ASSISTANT COMMISSIONER OF INCOME TAX, DELHI vs. VIC ENTERPRISES PRIVATE LIMITED, DELHI

PER NAVEEN CHANDRA, A.M:-

This appeal by the Revenue is preferred against the order of the ld. CIT(A), dated 06.11.2023 for A.Y 2015-16. 2. The Revenue has raised the following grounds of appeal:
“1. Whether, on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.
5,62,35,510/- on account of interest income.

ITA No. 3086/DEL/2024 [A.Y. 2015-16]
2,08,45,282/- on account of disallowance u/s 14A.
3. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
4. Brief facts of the case the assessee filed company is a Non-Banking
Financial Company engaged in trading in units and investment in shares and debentures. The assessee is a promoter of Dabur India Ltd and receives around 96.3% of total dividend from it. It filed its return of income on 29.09.2015 declaring taxable income of Rs.87,72,450/-. The Ld. Asst. Commissioner of Income Tax found that during the year under consideration, the assessee made interest free advances and investment in its associate/subsidiary companies to the extent of Rs 108.45 crore.
The ld AO also found that the assessee has paid interest at Rs.5,62,35,510/-.
5. The Assessing Officer was of the view that the assessee being an NBFC and had the assessee charged interest on interest free advances, the income would have been more and formed the opinion that the interest bearing borrowed funds have been utilized in making the interest free advances and, accordingly, the interest of Rs.5,62,35,510/-

ITA No. 3086/DEL/2024 [A.Y. 2015-16]
paid by the assessee was disallowed by the Assessing Officer keeping in view the interest free advances given by the assessee company. The Learned Assessing Officer further disallowed Rs. 2,08,45,282/- u/s 14A.
6. Aggrieved, the assessee filed an appeal before the CIT(A) who following the decision of ITAT in assessee's own appeal in ITA Nos. 2104
to 2107/Del/2017 vide order dated 29.01.2020 for Assessment Years
2010-11 to 2013-14, deleted the disallowance. The ITAT had held that that where the assessee enjoyed interest free funds in shape of share capital as well as reserve and surplus amounting to Rs.410.62 crore which formed part of the interest free funds available with the assessee which is more than the interest free advances, then it had to be presumed that the interest free advances have been made out of interest free funds available with the assessee.
7. Aggrieved by the deletion of addition, the Revenue is in appeal before us.
8. Before us, the ld. DR relied on the orders of the Assessing Officer.
9. Per contra, the ld. counsel for the assessee vehemently reiterated that recently, the ITAT has again in the case of the assessee for Assessment Years 2017-18, 2018-19 and 2020-21 in ITA Nos. 22 to 24/DEL/2024 vide order dated 16.05.2025 on identical issue, after

ITA No. 3086/DEL/2024 [A.Y. 2015-16]
following the orders for Assessment Years 2010-11 to 2013-14, has deleted the addition.
10. We have heard the rival submissions and have perused the relevant material on record. We find force in the contention of the ld. counsel for the assessee. We find that in ITA Nos. 22 to 24/DEL/2024 [supra], the co-ordinate bench has held as under in assessee’s own case:
“6. After perusing the facts of the case and arguments advanced by both the parties, it is seem that this issue is already decided in favour of the assessee in preceding years by the Coordinate Bench, wherein, in ITA No. 2106/Del/2017 for AY
2012-13, the Coordinate Bench has observed as under:-
“11. We find that the loans and advances including interest free advances are far less than the own funds. And hence, the presumption that the own funds have been utilized for extending the loans and advances sets in. When the assessee has got own funds available at their disposal, no disallowance is called for as enunciated in various judgments. The decision of Hon’ble Punjab & Haryana High Court in the case of Bright
Enterprises Pvt. Ltd. Vs. CIT in ITA No. 224/2013, dated
24.07.2015, it was held that if there are interest free funds available then it will be presumed that these have been made out of interest free funds. Similar view was held in the case of CIT Vs. Kapsons Associates Investment Pvt.
Ltd. (2015) 381 ITR 204 (P&H) wherein, the Hon'ble Court has held that interest on investment in other properties not ITA No. 3086/DEL/2024 [A.Y. 2015-16]
for business purpose cannot be disallowed if the assessee is having sufficient interest free funds at its disposal. Similar view was taken by the Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. 63 Taxman 308 held that no disallowance is called for if the assessee has got own surplus fund.
12. Keeping in view the facts and circumstances of the case and the judicial pronouncements and keeping in view the fact that the assessee has got sufficient own funds to extend the loans interest free, we hereby direct that the disallowance made under section 36(1)(iii) be deleted.”
7. Further, it is seen that ld. CIT(A), while deleting the disallowance has followed the aforesaid order of the Tribunal.
Before us, both the parties have agreed that there is no change in the facts as existed in earlier years and in the year under appeal. Therefore, we find no infirmity in the order of ld. CIT(A) who has followed the order of the Tribunal for deleting the additions made by the AO. Accordingly, the order of ld. CIT(A) on this score is upheld. As a result ground of appeal no. 1 of the Revenue is dismissed.”

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12. At the very outset, with regard to Ground No. 2, the ld. counsel for the assessee submitted that in ITA Nos. 22 to 24/DEL/2024 [supra], the co-ordinate bench has given relief to the assessee with the direction to recompute the disallowance u/s 14A of the Act by taking into consideration income yielding investment only.
13. The ld. DR fairly conceded to the same.
14. We have heard the rival submissions and have perused the relevant material on record. We find that the assessee has a dividend income u/s 10(34) of IT Act of Rs 50,83,38,210/- and exempted Interest income on tax free bonds of Rs. 2,40,50,506/-. The assessee has suo-motto disallowed Rs 10,96,599/- u/s 14A on account of expense for earning exempted income. The ITAT has held in the assessee’s case (supra) that the provisions of section 14A is applicable in the instant case and that the investment which are yielding exempt income should only be considered for making disallowance u/s 14A. Facts of present case being identical to those of the assessee’s case in earlier years [supra], the observations made in ITA No. 22/Del/2024 apply mutatis mutandis to the instant year of the present case. We accordingly direct the AO to ITA No. 3086/DEL/2024 [A.Y. 2015-16]
recompute the disallowance u/s 14A by taking into account dividend yielding investment only. Consequently, in consonance with the aforesaid order, Ground No. 2 raised by the Revenue is partly allowed.
15. In the result, the appeal of the Revenue in ITA No. 3086/DEL/2024
is partly allowed.
The order is pronounced in the open court on 04.09.2025. [MADHUMITA ROY]

[NAVEEN CHANDRA]
JUDICIAL MEMBER

ACCOUNTANT MEMBER

Dated: 15th October, 2025. VL/