FAIRCHEM ORGANICS LTD.,,AHMEDABAD vs. ACIT, CIR-15(1)(1), MUMBAI

ITA 6143/MUM/2025Status: DisposedITAT Mumbai20 March 2026AY 2020-21Bench: SHRI SAKTIJIT DEY (Vice President), SHRI MAKARAND VASANT MAHADEOKAR (Accountant Member)11 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had sufficient interest-free funds and internal accruals, exceeding the capital advances. It was presumed that advances were made from these interest-free funds, and the Revenue failed to establish a nexus between borrowed funds and the advances.

What were the facts?

The assessee made capital advances of Rs. 6,53,87,800/- while having substantial borrowings and interest-free funds. The Assessing Officer disallowed proportionate interest on borrowed funds, considering the advances as diversion of interest-bearing funds.

What were the issues?

Whether disallowance of interest under Section 36(1)(iii) is justified when the assessee has sufficient interest-free funds and internal accruals to cover capital advances?

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 143(3),Section 250,Section 234B,Section 234C,Section 234D,Section 270A

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “F” BENCH MUMBAI

For Appellant: Shri Saurabh Soparkar, Ld. AR
For Respondent: Shri Ankit Tiwari, Ld. DR
Hearing: 04.03.2026Pronounced: 20.03.2026

PER MAKARAND VASANT MAHADEOKAR, AM: This appeal is filed by the assessee against the order dated 26.08.2025 passed by the learned Addl/Joint Commissioner of Income Tax (Appeals) from the Office of Commissioner of Income Tax (Appeals), Unit-2, Coimbatore[hereinafter referred to as "CIT(A)"], under section 250 of the Income-tax Act,

2 Fairchem Organics Limited 1961[hereinafter referred to as "the Act"], arising out of the assessment order dated 29.09.2022 passed by the Assistant Commissioner of Income Tax, Circle 15(1)(1) [hereinafter referred to as "Assessing Officer”] under section 143(3) of the Act for A.Y. 2020–21. Facts o

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