ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, KOTA, KOTA vs. CHAMBAL FERTILIZERS AND CHEMICALS LTD, KOTA

PDF · subscribers
ITA 1091/JPR/2024Status: DisposedITAT Jaipur27 August 2025AY 2017-18Bench: SHRI GAGAN GOYAL (Accountant Member), SHRI NARINDER KUMAR (Judicial Member)1 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal set aside the CIT(A)'s findings on interest disallowance and remitted the matter back to the Assessing Officer to determine the availability of interest-free funds. Regarding the valuation of shares and capital loss, the Tribunal also remanded the issue to the Assessing Officer for fresh determination.

What were the facts?

The assessee company made investments in its subsidiary companies. The Assessing Officer disallowed interest on borrowed funds used for these investments under Section 36(1)(iii). The CIT(A) initially remanded the matter, and later allowed the assessee's appeal, deleting the disallowance. The department appealed this deletion.

What were the issues?

Whether interest on borrowed funds used for investment in subsidiaries is disallowable. Whether extinguishment of rights in a subsidiary company constitutes a transfer and results in a capital loss.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 14A,Section 2(47),Section 45

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(6)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, JAIPUR BENCHES,”A-Bench” JAIPUR

Before: SHRI GAGAN GOYAL, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 1090, 1097 to 1099 & 1091/JPR/2024

Hearing: 27/08/2025Pronounced: 27/08/2025

Result

56.

As a result, as regards the issue of allowance/disallowance of interest claimed u/s 36(1)(iii) of the Act in respect of the amounts said to have been invested in subsidiaries/group companies/associates, findings recorded by Learned CIT(A) are set aside, and the matter is remitted to Learned Assessing Officer for decision afresh so as to record finding as to amount(s) of interest free funds available with the assessee during the assessment years under consideration, after verification of all relevant documents relied on behalf of the assessee in this regard, and then adjudicate the issue involved in accordance with law.

1.

As regards the valuation of the shares and loss, if any, in view of the findings recorded above, the same is required to be assessed, before any further finding could be recorded about actual or notional loss, and as such, the findings recorded by Learned CIT(A) are set aside in this regard, and the matter is remanded to the Ld. Assessing Officer for determination of the 1097 TO 1099 & 1091/JPR/2024 Chambal Fertilizers and Chemicals Ltd., Kota valuation of the shares as on the date of transfer thereof, after providing reasonable opportunity of being heard to the parties.

1.

In view of the above discussion, the appeals filed by the department are partly allowed for statistical purposes.

As regards other issues, in view of the above findings recorded under each head, the appeals filed by the department are hereby dismissed.

Copy of the common order is also placed in the connected appeal file. File consignment to the record room after the needful is done by the office. Order pronounced in the open court on 27/08/2025.

More judgments on Section 36(1)(iii)

All 3,665 judgments and leading authorities on Section 36(1)(iii) →

Recent GST High Court judgments

Search GST case law →