ACIT, UDAIPUR v. M/s. Jagdish Swaroop Mewara & Party, UDAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR BEFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI V.D. RAO JUDICIAL MEMBER ITA NO: 316 / JU / 2009 ASSTT. YEAR: 2004 2005 ASSISTANT COMMISSIONER OF VS M/S JAGDISH SWAROOP M EWARA INCOME-TAX CIRCLE-2 & PARTY AJMER GROUP HO UDAIPUR. 424 PANCHRATNA COMPLEX UDAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT NI GAM D.R. RESPONDENT BY : NONE ORDER PER V.D. RAO: JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) UDAIPUR DATED 19 TH MARCH 2009 RELATING TO ASSESSMENT YEAR 200 2005. THE REVENUE HAS RAISED THE FOLLOWING SOLE GROUND OF APPEAL BEFORE THE TRIBUNAL. 2 ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE THE LD. CIT (A) H ERRED IN DELETING THE DISALLOWANCES OF RS. 6 54 854/- MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF INTEREST AGAINST INTERESTS FR EE LOANS. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE HAS FILED R ETURN OF INCOME DECLARING TOTAL INCOME OF RS. 43 91 740/-. THE RETU RN WAS PROCESSED U/S 143 (1) AND SUBSEQUENTLY U/S 143 (3) THE ASSESSING OFFICER MADE AN ADDITION OF RS. 6 54 854/- ON ACCOU NT OF THE INTEREST FREE LOANS GIVEN TO THE AOP AND ASSESSMENT WAS MADE ON TOTAL INCOME OF RS. 59 46 594/-. ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE LD. CIT (A) THE LD.CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE AND THE REVENUE CARRIED MATTER IN APPEAL B EFORE THE TRIBUNAL. THE TRIBUNAL DIRECTED THE ASSESSING OFFI CER TO DO A FRESH ASSESSMENT. AFTER THE DIRECTION OF THE HONBLE ITA T THE AO AGAIN DISALLOWED RS.6 54 854/-. 3. THE ASSESSEE AOP DERIVES INCOME FROM SALE OF COU NTRY LIQUOR AND IMFL / BEER. THE ASSESSEE AOP WAS FARMED TO CA RRY ON THE 3 BUSINESS OF COUNTRY LIQUOR AND IMFL / BEER AFTER OB TAINING THE CONTRACT FOR THE SAME FROM STATE EXCISE DEPARTMENT FOR THE DISTRICT OF AJMER. DURING THE COURSE OF THE SECOND ASSESSME NT PROCEEDINGS THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFF ICER WHICH IS EXTRACTED AS UNDER. IN RESPECT OF ADDITION OF RS. 654854.00 ON ACCOUNT OF INTEREST AGAINST INTEREST FREE LOANS TO THE AOP OF THE NEXT F.YS WE WOULD LIKE TO STATE HERE THAT THE ASSESSE E AOPS IS A LIQUOR CONTRACTOR WHICH WAS AWARDED TO HIM FOR O NE YEAR AND THE AMOUNT GIVEN TO SHRI ASHOK KUMAR JI (MAJOR MEMBER OF THE AOP) IS FOR EARNEST MONEY WITH THE TE NDER APPLICATION FOR OBTAINING THE NEW CONTRACT FOR THE NEXT FINANCIAL YEAR. THE SAID AMOUNT WAS GIVEN AT THE E ND OF THE F.Y. 2003-2004 (MOSTLY BETWEEN 15-03-2004 TO 31-03- 2004). FURTHER WE WOULD LIKE TO STATE HERE THAT MOST OF TH E MEMBERS ARE COMMON BETWEEN THE EXISTING AOP AND NEW AOP AND FOR OBTAINING NEW CONTRACT IT IS NECESSARY TO GIVE SUC H AMOUNT TO THE NEW AOP. 4 BASICALLY IT IS A WITHDRAWAL ON BEHALF OF THE MEMBE RS OF THE EXISTING AOP FROM THEIR CAPITAL CONTRIBUTION O N WHICH NO INTEREST HAS PAID BY THE ASSESSEE AOP BUT FOR THE C ONVENIENCE OF THE ACCOUNTING PROCEDURE IT IS DEBITED TO THE SH RI ASHOK KUMAR JI (MAJOR MEMBER OF THE AOP). FURTHER WE WO ULD LIKE TO STATE HERE THAT IN ADDITION TO THE MEMBERS CAPITAL THE ASSESSEE AOP IS ALSO HAVING A NON INTEREST BEARING FOUND DURING THE RELEVANT F.Y. 2003 2004 ON WHICH NO IN TEREST HAS PAID BY THE ASSESSEE AOP. THE ASSESSEE AOP IS HAVING A NON INTEREST BEARING FUND OF RS. 81362904.00 HOWEVE R THE CUMULATIVE ADVANCE UP TO 31-03-2004 COMES TO RS. 66674700.00 ONLY WHICH IS WITHIN THE RANGE OF NON INTEREST BEARING FUND AVAILABLE WITH THE ASSESSEE AOP. THER EFORE THE INTEREST ON ACCOUNT OF INTEREST FREE LOANS / ADVANC ES TO THE AOPS COULD NOT BE CHARGEABLE. FURTHER AS FAR AS THE BUSINESS EXPEDIENCY OF TE IN TEREST FREE ADVANCE IS CONCERN WE WOULD LIKE TO STATE HER E THAT THE AMOUNT SO PAID AS ADVANCE IS IN THE BUSINESS INTERE ST OF THE 5 EXISTING MEMBERS OF THE ASSESSEE AOP AS MOST OF TH E MEMBERS ARE COMMON BETWEEN THE EXISTING AOP & THE N EW AOP AND THE AMOUNT SO ADVANCED IS GIVEN WHOLLY & EXCLUSIVELY USED FOR THE BUSINESS INTEREST OF THE E XISTING MEMBER OF THE ASSESSEE AOP. THEREFORE THE ASSESSE E AOP DOS NOT CHARGED THE INTEREST ON SAID ADVANCE AMOUNT . THE ABOVE CONTENTION OF THE ASSESSEE IS ALSOACCEPTED BY THE HONOURBLE CIT (APPEALS) UDAIPUR AND ALLOWED THE RE LIEF ON THIS POINT IN HIS APPEAL ORDER. THEREFORE WE HERE BY REQUEST YOUR HONOUR TO KINDLY CONSIDER THE CONTENTION OF TH E ASSESSEE AS WELL AS THE APPEAL ORDER PASSED BY THE CIT (APPE ALS). UDAIPUR IN THIS REGARD AND PLEASE DO NOT TAKE ANY N EGATIVE INFERENCE ON ACCOUNT OF IT. 4. HOWEVER THE ASSESSING OFFICER HAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE ON THE GROUND THA T THE ASSESSEE HAS GIVEN ADVANCES TO OTHER AOP. IT CANNOT BE BENE FICIAL TO THE INTEREST OF THE ASSESSEE AND BUSINESS EXPEDIENCY FO R THE ASSESSEE TO PROVIDE SUCH AN INTEREST FREE ADVANCES TO OTHER AOP S AND HE 6 DISALLOWED RS. 6 54 854/- . ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE LD. CIT (A). IT WAS SUBMITTED BEFORE TH E LD. CIT (A) THAT THE INTEREST FREE ADVANCE WAS GIVEN TO ONE MR. ASHOK KUMAR JI UDAIPUR MAJOR MEMBER OF AOP M/S JAGDISH SWAROO P MEWARA & PARTY WHICH IS BEFORE US FOR THE PURPOSE OF EXCI SE CONTRACT. THE ASSESSEE HAS FURTHER SUBMITTED BEFORE THE CIT (A) W AS SUBMITTED BEFORE THE LD. CIT (A) THAT HE IS HAVING SUFFICIENT INTEREST FREE FUNDS AMOUNT TO RS. 8 13 62 904/- AND OUT OF WHICH HE ADVANCED ONLY RS. 6 66 74 700/- AND THE REMAINING FUNDS ARE AVAILABLE WITH THE ASSESSEE WHICH ARE NON INTEREST BEARING FUNDS. THE LD. CIT (A) AFTER CONSIDERING THE ISSUE PASSED A DETAILED O RDER AND HE HAS GIVEN A FINDING THAT THE FUNDS ADVANCED BY THE ASSE SSEE FROM THE NON INTEREST BARING FUNDS FOR THE BUSINESS EXPEDIE NCY OF THE ASSESSEES AOP AND ALLOWED THE APPEAL FILED BY THE ASSESSEE. ON BEING AGGRIEVED REVENUE CARRIED THE MATTER IN APPEA L BEFORE THE TRIBUNAL. 5. THE LD. D.R. HAS SUPPORTED THE ORDER PASSED BY T HE ASSESSING OFFICER. 7 6. WE HAVE HEARD BOTH THE SIDES PERUSE THE RECORD S AND GONE TO THE ORDERS OF THE AUTHORITIES BELOW. 7. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHE R THE ADVANCE MADE BY THE ASSESSEE TO THE AOP SHRI ASHOK KUMAR JI (MAJOR MEMBER OF THE AOP) FOR THE PURPOSE OF THE BUSINESS OR NOT. THE ASSESSEE HAS EXPLAINED IN DETAIL BEFORE THE ASSESSI NG OFFICER HOW THE ADVANCE MADE BY THE ASSESSEE IS FOR THE BUSINES S EXPEDIENCY TO THE ASSESSEES AOP AND IT WAS ALSO SUBMITTED THAT T HE ADVANCE WAS MADE TO THE AOP FOR THE PURPOSE OF LIQUOR TENDER AN D IN OUR CONSIDERED OPINION THE ASSESSEE IN LIQUOR BUSINESS WHEN SOME AMOUNT IS PAID IN RELATION TO THE BUSINESS OF THE A SSESSEE IT HAS TO BE CONSIDERED FOR THE PURPOSE OF BUSINESS EXPEDIEN CY AND APART FROM THE ABOVE THE LD. CIT (A) HAS GIVEN A CATEGORI CAL FINDING THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUN DS AND THE ADVANCES MADE BY THE ASSESSEE FROM THE NON INTEREST BARING FUNDS AND THEREFORE IN VIEW OF THE SPECIFIC FINDING OF THE LD. CIT (A) THE ADDITION MADE BY THE ASSESSING OFFICER CANNOT B E JUSTIFIED. 8 WE THEREFORE IN VIEW OF THE ABOVE WE UPHELD THE O RDER OF THE LD. CIT (A) AND DISMISSED THE APPEAL FILED BY THE REVEN UE. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED . 9. O RDER WAS PASSED IN THE OPEN COURT DATED ON 11 TH FEBRUARY 2011. SD/- SD/- (S.V. MEHROTRA) (V.D. RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH FEBRUARY 2011 KAMAL KUMAR COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. INCOME-TAX OFFICER 4. CIT 5. D/R 6. GUARD FILE