IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “E” BENCH: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER &

SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No.1190/Del/2024 [Assessment Year : 2018-19]

M3M India (P) Ltd. vs ACIT

41st Floor, Tower 1 Central Circle-2 M3M International Financial Faridabad Center, Sector-66 Golf Course Extension Road, Gurgaon-122101.

PAN-AACCT7082Q APPELLANT RESPONDENT ITA No.2033/Del/2024 [Assessment Year : 2018-19]

DCIT vs M3M India (P) Ltd.

Central Circle-2 6th Floor, Paras Twin Towers Faridabad Tower-B, Golf Link Road Gurgaon, Haryana-122002 PAN-AACCT7082Q APPELLANT RESPONDENT Appellant by Shri Gautam Jain, Adv.

Shri Lalit Mohan, CA Shri Ankit Kumar, Adv. &

Shri Malay Chaturvedi, AR Respondent by Ms. Baljeet Kaur, CIT DR Date of Hearing 28.02.2025 Date of Pronouncement 26.03.2025 ORDER PER PRADIP KUMAR KEDIA-AM :

Both assessee and revenue have filed cross-appeals arising out from the first appellate order dated 16.02.2024 passed under s. 250 of the Income Tax Act, 1961 [“the Act”] by CIT-3, Gurugram arising from the assessment order dated 30.09.2021 passed by the DCIT, Central Circle-2, Faridabad under s. 143(3) of the Act pertaining to assessment year 2018-19.

2. The concise Grounds of Appeal raised by the assessee read as under:-

1. “That the learned Commissioner of Income Tax (Appeals)-3, Gurgaon has erred both in law and on facts in-law-in-upholding a disallowance of a sum of Rs. 125,29,80,000/- out of expenditure incurred on interest by applying an adhoc rate of interest on the advances to wholly owned subsidiaries and group companies outstanding at the end of financial year

2017-18 relevant to assessment year 2018-19 u/s 36(1)(iii) of the Act.

1.1. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once identical claim of deduction stood allowed in preceding years, the disallowance so made and, upheld was contrary to principles of consistency and thus untenable.

1.2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that total borrowings from banks and other financial institutions at the close of instant year had fallen from Rs. 992.03 crores to Rs. 879.42 crores and, thus once interest on such borrowings had been allowed in previous financial year then no disallowance could be upheld on account of interest u/s 36(1)(iii) of the Act even in instant year.

1.3. That while upholding the aforesaid disallowance the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once interest free funds were available with the appellant company, which was far in excess to the advances to wholly owned subsidiaries and group companies; the premise of arbitrary, notional and hypothetical disallowance is untenable.

1.4. That while upholding the aforesaid disallowance the learned Commissioner of Income Tax (Appeals) has failed to appreciate that advances to wholly owned subsidiaries where appellant company being a holding company has deep interest in the subsidiaries and, the same has been utilized by the subsidiaries for business purposes and, thus the conclusion that such advances are on not on account of commercial expediency is factually incorrect, legally misconceived and wholly unsustainable.

1.5. That furthermore advances to group companies are also advances to special purpose vehicles in the course of business of real estate, who have either developed the real estate project or have invested in land or are developing land and revenue from which will be shared with the appellant company and thus advances are on account of commercial expediency, therefore disallowance of interest upheld on the basis of such advances is untenable.

1.6. That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that since it is undisputed fact that, that advances by appellant company to wholly owned subsidiaries and group companies has not been utilized by director of said companies for their personal benefit, then neither logica