IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil Kumar, Judicial Member ITA No: 2677 & 2678/Ahd/2025 Asst. Years: 2013-14 & 2014-15 The DCIT Gujarat Insecticides Ltd.

Circle-2(1)(1), Plot No. 805-806, Vadodara Vs GIDC Estate, Ankleshwar Gujarat-393002, Gujarat, India PAN: AAACG8436D (Appellant) (Respondent)

Revenue Represented: Shri Rignesh Das, CIT-DR Assessee Represented: Ms. Arti N Shah, A.R.

Date of hearing : 09-02-2026 Date of pronouncement : 11-02-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

These two appeals are filed by the Revenue as against the appellate orders both dated 10-10-2025 passed by the Additional Commissioner of Income Tax/JCIT (Appeals), Indore arising out of the assessment orders passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years 2013-14 and 2014-15 respectively. Since common issue is involved in these appeals for the sake of convenience the same are disposed of by this common order.

2. ITA No. 2677/Ahd/2025 is taken as the lead case. Brief facts of the case is that the assessee is company engaged in the business of manufacturing Insecticides and Pesticides. It is a subsidiary of M/s. Gharda Chemicals Ltd. Assessee filed its Return of Income for the Asst. Year 2013-14 on 30-11-2013 declaring total income of Rs.8,54,45,937/-. The return was taken for scrutiny assessment and made disallowance u/s. 36(1)(iii)/40A(2)(b) of Rs. 2,26,69,000/- by observing as follows:

“As the assessee company has diverted its interest bearing fund for non- business purposes, the interest expenditure claimed u/s. 36(1)(iii) of the Act on borrowings made not for the purpose of business as aforesaid is required to be disallowed. Further, GCL is a holding company falling within the proviso of sec. 40A(2)(b) and therefore, the assessee company has parked its funds with GCL without interest. Further there is outstanding loan of Rs.1.5 crores against Gharda Foundation, which is a related party, on which no interest has been charged. The assessee has obtained funds in the form of working capital facilities from bank amounting to Rs.2760.55 lacs and paid interest and financial charges of Rs.226.69 lacs (Rs.207.55 lacs + Rs.19.14 lacs) thereon. Thus, average of opening and closing balance in the hand of GCL i.e. Rs.2909.28 lacs has been used in financing the interest free credit given to GCL. The amount of bank loan is less than the amount kept in the hand of GCL. Hence whole of interest and financial charges to the tune of Rs.226.69 lacs is disallowed and added back to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) is being initiated separately for furnishing of inaccurate particulars of income.”

2.1. The assessing officer also made disallowance of Miscellaneous Expenses and Staff Welfare Expenses totaling to Rs.2,08,98,216/- wherein these expenses are not fully supported with proper bills/vouchers and most of the cases, payments were made in cash and self-made vouchers are available. Therefore in the absence of proper and supporting and lack of complete verification adhoc disallowance at 5% of Rs. 2,08,98,216/- which works out to Rs.10,44,911/- was disallowed and added to the total income of the assessee.

2.2. The A.O. also made disallowance of Repairs and Maintenance to Plant and Machineries Expenses of Rs.73,71,129/-. Thus the assessing officer determined the total income of the assessee as Rs.11,65,30,977/- and demanded tax thereon.

3. Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) who deleted the additions following assessee’s own case by his predecessor which was and confirmed by this Tribunal order.

4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal:

(i) On the facts and circumstances of the case and in law, the Ld. Addl/JCIT(A) erred in deleting the disallowan