ACIT Vs VIC Enterprises Pvt Ltd (ITAT Delhi)
VIC Enterprises Pvt. Ltd. is an NBFC & promoter of Dabur India Ltd., earning over 96% of its dividend income from Dabur. AO noticed that the company had made interest-free advances/investments of ₹108.45 Cr to group/associate entities while paying interest of ₹5.62 Cr on borrowings. AO presumed that borrowed funds were diverted interest-free & disallowed the entire interest u/s 36(1)(iii). AO also made disallowance of ₹2.08 Cr u/s 14A.
CIT(A) deleted both disallowances by following ITAT orders in Assessee’s own cases for AYs 2010-11 to 2013-14, where it was held that Assessee had sufficient own interest-free funds (share capital + reserves of over ₹410 Cr) far exceeding the interest-free advances. Applying the presumption laid down by P&H HC in Bright Enterprises, Kapsons Associates & SC in Hero Cycles, no disallowance was permissible.
Before Tribunal, Revenue contended that disallowances were justified. However, Assessee demonstrated that ITAT had again decided the same issue in its favour for AYs 2017-18, 2018-19 & 2020-21 (ITA Nos. 22–24/Del/2024, order dated 16.05.2025) on identical facts, following earlier precedents.
Tribunal noted that:
- Facts are identical to earlier years.
- Own funds are far more than advances.
- In absence of nexus, no interest disallowance can be made.
- Thus, interest disallowance of ₹5.62 Cr was rightly deleted.
On 14A disallowance, Tribunal observed that Assessee had large exempt income (dividend + tax-free bonds) & had already suo motu disallowed ₹10.96 lakh. ITAT in earlier years had held that only investments actually yielding exempt income should be considered for Rule 8D. Therefore, Tribunal directed AO to recompute 14A disallowance by considering only dividend-yielding investments, consistent with past orders.
