KETAKI BENARA,AGRA vs. INCOME TAX OFFICER , AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH ‘SMC’, JAIPUR Jh fot; iky jko] U;kf;d lnL; ds le{k Before : Shri Vijay Pal Rao, Judicial Member vk;dj vihy la-@ITA No.858/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2014-15 cuke Smt. Ketaki Benara The ITO Vs. 1205, Professor Colony Ward-2(1), Hari Parwat, Agra (U.P.) Ajmer LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AMPPS 9801 E vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls @Assessee by :Shri Jinesh Sogani, CA jktLo dh vksj ls@ Revenue by Shri Abhishek Sharma,Addl. CIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 03/10/2019 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 09/10/2019 vkns'k@ ORDER PER VIJAY PAL RAO, JM This appeal by the assessee is directed against the order dated 07-09-2017 of ld. CIT(A), Ajmer for the Assessment Year 2014-15. The assessee has raised the following ground:- ‘’Looking to the facts and circumstances of the case the ld. CIT(A) has erred in confirming disallowance of Rs. 11,21,785/- out of interest paid to parties on loan procured during the year.’’

2 ITA No. 858/JP/2017 Smt. Ketaki Benara, vs ITO, Ward-2(1), Ajmer 2.1 The appeal of the assessee was earlier dismissed ex-parte by the Tribunal vide order dated 20-03-2018. However, the said Tribunal order was recalled in the M.A. No. 125/JP/2018 vide order dated 27th March,

2019. This appeal of the assessee was again taken up for hearing and disposal. 2.2 The only issue raised by the assessee in this appeal is regarding

disallowance of interest amounting to Rs. 11,21,785/- made by AO on the ground that the assessee had given advances to the related parties at lesser rate of interest in comparison to the rate of interest on which the

assessee had borrowed funds. The ld.AR of the assessee submitted that the assessee had borrowed funds at normal rates and the AO had not disputed this fact. However, as against this, the fund was borrowed @

9% and 12% interest rate. Some of the money was advanced by the assessee to the other sister concerns @ 9% per annum which is also on the same rate at which the assessee had borrowed part funds. The ld.AR of the assessee submitted that due to the different rate of interest and

interest income, the AO made the addition of the differential amount which is not justified. The ld.AR of the assessee referred to the details of

3 ITA No. 858/JP/2017 Smt. Ketaki Benara, vs ITO, Ward-2(1), Ajmer funds borrowed and advances made and further submitted that when no

fund was advanced to the sister concern during the year under

consideration then the disallowance made by the AO on account of

unexplained interest expenditure is not justified.]

2.3 On the other hand, the ld. DR relied on the orders of the authorities

below and submitted that assessee's total borrowed fund is Rs. 4.79 crores

and advances made is Rs. 2.33 crores as on 31-03-2014. Therefore, when

the average rate of interest on the loan is more than the rate of interest

received from related parties then differential amount was rightly

disallowed by the AO and added to the income of the assessee.

2.4 I have considered the rival submissions as well as relevant

materials on records. The AO has made disallowance of Rs. 11,21,785/-

on account of loss in respect of interest income by observing as under:-

‘’From the above, it is clear that the assessee has made investment from interest bearing funds from which either no income is earned or would be earned in near future as major investment are in private limited companies in which the assessee is interest or the interest of family members is involved.

Further the logic employed by A.R. that the interest paid on loans taken on current year is amounting to Rs.

4 ITA No. 858/JP/2017 Smt. Ketaki Benara, vs ITO, Ward-2(1), Ajmer 2494314/- only against which she has earned interest of Rs. 2909916/- is also not acceptable as the loan forwarded to M/s. Benara Bearing and PistonsLtd is coming as opening balance and during the year the loan is restricted from Rs. 27042433/- in previous year to Rs. 23362965/- at the end of the year. The assessee has taken loan of approximately Rs. 4.79 crorer and the loan forwarded to M/s. Benara Bearing and Piston Ltd is only 2.33 crore hence balance interest bearing fund have been invested in assets which do not yield only income and hence the current years loan have been invested in assets which do not yield any income.

The interest paid in excess of interest earned at Rs. 1121785/- is added to the income of the assessee. Penalty proceedings u/s 271(1)© of the Income Tax Act 1961 is made for furnishing of inaccurate particulars of income and concealment of income.’’

Thus it is clear that the advances given to sister concern as per opening

balance is Rs. 2,70,42,433/-whereas closing balance is Rs. 2,33,62,965/-.

This fact is not disputed as recorded by the AO and therefore, it is a case

of reduction in the advance to the sister concern during the year under

consideration. Once there is no fresh advance given to the sister concern

during the year under considerations and there is no disallowance of

interest in the preceding year then advance given in the preceding year to

the sister concern cannot be a reason for disallowance of interest for the

year under consideration. Hence, in view of undisputed fact that there was

5 ITA No. 858/JP/2017 Smt. Ketaki Benara, vs ITO, Ward-2(1), Ajmer no fresh advance to the sister concern rather there is a reduction in the outstanding balance during the year under consideration and no disallowance on account of interest expenditure was made in the preceding year then disallowance made by the AO is not justified and the same is deleted. Thus the solitary ground of the assessee is allowed. 3.0 In the result, the appeal of the assessee is allowed Order pronounced in the open court on 09 /10/2019. Sd/- ¼fot; iky jko½ (Vijay Pal Rao) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 09 /10/ 2019 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Smt. Ketaki Benara, Agra 1. 2. izR;FkhZ@ The Respondent- The ITO , Ward- 2 (1), Ajmer vk;dj vk;qDr¼vihy) @ CIT(A), 3. 4. vk;dj vk;qDr@ CIT, विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No.858/JP/2017) 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत