within 8 A.Y.s, else those will lapse. Hence, the disallowances made under section 94B have a limited life in terms of carry forward, and a long-term project where the venture will turn profitable beyond a period of 8 years, would stand to lose the deduction carried forward interest. Hence, the Applicant would merge the interest payments into Work-in-Progress (WIP), so as to avoid the time limitation on the carry forward of interest. It is well known that Work-in- Progress (WIP) is a cost of the Project, and can be claimed against revenue of any period in future. Hence, the action of the Applicant in claiming a part of the interest as capitalised to stock-in-trade and part amenable to section 94B(deduction claimed) is not acceptable. The Panel notes that the Project of the Applicant is a long term project. Inclusion of the sums in Work-in-Progress (WIP) will lead to unlimited carry- forward - without any time horizon. The Panel has no hesitation in holding that the due disallowance in these circumstances is section 94B. There will be a limit of 8- year cap on the c/f and claim. Therefore, the Applicant seems to have made the erroneous classification so as to bypass the limitation of se. 94B. Hence, the capitalisation and non-claiming of the interest is rejected. The entries in accounts of the Applicant are erroneous and motivated to avoid section 94B disallowance. As per Panel's considered view, the accounting treatment given by the Applicant in its books of account cannot decide the accrual of income in law. It is now well-settled that accounting entries are not determinative of taxability of income or deductibility of any expenditure. Just like a mere book-keeping entry cannot be income unless income has actually resulted; similarly, a mere entry on capitalization does not turn it into capital, since the amounts have already been accrued out as interest. Furthermore, income and expenditures are to be computed as per the provisions of law, and it is not necessary that law should follow the footsteps of accountancy. Income-tax law does not march step by step in the divergent footprint of the accountancy profession. The Panel draws support from the above observations of the Hon'ble Apex Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC). In other words, what is given weight, ultimately, is the provisions of the Act and not what is

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited incorporated in or omitted from the books of accounts, annual statements, whether as a part of accounting practice or otherwise. The Panel also gets support from ratio of cases including Taparia Tools Ltd. v. Jt. CIT [2015] 55 taxmann.com 361/231 Taxman 5/372 ITR 605 (SC)/[2015] 7 SCC 540; Pr. CIT v. Matrix Cellular 90 taxmann.com International Services 54 (P.) Ltd. [2018] (Delhi)/2017:DHC:7186-DB; Pr. CIT v. Dentsply India (P.) Ltd.[2022] 142 taxmann.com 434/289 Taxman 530 (Delhi). Thus, the characterization and booking of the interest as "Capitalized" sums are rejected. In alternative, the Panel holds that if the capitalization is to be allowed, it has to be allowed after passing through the provisions of section 94B. The interestapportionment/characterization are "capital" can be made only after the entire sum is made amenable to section 94B of the Income Tax Act, which is a special provision. The Panel relies on principle of GeneralisSpecialibus non Derogant which mandates that special provisions like section 94B is to be given superiority over general provisions of accounting treatment. Thus, the entire interest is amenable to section 94B of the Income Tax Act, 1961. Thus, the Objection No. 1 that challenges the decision of the Transfer Pricing Officer (TPO) and Assessing Officer (AO) to disallow interest expenses and include them in the assessee's income fails. The disallowance as per section 94B of the Income Tax Act, 1961 is upheld. The Assessing Officer / Transfer Pricing Officer is directed to give credit to voluntary disallowances made u/section 94B, and only conduct further disallowance of the excess amount due as per above directions. The Objection No. 2 that questions the AO’s decision to disallow an amount of Rs. 31,40,82,736, despite only Rs. 17,79,08,415 being debited as interest paid to a related entity in the profit & loss account, is rejected as an accounting jugglery to avoid the impact of section 94B. This objection is rejected. 6.4 Directions of the DRP: Hence, the objection Nos. 1 and 2 of the applicant are not acceptable. The Assessing Officer/Transfer Pricing Officer are directed to give effect to the disallowance under section 94B, but to avoid double disallowance of the already carried out disallowance. 6.4.2 Since the facts of the present year are similar to the facts of the earlier year AY 2020-21, relying on the findings of the DRP for the earlier year on the same issue, we reject objections number 1 to 6 of the applicant assessee. The disallowance as per section 94B of the Income Tax Act, 1961 is upheld. The Assessing Officer / Transfer Pricing Officer is, however, directed to give credit to voluntary disallowances made u/section 94B and only conductfurther disallowance of the excess amount due as per the earlier directions of the DRP for AY 2020-21. 6.5 Directions of the DRP: Since the facts of the present year are similar to the facts of the earlier year AY 2020-21, relying on the findings of the DRP for the earlier year on the same issue, we reject objections number 1 to 6 of the applicant assessee. As also directed in the earlier AY 2020-21, the AO/TPO are directed to give effect to the disallowance under section 94B of the Act but to avoid double disallowance of the already carried out disallowance.”

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited income chargeable under the head ‘profit and gains of business or profession’, the said expenditure can never be disallowed u/s. 94B of the Act. It was further submitted that the part of the interest which was capitalized as part of work in progress, the said amount was subsequently recognized in the profit &loss account in the subsequent A.Y. 2023-24 and A.Y. 2024-25 and while filing the return of income, the same has been disallowed u/s. 94B in the subsequent assessment years.

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited consideration, in the subsequent A.Y. 2023-24, the Assessing Officer thereafter, pursuant to the TPO order, carried out independent examination of the applicability of Section 94B of the Act and it was held that where the assessee has not claimed any interest deduction for tax purposes, invocation of Section 94B is not warranted and our reference was drawn the relevant findings of the Assessing Officer while passing the assessment order u/s. 143 read with section 144B dated 13.03.2026 for A.Y 2023-24 wherein the relevant findings reads as under: ii) Examination of provisions of section 94B related to limitation of interest deduction in certain cases. Regarding examination of limitation of interest deduction under section 94B, the assessee has furnished a detailed computation of EBITDA and reconciliation of disallowance carried forward from earlier assessment years. The Profit after Tax for the year stands at Rs. (-) 3,87,55,645/- and after adding back depreciation of Rs. 9,93,412/- and finance cost of Rs. 10,88,53,669/-, the EBITDA is computed at Rs. (-) 27,77,09,364/-. Since the EBITDA for the relevant year is negative, the allowable interest under section 94B is Nil and the entire interest expenditure is liable for disallowance subject to carry forward provisions. The assessee has disallowed interest in accordance with section 94B and has furnished a year-wise reconciliation The cumulative interest on NCDs from AY 2018-19 to AY 2023-24 aggregates to Rs. of interest on Non-Convertible Debentures from Assessment Year 2018-19 onwards. 162.10 crores, and the interest disallowed under section 94B during various years aggregates to Rs. 78.10 crores, with corresponding capitalization of borrowing cost in Account. The reconciliation furnished aligns with the figures reported in Form 3CD work-in-progress and subsequent disallowance in the year of debit to Profit and Loss to inventory in accordance with AS-7 and recognizing cost proportionately under and the computation of income. The accounting policy of capitalizing borrowing cost Percentage of Completion Method (POCM) has also been substantiated. Section 94B operates as a limitation provision restricting deduction of "interest or similar expenditure" paid by an Indian company or permanent establishment to an associated enterprise, to the extent such interest exceeds 30% of EBITDA. The provision presupposes that an interest expenditure is otherwise allowable under the Act and is claimed as a deduction in computing income under the head "Profits and Gains of Business or Profession." Only when such interest is claimed as deduction does the ceiling of 30% of EBITDA apply. In the present case, the assessee has categorically demonstrated that no interest deduction has been claimed in the computation of income for AY 2023-24. DEPART The finance cost of Rs. 10,88,53,669/- debited to the Profit and Loss Account was already disallowed in the return of income. Further, interest amounting to Rs. 41,99,05,099/- relating to earlier years, though routed through the Profit and Loss Account during the year under POCM, was also not claimed as deduction in the tax computation. Therefore, in substance, the taxable income computation does not contain any claim of interest deduction which could be subjected to restriction under section 94B. Once no deduction is claimed, there is no scope for invoking a limitation provision. From the perspective of accounting and ICDS, the assessee follows the Percentage of Completion Method for recognition of revenue and corresponding costs. Borrowing costs directly attributable to the project are capitalized to inventory in accordance with accounting standards and ICDS IX (Borrowing Costs). Under ICDS IX read with section 36(1) (iii), borrowing cost incurred for acquisition or construction of qualifying assets is required to be capitalized and forms part of the cost of inventory. Such capitalized borrowing cost is not immediately deductible; it is recognized in the Profit and Loss Account only when the related inventory cost is recognized in accordance with ICDS III (Construction Contracts) and ICDS IV (Revenue Recognition). In the current year, although Rs. 10,88,53,669/- appears as finance cost in the it in full. Further, the Rs. 41,99,05,099/- pertaining to earlier capitalized interest, though routed through Profit and Loss Account due to POCM, has also been disallowed in the computation. Thus, the tax treatment has overridden book recognition in order to comply with section 94B. Since no interest deduction has ultimately reduced taxable income, the object of section 94B-to prevent erosion of tax base through excessive interest deduction-stands satisfied. It is also important to note that section 94B provides for carry forward of disallowed interest under sub-section (4) to subsequent assessment years, where it may be allowed to the extent of available EBITDA. The reconciliation furnished by the assessee shows cumulative interest on NCDs of Rs. 162.10 crores and cumulative disallowance of Rs. 120.10 crores up to AY 2023-24. This demonstrates that the assessee has been consistently applying the thin capitalization rule and tracking disallowance year-wise. Therefore, mechanically invoking section 94B again for the current year would amount to double disallowance of the same interest expenditure, which is not contemplated by law. Once the assessee has already disallowed the entire current year interest in the return of income, there is no further deduction to restrict. Hence, no additional adjustment under section 94B is required. In summary, although the assessee computed EBITDA at Rs. (-) 27,77,09,364/- and determined that 30% thereof was Nil, it has already disallowed the entire interest expenditure of Rs. 10,88,53,669/- along with Rs. 41,99,05,099/- transferred from earlier years. In light of ICDS-

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited compliant capitalization of borrowing costs, the POCM accounting framework, and the fact that no interest deduction has been claimed in the tax computation, invocation of section 94B for any further disallowance is not warranted. The computation of income already reflects complete neutralization of interest expenditure for AY 2023-24, and therefore the provisions of section 94B stand satisfied without necessity of any additional adjustment.” 7. The ld. DR has been heard, who has relied on the order passed by the TPO as well as by the ld. DRP.

“7. Admittedly, it is a fact on record that assessee had suo moto disallowed interest of Rs. 16,82,57,452/ by taking 30% EBIDTA for which ld. DRP had given a direction in its order in para 6.4 to avoid double disallowance of the already carried out disallowance. Contrary to this direction, ld. Assessing Officer has made the addition of the full amount of upward adjustment as proposed by ld. TPO of Rs.31,40,82,736/-. We thus, find that final order passed by ld. Assessing Officer is not in conformity with the direction given by ld. DRP to this effect. Our finding is fortified by the aforesaid judicial precedents. Accordingly, grounds raised by assessee in this respect are allowed. 8. On the contention of the assessee that restrictive provisions, of section 94B cannot be used for benchmarking exercise to arrive at ALP of an international transaction under the "other method", reference is made to Rule 10AB of the Income-tax Rules, 1961 (The Rules) which provides that the other method for determination of ALP shall be any method which takes into account the price which has been charged or paid or would have been charged or paid for the same or similar uncontrolled transactions, with or between non-associated enterprises under similar circumstances, considering all the relevant facts. Important here is to note that while applying this method to arrive at ALP the price has to be with or between non-associated enterprises. Restrictive conditions prescribed u/s.94B do not satisfy the requirements of Rule 10AB, since there is no price which has been charged or paid or would have been charged or paid with or between non-associated enterprises. Section 94B deals with deduction in relation to interest payable to AE providing for limitation on the interest paid to AE in excess of 30% of EBIDTA for making the disallowance. Disallowance prescribed u/s. 94B, thus cannot be considered a method for the purpose of Rule 10AB. Furthermore, it is important to note that section 94B is applicable on transactions between two AEs. For the purpose of Rule 10 AB, the price for determining ALP has to be with or between non-AEs. Thus, when the

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited other method is applied requiring a price of an uncontrolled transaction with or between non-AEs, provision of section 94B cannot be imputed into it as it deals with a transaction between two AEs. 8.1. We refer to the show cause notice issued by ld. TPO, wherein the assessee was show caused in specific terms as to why the ALP of interest paid by it to its AE on borrowings should not be computed as per section 94B using the other method as most appropriate method. We also take note of the conclusion drawn by ld. TPO in para 5.7, whereby he has categorically stated that restriction imposed by section 94B is taken as a reference for benchmarking the impugned transaction of payment of interest on NCD to arrive at ALP. 8.2. In the given set of facts and the provisions of law, we note that ld. TPO has erred in taking section 94B restrictions as other method for benchmarking the impugned transaction and thus the adjustment so proposed is bad in law. Accordingly, the adjustment so made in the final order is deleted. 9. It is also important to note the fact that assessee has capitalized part of the total interest, that is Rs.14,60,91,585/- to the inventory of WIP. No deduction was claimed in this respect. In this context, reference is made to the relevant provisions of the section 94B. “.............(1). Notwithstanding anything contained in this Act, where an Indian company, or a permanent establishment of a foreign company in India, being the borrower, incurs any expenditure by way of interest or of similar nature exceeding one crore rupees which is deductible in computing income chargeable under the head "Profits and gains of business or profession" in respect of any debt issued by a non-resident, being an associated enterprise of such borrower, the interest shall not be deductible in computation of income under the said head to the extent that it arises from excess interest, as specified in sub-section (2) (2) For the purposes of sub-section (1), the excess interest shall mean an amount of total interest paid or payable in excess of thirty per cent of earnings before interest, taxes, depreciation and amortisation of the borrower in the previous year or interest paid or payable to associated enterprises for that previous year, whichever is less.. 9.1. From the above, the important ingredients of section 94B in the present context are noted as: - Indian company is borrower; - Indian company has incurred an expenditure; - Expenditure involved is interest or of similar nature; - The said expenditure is deductible in computing income chargeable under the head 'profits and gains of business or profession'; - The lender is associated enterprise; - Excess interest is interest paid/payable in excess of 30% of earning before interest, taxes, depreciation and amortization (‘EBITDA’). 9.2. From the above, it is noted that unless and until the expenditure on interest is deductible in computing the income chargeable under the head 'profits and gains of business or profession', the said expenditure cannot be disallowed u/s.94B of the Act. What has not been claimed as deduction under the profit and loss account but has been capitalized, cannot be brought into the provisions of section 94B for the purpose of making disallowance. The word 'deductible' is not

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited defined under the Act. However, in taxation, an item which may be subtracted from gross income or adjusted in gross income for determination of taxable income can be said to 'deductible'. In other words, where the said expenditure is not claimed in first place, the same cannot be disallowed. Interest cost which has been allocated to WIP and does not form part of expenditure in the profit and loss account cannot be considered for the purpose of section 94B. 9.3. Reference is made to para- 46.3 of the explanatory notes to the provisions of the Finance Act, 2017 vide circular No.2/2018, dated 15.02.2018 wherein it is stated that "In view of the above, the new section 94B has been inserted in the Income Tax Act, so as to provide that interest expenses claimed by an entity to its Associated Enterprises shall be restricted to 30% of its earnings before interest, taxes, depreciation and amortisation (EBITDA) or interest paid or payable to Associated Enterprises or whichever is less." Based on this reading and explanation, the provisions of section 94B relates to allowability of interest expenditure claimed by an entity. Reference is also made to explanatory circular explaining the provisions of Finance Act, 2023, vide Circular No.1/2024, dated 23.01.2024 vide para 38.1, wherein it states that section 94B provides restriction on deduction of interest expense in respect of any debt issued by a non-resident, being an AE of the borrower. This in itself provides that the restriction is on the deduction of the interest expense and not otherwise. 9.4. Accordingly, there is no question of taking into account the component of interest which has been capitalized by the assessee and not claimed as a deduction in its profit and loss account for the year under consideration. On this aspect, it is also important to note that assessee follows percentage completion method and such interest expenditure is recognised in the profit and loss account in the subsequent Assessment Year, i.e., 2023-24 and is disallowed u/s.94B in that year. Accordingly, direction of ld. DRP to take into account the total interest expense of Rs.32.40 crores for the purpose of computing the disallowance u/s.94B is not proper, to meet the requirement of section 94B. 10. Considering the overall factual matrix of the case, elaborate discussion made in the above paragraphs and judicial precedents relied upon, addition made in the hands of the assessee in respect of interest expenditure of non-convertible debentures to its AEs is deleted. Accordingly, grounds raised by the assessee in this respect are allowed.”

ITA No. 6456/Mum/2025; A.Y. 2022-23 Beauty Etoile Private Limited 10. In the instant case, it is admitted position that out of the total interest accrued to the tune of Rs. 24,30,00,000/- during the year under consideration, amount of Rs.13,41,46,331/- was capitalized to the cost of inventory under work in progress and not debited to the profit/loss account and not claimed for tax purposes and therefore, cannot be subject matter of disallowance u/s 94B of the Act. Further, interest to the tune of Rs. 10,88,53,669/- which was debited to the profit & loss account has been suo-moto disallowed by the assessee while filing its return of income. In light of the same, the addition so made in the hands of the assessee is hereby directed to be deleted.

Order pronounced in the open court on 25.06.2026.

Sd/- Sd/- KAVITHA RAJAGOPAL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 25.06.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai