Bestone Industries Private Limited Vs ITO (ITAT Delhi)
Three Disallowances, One Missing Ingredient: Evidence
An AO cannot disallow salary, reduce interest to a preferred rate, or add a percentage of creditors without establishing the facts that justify each adjustment. The Delhi Bench of the ITAT has deleted all three adjustments in Bestone Industries Private Limited v. ITO, ITA No. 4758/Del/2026, AY 2022–23, pronounced on 28 September 2026.
The additions in dispute totalled ₹1,47,37,019. They concerned employee benefit expenses of ₹88,34,678, interest of ₹41,50,312 on a director’s unsecured loan, and ₹17,52,029 representing 25% of outstanding creditors. The Tribunal allowed the assessee’s appeal on each issue.
Salary cannot be disallowed merely because TDS was not deducted
The AO had disallowed ₹88,34,678 of employee benefit expenses because the company had not deducted tax from the salary payments. The company’s explanation was straightforward: the salaries paid to the employees concerned did not give rise to a TDS obligation. It had also furnished an employee-wise salary chart during the assessment proceedings.
The Tribunal noted that the Department had not rebutted this factual position. If the salary paid to the relevant employees did not attract deduction of tax, failure to deduct TDS could not be used as a reason to disallow that salary expenditure. The AO had not properly considered the employee-wise details, and the CIT(A) had sustained the disallowance. The Tribunal reversed it.
