JAI AMBEY WINES,AJMER vs. ITO, WD1(2), AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’ble SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 328/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2016-17 M/s. Jai Ambey Wines cuke The ITO Vs. C/o R.L. Mantri Ward 1(2) Chitrakut Colony, Chourasiyawas Road Ajmer Vaishali, Ajmer LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAGFJ 7681 L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Sunil Porwal, CA jktLo dh vksj ls@Revenue by: Smt. Monish Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 22/11/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 15 /02/2023 vkns'k@ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 13-07-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2016-17 wherein the assessee has raised the following ground of appeal. ‘’Disallowance of interest of Rs.19,41,398/- not in business expediency is also bad in law.’’ 2 JAI AMBEY WINES VS ITO, WARD 1(2), AJMER 2.1 Apropos solitary ground of the assessee, the facts as emerges from the order of the ld. CIT(A) at pages 18 & 19 are as under:- ‘’The AO further added a sum of Rs.19,41,398/-on account of disallowance of interest as the appellant is not showing interest income in respect of loan and advances of Rs.1,86,94,593/- while at the same time, the appellant claimed bank charged and interest of Rs.21,65,860/-. The appellant was asked to produce the books of accounts and to furnish justification of interest and business necessity for giving the interest free advance. The AO averred that the appellant is dealing in liquor business, however it has given advance to M/s Hotel Hard Rock, M/s AVR Business Pvt. Ltd, Hotel India, Hotel Jawahar International, JMD Real Estate Pvt. Ltd. without any business necessity. No supporting evidence has been provided by the appellant to prove that interest free advance has been given on account of business necessity. The appellant was having fixed assets of Rs.3,18,897/-. The appellant on one hand was paying huge interest of Rs.21,65,807/- and on the other hand given interest free advances without any business necessity. However, the appellant has not filed any supporting documentary evidence to prove that interest free advances were given out of interest free receipts. The appellant has in respect of the above ground submitted that before making disallowance of interest paid on borrowed money alleged to have been advanced to sister concerns, what is required to be examined by the Assessing Officer is the extent to which benefit of borrowed funds is granted by way of allowing advances to sister concerns – CIT vs Motor General Finance Ltd (2005) 142 taxman 300 (Delhi. ‘’Where the Tribunal had retarded a finding that there was sufficient funds, other than borrowed money, available with the assessee in the form of share capital, share application money, reserves and surpluses for diverting a particular sum to its sister concern, it could not be said that the loan advanced to sister concern came out of the borrowed moneys – CIT vs Radico Khaitan Ltd. (2005) 142 taxman 681 (All).’’ 3 JAI AMBEY WINES VS ITO, WARD 1(2), AJMER Thus when there is no dispute in genuineness of transaction, payer, payee there is no issue for even non charging of interest from debtors and others ‘’CIT vs Indo Koppy Ltd. (2008) 167 ITR 172 (Delhi) The interest free funds as advanced are also to associate concerns with whom the funds are kept exchanged in emergency being in the same nature of business, it is prayed to delete the addition..’’ As per provisions of Section 37(1) expenses are allowed only when the same incurred wholly and exclusively for business purposes. Considering the facts, the capital of firm on which no interest is paid is considered for giving interest free advances. However, other interest free receipts shown from M/s, Jai Ambey Wines, Dehradun, Jai Wines Old, Ruby Enterprises, Sai Associates and Star Cong Trade is not considered for interest free advances as the appellant has not proved that receipts from these concerns have been subsequently given for interest free advances. Considering the above, it is treated as loan given without any business necessity and thus the addition by the AO on account of the interest disallowed, is upheld.

2.2 During the course of hearing, the ld. AR of the assessee has prayed that the ld. CIT(A) has erred in confirming the disallowance of interest of Rs.19,41,398/-. However, the ld. AR of the assessee filed the written submission with details of advances given to the parties. 2.3 On the other hand, the ld. DR supported the orders of the lower authorities and also relied upon the following case laws.

2.4 The Bench has heard both the parties and perused the materials available on record including the case laws cited by the parties. In this case, it is noted from the assessment order that the asseessee is dealing in liquor business but it has given advances to M/s. Hotel Hard Rock, M/s. AVR Business Pvt. Ltd., Hotel India, Hotel Jawahar International, JMD Real Estate Pvt. Ltd. without any business necessity. No supporting documents had been placed before the AO to prove that interest free advances were given on business necessity while the assessee was having only fixed assets only of Rs.3,18,897/-. The assesee on one hand paid huge interest of Rs.21,65,807/- and on the other hand it had given interest free advances without any business necessity. The AO asked the assessee to prove the nexus that interest free receipts so received was given for interest free advances. During the course of hearing the ld. AR of the assessee submitted that the assessee has submitted justification before the AO as to business necessity for giving interest free advances which are as under:- 1. That during the year the assessee has paid the following amount to bank as interest and bank charges for business need. Bank Charges Rs.1,42,875.20 Bank interest Rs.20,22,932.00

Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 15 / 02/2023 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- M/s. Jai Ambey Wines, Ajmer 2. izR;FkhZ@ The Respondent- The ITO, Ward-1(2), Ajmer 3. vk;dj vk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 328/JP/2022) vkns'kkuqlkj@ By order,

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