PR. COMMISSIONER OF INCOME TAX, DELHI 1 vs. M/S. EBONY RETAIL HOLDINGS LTD.

2026 CM APPL. 22925/2026 (delay in re-filing)

Having heard learned counsel for the parties, we are of the view that though the delay is substantial, but the reasons with which the department has come up, are valid reasons. Hence, considering that the delay was caused due to the fault of the counsel, we do not propose to non-suit the appellant on the ground of delay.

The application is, therefore, allowed. The delay of 558 days in filing

By way of present appeal the department has challenged the order dated 17.07.2023 passed by the Income Tax Appellate Tribunal, Bench - B, New Delhi (hereinafter referred to as ‘Tribunal’) in ITA No. 7339/Del/2019. 11. The dispute arose when the Assessing Officer while framing the assessment order disallowed expenditure to the tune of Rs. 6.25 Crores being the amount spent for obtaining a loan of about Rs.42 Crores.

Learned Senior Standing Counsel for the appellant-department argued that the disputed amount spent for obtaining the loan is not allowable as the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/04/2026 at 11:47:16

The Commissioner of Income Tax (Appeals) (hereinafter referred to as ‘CIT(A)’) vide order dated 25.06.2019 partly allowed the appeal filed by the Respondent-assessee and upheld that the addition of Rs. 52,84,966/- made by the assessing officer as Finance Cost (interest) in relation to the proportionate expenditure of Rs. 2.55 Crores loan given to subsidiary company and Rs. 1.05 Crores loan disbursed to related party. The CIT(A) however deleted the remaining addition amounting to Rs. 5,72,22,087/-.

The department, so also the assessee preferred appeals against the above referred order of the CIT(A), both of which have been rejected by the Tribunal vide order dated 17.07.2023. 15. In the present appeal, the appellant-department has challenged deletion of the proportionate/corresponding expenditure on the amount relating to repayment of loan to Standard Chartered Bank and return of share application money.

Mr. Agarwal, learned Senior Standing Counsel for the appellant- department, vehemently argued that the CIT(A) has erred in deleting the addition as the assessee had no plausible reason to offer as to why the loan This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/04/2026 at 11:47:16

Having heard learned counsel for the appellant, we are of the view that the view taken by the CIT(A) was perfectly justified and legally correct.

It is the business acumen or wisdom of an assessee to take a loan to repay previous loan. Such repayment may necessitated for a score of factors, maybe because of the strained relationship with the existing banker or because of the fact that the assessee is able to get loan at a lesser rate because of the fluctuation in interest rates and may be because of any other reason. The Assessing Officer cannot undertake the exercise of finding fault in the commercial wisdom or business acumen of an assessee.

Even stronger is the position, when it comes to return of Share Capital Money. Return of Share Capital Money is a bounden duty of the assessee and if it finds itself to be in financial requirement to pay off its statutory obligation and loan has been taken, it cannot be said that such loan was taken for pleasure or for luxury. Both the above referred expenses are indisputably a business necessity and therefore, an expenditure relating to business or amount spent to carry on the operations to earn income. Hence, the contentious amount has rightly been allowed by the CIT(A).

The remaining two components of utilisation of loan were really doubtful. Because an assessee company cannot take loan and disburse it to its related party or to its subsidiary company. This approach definitely amounts diversion if not siphoning of funds.

We find that the order of the CIT(A) was perfectly justified and in tandem with the law and hence, the Tribunal has committed no error of law This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/04/2026 at 11:47:16

Appeal is, therefore, rejected. Pending application also stands disposed of.