ITAT Mumbai Upholds Deletion of ₹47.76 Crore Interest Disallowance; LIBOR Benchmark and TPO Acceptance Prevail
Court / Authority
Income Tax Tribunal
Update / Judgement Date
24 Aug 2026
Source
WCP News Bulletin
Author
Manas Yadav — WCP Legal Desk
Reading Time
2 min read
View Count
Key Facts and Tribunal Findings
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, dismissed the Revenue’s appeal and upheld deletion of disallowance of ₹47.76 crore made under Section 36(1)(iii) in the case of Reliance Coal Resources Pvt. Ltd. for Assessment Year 2020–21.
The dispute arose from interest charged by the assessee on loans advanced to its Netherlands-based subsidiary at 5%, while it had borrowed funds from its holding company at 15%. The Assessing Officer held that the lower rate of interest resulted in understatement of income and disallowed a portion of interest expenditure.
The CIT(A) deleted the disallowance, noting that the loans to the overseas subsidiary were in foreign currency, whereas borrowings from the holding company were in Indian rupees. It was further observed that the subsidiary operated in jurisdictions where prevailing interest rates were significantly lower.
The Tribunal affirmed these findings. It held that benchmarking of interest rates in cross-border transactions must be aligned with the market conditions of the borrower’s jurisdiction. The LIBOR-based rate of 3–4% prevailing internationally was considered relevant, and the assessee’s charging of 5% was found to be consistent with such benchmarks.
The Tribunal also placed significant reliance on the Transfer Pricing Officer’s order, which had accepted the interest rate as being at arm’s length without proposing any adjustment.
Further, it noted that the assessee had earned substantial foreign exchange gains on account of currency fluctuations, which had been offered to tax, undermining the Assessing Officer’s allegation of loss.
In view of these factors, the Tribunal held that the disallowance lacked factual and legal basis and upheld the order of the CIT(A).
Full Judgement / Attachment
Full Judgement
Frequently asked questions about Income Tax Tribunal
- What is the Income Tax Appellate Tribunal (ITAT)?
- The ITAT, set up in 1941, is the second appellate authority in direct tax matters and the final fact-finding body. It hears appeals against orders of the Commissioner (Appeals) and certain other authorities, through benches across India.
- What is the time limit to file an appeal before the ITAT?
- An appeal must be filed within two months from the end of the month in which the order is communicated. This rule has applied since 1 October 2024 and continues under the Income-tax Act, 2025. The Tribunal can condone delay for sufficient cause.
- Can the ITAT stay a tax demand?
- Yes. The Tribunal can stay recovery of a disputed demand while an appeal is pending, usually on deposit of a part of the demand or furnishing security. Stays are granted for a limited period, and the appeal is expected to be decided within it.
- Where does an appeal go after the ITAT?
- An appeal against an ITAT order lies to the High Court, but only on a substantial question of law. A further appeal lies to the Supreme Court.
- How can White Collar Professional help with a ITAT matter?
- Post your requirement on White Collar Professional to receive proposals from verified Chartered Accountants and tax Advocates, compare them, and pay securely through the platform. This page also tracks the latest ITAT ITAT orders as they are reported.
