CORRTECH ENERGY LIMITED,AHMEDABAD vs. THE DY.CIT, CIRCLE-1(1)(1), AHMEDABAD

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ITA 2492/AHD/2025Status: DisposedITAT Ahmedabad29 April 2026AY 2018-195 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed the ground related to late deposit of employee PF/ESI, following the Supreme Court's decision in Checkmate Services. The ground regarding interest on late TDS was dismissed as not pressed. The disallowance of proportionate interest was deleted, finding no nexus between borrowed funds and interest-free advances. The issue of duty drawback was restored to the AO for fresh verification.

What were the facts?

The assessee appealed an ex-parte order by the CIT(A) which confirmed additions made by the AO. These additions included disallowances for late deposit of employee PF/ESI, interest on late TDS, proportionate interest on borrowed funds used for interest-free advances, and addition of duty drawback income.

What were the issues?

Whether disallowance of employee PF/ESI contribution deposited late is valid, and whether proportionate interest on borrowed funds used for interest-free advances is disallowable without establishing a nexus.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 37,Section 37(1),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

For Appellant: Shri Tushar Hemani, Sr Advocate &, Shri Kushal Fofaria, AR
For Respondent: Shri Abhijit, Sr DR
Hearing: 19.02.2026Pronounced: 29.04.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA R. KAMBLE, JUDICIAL MEMBER ITA No. 2492/Ahd/2025 (Assessment Year: 2018-19) Corrtech Energy Limited, Deputy Commissioner of Vs. 22, Dhara Centre,Nr. Vijay Cross Income-Tax, Road, Navrangpura, Circle 1(1)(1), Ahmedabad-380009 Ahmedabad [PAN : AAACI 8838 F] (Appellant) .. (Respondent) Appellant represented by : Shri Tushar Hemani, Sr Advocate & Shri Kushal Fofaria, AR Respondent represented by: Shri Abhijit, Sr DR Date of Hearing 19.02.2026 Date of Pronouncement 29.04.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

This appeal has been filed by the assessee against the order dated 25.03.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2018-19.

2.

The assessee has raised following grounds of appeal:- “1. The Ld. CIT(A) has erred in law and on facts of the case in passing an ex-parte order resulting in violation of principles of natural justice.

2.

The Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making a disallowance of Rs.9,23,776/- u/s 36(1)(va) of the Act for late deposit of employees’ contribution towards PF & ESI.

3.

The Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making a disallowance of Rs.1,88,738/- u/s 37 of the Act of interest on late payment of TDS.

4.

Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in disallowing proportionate interest expense at 14.1% u/s 37(1) of the Act amounting to Rs.98,63,432/- on borrowings of Rs.9,80,90,138/- allegedly being utilized for advancing interest free loans and advances of Rs.6,99,53,468/-.

ITA No. 2492/Ahd 2025 Corrtech Energy Ltd Vs. DCIT Asst.Year : 2018-19 - 2–

5.

The Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition towards duty drawback of Rs.26,06,954/-.

6.

The Ld. CIT(A) and Ld. AO has passed the order without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. Their action is in clear breach of law and principles of natural justice and therefore deserves to be quashed.”

3.

The brief facts of the case are that the assessee-company is engaged in the business of manufacturing engineering goods, executing turnkey projects of gas pipelines, providing cathodic protection systems and other engineering services in domestic and international markets. The assessee filed its return of income on 18.09.2018 declaring total income of Rs.3,01,68,800/-. The case was selected for scrutiny through CASS and statutory notices were issued. Thereafter, the assessment was completed u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Act vide order dated 30.03.2021 determining total income at Rs.4,37,51,703/- after making additions aggregating to Rs.1,35,82,903/-. The additions made by the Assessing Officer were as under:

i. Disallowance u/s 36(1)(va) – Rs.9,23,776/- ii. Disallowance u/s 37 – Rs.1,88,738/- iii. Disallowance of proportionate interest u/s 37(1) – Rs.98,63,435/- iv. Addition of duty drawback income – Rs.26,06,954/-

4.

Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A). However, the Ld. CIT(A) dismissed the appeal ex-parte on account of non-appearance of the assessee.

5.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal by raising the aforesaid grounds.

ITA No. 2492/Ahd 2025 Corrtech Energy Ltd Vs. DCIT Asst.Year : 2018-19 - 3– Ground No. 2 – Disallowance u/s 36(1)(va) 6. This ground relates to the disallowance of employees’ contribution to PF & ESI amounting to Rs.9,23,776/- for delayed deposit. The Assessing Officer noted from the tax audit report that employees’ contributions towards PF and ESI were deposited beyond the due dates prescribed under the respective Acts. Accordingly, the same was disallowed u/s 36(1)(va) r.w.s. 2(24)(x) of the Act.

6.1 Before us, the Ld. AR fairly conceded that the employees’ contribution was deposited beyond the due dates prescribed under the respective statutes.

6.2 We find that the issue is now settled by the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT (2022) 448 ITR 518 (SC) wherein it has been held that employees’ contribution to PF/ESI deposited beyond the due date prescribed under the relevant Act is not allowable as deduction even if deposited before the due date of filing of return. Respectfully following the above decision of the Hon’ble Supreme Court, we find no infirmity in the order of the Ld. CIT(A). Accordingly, Ground No.2 of the assessee is dismissed.

Ground No. 3 – Interest on late payment of TDS 7. This ground relates to the disallowance of Rs.1,88,738/- being interest on delayed payment of TDS.

7.1 At the time of hearing, the Ld. AR submitted that this ground is not pressed owing to smallness of the amount. In view of the above submission, Ground No.3 is dismissed as not pressed.

Ground No. 4 – Disallowance of proportionate interest 8. This ground relates to disallowance of proportionate interest amounting to Rs.98,63,435/-.

8.1 The Assessing Officer observed that the assessee had advanced interest-free loans and advances amounting to Rs.6,99,53,438/- while it had borrowed funds on

ITA No. 2492/Ahd 2025 Corrtech Energy Ltd Vs. DCIT Asst.Year : 2018-19 - 4– which interest was paid. Accordingly, the Assessing Officer disallowed proportionate interest by applying the rate of 14.10%.

8.2 Before us, the Ld. AR submitted that the assessee had sufficient own funds and the advances were given in the course of business. It was further submitted that the Assessing Officer had not established any direct nexus between the borrowed funds and the interest-free advances.

8.3 The Ld. DR, on the other hand, relied on the orders of the lower authorities.

8.4 We have considered the rival submissions and perused the material available on record on this issue. We note that the Assessing Officer has merely presumed that the borrowed funds were utilized for advancing interest-free loans without establishing any direct nexus between the borrowings and such advances. It is a settled principle of law that where the assessee possesses sufficient interest-free funds, a presumption arises that the investments or advances are made out of such interest-free funds. In the present case, the Assessing Officer has not brought any material on record to demonstrate that the borrowed funds were actually diverted for non-business purposes. In absence of any such nexus, the disallowance made by the Assessing Officer cannot be sustained. Accordingly, the addition of Rs.98,63,435/- is deleted and Ground No.4 of the assessee is allowed.

Ground No. 5 – Addition of Duty Drawback 9. This ground relates to addition of Rs.26,06,954/- on account of duty drawback. The Assessing Officer observed that the assessee had not offered the duty drawback amount assessed by the Customs Authority as income and therefore added the same to the total income.

9.1 Before us, the Ld. AR submitted that the relevant details of duty drawback could not be properly placed before the lower authorities and requested that the matter may be restored to the Assessing Officer for fresh verification. The Ld. DR did not object to the request of the assessee.

ITA No. 2492/Ahd 2025 Corrtech Energy Ltd Vs. DCIT Asst.Year : 2018-19 - 5–

9.2 Considering the facts and circumstances of the case and in the interest of justice, we deem it appropriate to restore this issue to the file of the Assessing Officer for fresh examination after giving adequate opportunity of hearing to the assessee. Accordingly, Ground No.5 is allowed for statistical purposes.

10.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open Court on 29.04.2026

Sd/- Sd/-

(SUCHITRA R. KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated …29.04.2026 **btk आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent. 2. संबंिधतआयकरआयु�/ Concerned CIT 3. 4. आयकरआयु�(अपील) /The CIT(A)- 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 6. गाड�फाईल /Guard file. आदेशानुसार/ BY ORDER, True Copy

सहायकपंजीकार (Dy./Asstt. Registrar) आयकरअपीलीयअिधकरण, , अहमदाबाद / ITAT, Ahmedabad , ,

1.

Date of dictation … …….words processed by the Hon’ble VP on his PC on….16.04.2026 2. Date on which the typed draft is placed before the Dictating Member ……28..04.2026 3. Other Member………..28.04.2026 4. Date on which the approved draft comes to the Sr.P.S./P.S………28.04.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement……..29.04.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S….......29.04.2026 7. Date on which the file goes to the Bench Clerk ….......29.04.2026 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order……………………………………

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