ENTERTAINMENT NETWORK (INDIA) LTD, MUMBAI V. ACIT 11(1), MUMBAI

ITA 3114/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9194 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: M SUBHAMANIAN
• Keywords: Depreciation; Source of fund
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 3114/MUM/2011 ASSESSMENT YEAR 2006-07 ENTERTAINMENT NETWORK (INDIA) LIMITED, 4 TH FLOOR, A WING, MATULYA CENTRE, SENAPATI BAPAT MARG, LOWER PAREL (WEST), MUMBAI 400 013. PAN: AAACE 7796 G VS. ACIT-11(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ITA NO. 3115/MUM/2011 ASSESSMENT YEAR 2007-08 ENTERTAINMENT NETWORK (INDIA) LIMITED, 4 TH FLOOR, A WING, MATULYA CENTRE, SENAPATI BAPAT MARG, LOWER PAREL (WEST), MUMBAI 400 013. PAN: AAACE 7796 G VS. ADDL. CIT-11(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ITA NO. 1863/MUM/2011 ASSESSMENT YEAR 2006-07 ACIT-11(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. ENTERTAINMENT NETWORK (INDIA) LIMITED, 4 TH FLOOR, MATULYA CENTRE, SENAPATI BAPAT MARG, LOWER PAREL (WEST), MUMBAI 400 013. PAN: AAACE 7796 G (APPELLANT) (RESPONDENT) ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 2 REVENUE BY : SHRI GIRIJA DAYAL ASSESSEE BY : SHRI M. SUBHAMANIAN DATE OF HEARING : 03-12-2012 DATE OF PRONOUNCEMENT : 26-12-2012 O R D E R PER SANJAY ARORA, A.M. THESE ARE THE SET OF THREE APPEALS FOR TWO AS SESSMENT YEARS, BEING AYS 2006-07 AND 2007-08, WITH THE REVENUE BEING IN APPEAL FOR T HE FIRST YEAR. THE SAME ARISE OUT OF SEPARATE ORDERS BY THE COMMISSIONER OF INCOME TA X (APPEALS)-3, MUMBAI (CIT(A) FOR SHORT) DATED 01-12-2010, PARTLY ALLOW ING THE ASSESSEES APPEALS CONTESTING ITS ASSESSMENTS U/S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE RELEVANT YEARS. THE APPEALS R AISING COMMON ISSUES, WERE TAKEN UP TOGETHER FOR HEARING, AND ARE BEING DISPOSED OF VIDE A COMMON, CONSOLIDATED ORDER. 2. AT THE OUTSET IT WAS OBSERVED BY THE BENCH THAT THE ASSESSEES APPEALS ARE BELATED BY A PERIOD OF 36 DAYS EACH. THE SAME ARE A CCOMPANIED BY AN APPLICATION FOR CONDONATION OF DELAY, DULY SUPPORTED BY AN AFFIDAVI T. ITS STANDS AVERRED THEREIN THAT THE CONCERNED EXECUTIVE, HANDLING THE MATTERS, PROC EEDED ON LEAVE, AND SUBSEQUENTLY LEFT THE ORGANIZATION. HENCE, THE DELAY. THE REVEN UE DID NOT SERIOUSLY DISPUTE THE SAME OR RAISE ANY OBJECTION AS TO THE VERACITY OF T HE REASONS STATED IN THE AFFIDAVITS, WHICH WE FIND TO BE SIGNED BY THE SAME DIRECTOR, SH RI PRASHANT BABULAL PANDAY, WHO HAS VERIFIED THE APPEAL MEMO. THE PERIOD OF DELAY D OES NOT RAISE ANY SERIOUS QUESTION IN OUR MINDS AS TO THE ASSESSEES BONA FIDES IN THE MATTER, OR AN INFERENCE AS TO LACHES . THE DELAY WAS ACCORDINGLY CONDONED, AND THE HEARI NG OF ASSESSEES APPEALS PROCEEDED WITH, AFTER ADMITTING THE SAME. 3. THE ONLY ISSUE IN THE ASSESSEES APPEAL IS IN RESPECT OF DISALLOWANCE OF INTEREST EXPENDITURE ON BORROWED CAPITAL, CLAIMED IN THE SUM OF RS. 259.26 LAKHS AND RS. ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 3 202.82 LAKHS FOR THE TWO CONSECUTIVE YEARS RESPECTI VELY U/S. 36 (1)(III) OF THE ACT, ON THE BASIS THAT THE BORROWED CAPITAL HAD NOT BEEN UT ILIZED FOR THE PURPOSE/S OF ITS BUSINESS BY THE ASSESSEE. THE ASSESSING OFFICER (AO ); THE MATTER BEING ESSENTIALLY FACTUAL, DREW HIS FINDINGS ON THE BASIS OF ASSESSEE S CASH FLOW STATEMENT, WHICH APPEARS THAT PGS. 5 & 6 OF THE ASSESSMENT ORDER (FO R AY 2006-07, TO WHICH YEAR WE SHALL RESTRICT OUR DISCUSSION FOR THE MOMENT). THE SUMMARY OF THE SAME FINDS REFLECTION AT PARA 2.1.2 OF THE APPELLATE ORDER, AS UNDER: (AMOUNT IN RS. LAKHS) A. CASH IN FLOW FROM OPERATING ACTIVITIES 2, 283.55 B. PROCEEDS FROM FRESH ISSUE OF SHARES 20,025.8 7 C. PROCEEDS FROM LONG TERM BORROWINGS 3,500.0 0 D. PROCEEDS FROM SHORT TERM BORROWINGS 17,70 0.00 E. SALE OF INVESTMENTS 6,156.73 -------------- 49,666.15 (*) -------------- THE ABOVE FUNDS HAVE BEEN UTILIZED AS UNDER: A. PURCHASE OF FIXED ASSETS 21,672.22 B. PURCHASE OF INVESTMENTS 8,483.53 C. LOANS AND INVESTMENTS IN SUBSIDIARY INCL INT 757.95 D. PREOPERATIVE EXPENSES 811.04 E. REPAYMENT OF SHORT TERM BORROWINGS 17,959.25 --------------- 49,683.99 --------------- NET DEFICIT FOR THE YEAR 17.85 --------------- [(*) WRONGLY TYPED AS 47,666.15 IN THE APPELLATE ORDER] FURTHER DETAILS WERE CALLED FOR. THE BORROWING OF RS. 35 CRORES WAS IN FACT ASSUMED AT RS. 65 CRORES IN THE FORM OF INTER CORPORATE DEP OSITS (ICDS) FROM BENNETT COLEMAN & CO. LTD. (BCCL) @ 8% P.A., OF WHICH RS. 3 0 CRORES WAS PAID ON 15-02- 2006. THE TOTAL INTEREST LIABILITY ON THIS ACCOUNT AMOUNTED TO RS. 67.86 LAKHS . IN ADDITION, THE ASSESSEE-COMPANY HAD PAID INTEREST AT RS. 191.39 LAKHS TO THE MINISTRY OF INFORMATION AND BROADCASTING, GOVERNMENT OF INDI A (MIB) FOR DELAYED PAYMENT OF THE LICENSE FEES. THE ASSESSEES INVESTMENTS, WH ICH WERE IN TAX-EXEMPT SECURITIES, HAD INCREASED FROM RS. 6.29 CRORES (AS AT THE BEGIN NING OF THE YEAR) TO RS. 34.24 ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 4 CRORES AS AT ITS END, SO THAT BORROWINGS FROM BCCL WERE PRIMARILY UTILIZED TOWARD THE SAME. THE INTEREST TO MIB WAS AGAIN ONLY THE P ENAL IMPLICATION OF A CONTRACT AND, IN ANY CASE, AROSE OUT OF THE INABILITY TO ABI DE BY THE TERMS OF THE CONTRACT. THE DEBIT OF SUCH INTEREST TO THE OPERATING STATEMENT F OR THE YEAR WAS ONLY A DEVICE BY THE ASSESSEE TO REDUCE ITS TAX LIABILITY. ACCORDINGLY, THE AO EFFECTED A DISALLOWANCE FOR THE ENTIRE INTEREST CLAIMED, I.E., RS. 259,25,610/ -. IN APPEAL, IT WAS EXPLAINED THAT THE LONG TERM BORROWING HAD BEEN UTILIZED FOR PAYING O NE TIME ENTRANCE FEE (OTEF) AND ACQUIRING ASSETS, I.E., SETTING UP OF BROAD-CAS TING TOWERS, AND HAD BEEN, RATHER, TO THAT EXTENT (RS. 44.93 LAKHS), CAPITALIZED AS A PAR T OF THE CAPITAL COST OF THE ASSETS. THE ICD FUNDS HAD BEEN TAKEN AS TEMPORARY LOANS TO FINANCE THE WORKING CAPITAL REQUIREMENTS. THE NEED HAS ARISEN AS THERE AROSE CE RTAIN DISPUTES AS TO THE EFFECTIVE DATE OF COMMENCEMENT OF OPERATIONS FOR THE PURPOSE OF LICENSE FEE TO BE PAID TO THE MIB, WITH THE ASSESSEE-COMPANY APPROACHING THE HON BLE HIGH COURT OF DELHI UNDER WRIT JURISDICTION. THE HONBLE COURT DIRECTED IT TO PAY 1/3 RD OF THE TOTAL LICENSE FEE AS WELL AS INTEREST FOR THE DELAYED PERIOD @ 8% P.A. T HE LD. CIT(A) WAS OF THE VIEW THAT THIS PAYMENT COULD NOT BE REGARDED AS PENAL IN NATU RE, BUT ONLY AS COMPENSATORY TOWARD DEPRIVING THE USE OF FUNDS TO THE GOVT. OF I NDIA FOR THE PERIOD OF DELAY. NO DISALLOWANCE IN ITS RESPECT WOULD THUS ARISE. AS RE GARDS INTEREST ON LOAN OF RS. 35 CRORES, IT WAS CLEAR THAT THE SAME WAS UTILIZED FOR LOANS AND ADVANCES TO SISTER CONCERN AS ALSO INVESTMENT IN TAX-EXEMPT SECURITIES , WHICH HAD WITNESSED AN INCREASE OF RS. 24.6 CRORES DURING THE YEAR. A PROPORTIONATE DISALLOWANCE WAS, THUS, CALLED FOR. 3. BEFORE US, WHILE THE REVENUE DISPUTES THE R ELIEF IN RESPECT OF INTEREST PAID TO MIB (RS. 191.39 LAKHS), THE ASSESSEE CHALLENGES THE PROPORTIONATE DISALLOWANCE OF INTEREST ON BORROWING (RS. 67.86 LAKHS). THE ASSESS EE, APART FROM ON ITS FINANCIAL STATEMENTS, CLAIMING OF THEM TO BE IN SUPPORT OF IT S CASE THE RESERVES & SURPLUS AS AT THE YEAR-END BEING AT RS. 216.18 LAKHS, ALSO REL IED ON THE DECISION IN THE CASE OF S.A. BUILDERS LTD. VS. CIT(APPEALS) (2007) 288 ITR 1 (SC) AND CIT VS. RELIANCE UTILITIES & POWER LTD . (2009) 313 ITR 340 (BOM). ON BEING QUERIED BY THE BENCH AS TO THE PURPOSE OF THE LOANS AND ADVANCES TO SISTER CONCERN/S, THE LD. AR EXPLAINED ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 5 THAT THE SAME WAS TO A SUBSIDIARY COMPANY AND, IN F ACT, CARRIED INTEREST @ 8% P.A., I.E., THE RATE AT WHICH INTEREST WAS PAID ON THE BO RROWINGS. FURTHER, AS REGARD INVESTMENTS, THESE COULD NOT BE TERMED AS TAX-EXEMP T INASMUCH AS THE INVESTMENTS WERE IN MUTUAL FUNDS WITH GROWTH OPTION, YIELDING CAPITAL GAINS. THESE COULD NOT, ACCORDINGLY, BE TERMED AS TAX-EXEMPT. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MA TERIAL ON RECORD, AS ALSO THE CASE LAW CITED. 4.1 OUR FIRST OBSERVATION IS THAT THE SUM UNDER D ISPUTE HAS BEEN WRONGLY MENTIONED IN BOTH THE APPEALS. WHILE REVENUES APPEAL STATES THE FIGURE AT RS. 191,30,764/-, THE INTEREST PAID TO MIB IS ACTUALLY RS. 1,91,40,760/- (REFER PG. 7 AND PARA 2.1.6 OF THE ASSESSMENT ORDER AND THE APPELLATE ORDER RESPECTIVE LY). THE DISALLOWANCE IN ITS RESPECT HAS BEEN ACTUALLY MADE AT RS. 191,39,268/-, I.E., AT NET OF INTEREST RECEIVED ON SECURITY WITH MPSEB. THE ASSESSEE, ON THE OTHER HAN D, MENTIONS THE ENTIRE INTEREST DISALLOWED IN ITS APPEAL MEMO (RS. 259,25,610/-), E VEN AS IT HAS BEEN ALLOWED RELIEF TO A SUBSTANTIAL EXTENT THEREOF BY THE FIRST APPELL ATE AUTHORITY. 4.2 ON MERITS, WE MAY, TO BEGIN WITH, EXAMINE T HE ASSESSEES CASH FLOW STATEMENT FOR THE YEAR. THE TOTAL CASH INFLOW IS AT RS. 49,6 66.15 LAKHS . EXCLUDING THE SHORT- TERM BORROWINGS AND ITS REPAYMENT (RS. 177 LAKHS) F ROM BOTH THE SIDES; THE SAME HAVING BEEN RE-PAID DURING THE YEAR ITSELF IN FULL, AS WELL AS NETTING THE MOVEMENT OF FUNDS IN INVESTMENTS (ON THEIR PURCHASE AND SALE DURING THE YEAR), AS WELL AS THE FINANCING COST, THE SAME WOULD BE AS UNDER:- A. SOURCE OF FUNDS: (RS IN LAKHS) REMARKS A. CASH IN FLOW FROM OPERATING ACTIVITIES 2,283.55 B. PROCEEDS FROM FRESH ISSUE OF SHARES 20,025.87 C. PROCEEDS FROM LONG TERM BORROWINGS 3,500.00 25,809.42 B. UTILIZATION OF FUNDS: (RS IN LAKHS) REMARKS A. PURCHASE OF FIXED ASSETS 21,672.22 ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 6 B. INCREASE IN INVESTMENTS 2326.80 C. LOANS AND INVESTMENTS IN SUBSIDIARY 760.00 D. P REOPERATIVE EXPENSES 811.04 25,570.06 C SURPLUS: 239.36 (A B) D FINANCING COST (NET OF INTEREST 2.05L) 259.20 (259.25 2.05) E SHORTFALL (@) 17.84 (D C) [@ IMPLYING A REDUCTION IN CASH/CASH EQUIVALENTS, I .E., AT THE END OF THE CURRENT YEAR VIS-A-VIS THE BEGINNING OF THE YEAR.] 4.3 HOW COULD, WE WONDER, THE BORROWED FUNDS, FORMING P ART OF THE LONG TERM FUNDS, GENERATED AT RS. 258.09 CRORES DURING THE RE LEVANT YEAR, BE SAID TO HAVE BEEN UTILIZED FOR NON-BUSINESS PURPOSES ? THAT IS, ASSUMING THE INVESTMENTS AND THE LOANS AND ADVANCES TO SUBSIDIARY TO REPRESENT A NON-BUSIN ESS PURPOSE. IN OTHER WORDS, THE REVENUE COULD AT BEST CLAIM A PROPORTIONATE DISALLO WANCE U/S. 36(1)(III) IN RESPECT OF INTEREST ON LONG TERM BORROWINGS (RS. 67.86 LAKHS), WHICH THOUGH WOULD BE ON THE FUNDS AVAILABLE, ON AN AVERAGE, DURING THE YEAR. WE MAY NOT ATTEMPT TO REFLECT THE WORKING HERE (FOR WHICH THE FIGURES AFORE-MENTIONED WOULD HAVE BE SUBSTITUTED BY AVERAGE FIGURES FOR THE YEAR RS. 30 CRORES, ENTAI LING AN INTEREST PAYMENT OF RS. 28.23 LACS, HAVING BEEN REPAID DURING THE YEAR), IT WOULD SUFFICE TO SAY THAT THE SAME SHALL SCALE DOWN THE EXTENT OF DISALLOWANCE, I.E., ASSUMING SO, TO AROUND 10% OF THE INTEREST THEREON (RS. 67.86 LAKHS). WE STATE SO ON LY TO EMPHASIZE THE UN-TENABILITY OF THE REVENUES CASE ON THE VERY FACE OF THE CASH FLO W STATEMENT, EVEN AS THERE IS NO CASE FOR DISALLOWANCE INASMUCH AS THERE CAN BE NO P RESUMPTION THAT THE BORROWED INTEREST BEARING FUNDS ARE UTILIZED FOR WHICH PURPO SE. THE ONLY EXCEPTION WOULD BE IN CASE OF DEDICATED FUNDS OR BORROWINGS, WHICH HAVE T O BE OR ARE REQUIRED TO BE EXPENDED TOWARD THE STATED PURPOSE, SO THAT WHERE N OT FOR THE PURPOSE OF BUSINESS, DISALLOWANCE TO THE PROPORTIONATE EXTENT WOULD FOLL OW. FURTHER, THE INVESTMENT, AS IT APPEARS TO US, IS ONLY IN BUSINESS ASSETS, PERHAPS HELD TO PROVIDE A LIQUIDITY RESERVE. WHERE SOME INCOME THEREFROM IS TAX-EXEMPT, A DISALL OWANCE U/S. 14A, RATHER THAN ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 7 U/S. 36(1)(III), WOULD ARISE, FOR WHICH THERE IS NO CASE BY THE REVENUE. THE LOAN TO SUBSIDIARY, AS AFORE-STATED, IS INTEREST BEARING, Y IELDING AN INTEREST OF RS. 2.05 LACS FOR THE YEAR. NO CASE FOR DISALLOWANCE, EVEN WHERE FINA NCED OR CONSIDERED AS FINANCED OUT OF BORROWED FUNDS, IN THE FACTS AND CIRCUMSTANC ES OF THE CASE, THUS, ARISES. 4.4 WITH REGARD TO DEDUCTION IN RESPECT OF INTE REST PAID TO MIB, OUR FIRST OBSERVATION IS THAT THE SAME STANDS CLAIMED NOT U/S . 36(1)(III), BUT ONLY U/S. 37(1), GIVEN THE ASSESSEES CLAIM THAT THE BORROWED FUNDS WERE UTILIZED FOR WORKING CAPITAL REQUIREMENTS AND FOR SETTING UP RADIO STATIONS. THE CONTRACT WITH GOVT. OF INDIA IS ONLY A BUSINESS CONTRACT AS FAR AS ASSESSEE-COMPANY IS CONCERNED. EVEN ASSUMING A DEFAULT ON ITS PART, WHICH THOUGH IT CONTESTS IN A COURT OF LAW, THE INTEREST OBLIGATION, EVEN AS STATED BY THE FIRST APPELLATE AUTHORITY, IS ONLY A CONTRACTUAL DEFAULT OR LIABILITY. THERE IS NO QUESTION OR CASE OF ANY INFRACTION OR B REACH OF ANY LAW. IN FACT, IT IS NOT EVEN CLEAR IF THE SAME ARISES UNDER THE TERMS OF TH E CONTRACT OR IS AS PER THE DIRECTIONS OF THE HONBLE COURT. IT WOULD THUS BE A LITTLE CON SEQUENCE EVEN IF SOME BORROWED CAPITAL WAS UTILIZED (FOR A GIVEN PERIOD) TO PAY TH E SAME, BEING ONLY A BUSINESS PURPOSE, AS IS A PAYMENT OF LICENSE FEE ITSELF. THE PAYMENT, IN ANY CASE, IS COMPENSATORY IN CHARACTER. THE REVENUES ONLY CASE, RATHER, COULD BE THAT INTEREST, CORRESPONDING TO THE PERIOD FOR WHICH THE RADIO STA TIONS WERE NOT OPERATIVE AND UNDER INSTALLATION, BE CAPITALIZED, AS ITSELF DONE BY THE ASSESSEE FOR A PART OF INTEREST PAID DURING THE YEAR. NO CASE FOR A DISALLOWANCE WOULD A RISE UNLESS THE REVENUE SHOWS THE PAYMENT TO BE NOT FOR BUSINESS PURPOSE OR FOR A NY INFRACTION OF LAW, IN WHICH CASE THE ENTIRE OF IT, AND NOT THE INTEREST INCURRE D ON THE CORRESPONDING BORROWINGS (WHERE SO), WOULD STAND TO BE DISALLOWED, AND AS IN FACT STANDS DONE BY THE REVENUE. THE IMPUGNED ORDER THUS MERITS CONFIRMATION IN RESP ECT OF THIS DISALLOWANCE ALSO. WE DECIDE ACCORDINGLY. 5. WE NEXT CONSIDER THE ASSESSEES APPEAL FOR THE SECOND YEAR UNDER REFERENCE, I.E., AY 2007-08. THE AOS ORDER, WHO HAS PROCEEDED TO DISALLOW THE ENTIRE INTEREST EXPENDITURE AS DEBITED BY THE ASSESSEE IN ITS ACCOU NTS (OPERATING STATEMENT) IS BEREFT OF ANY DETAILS, APART FROM THE NAMES OF THE PAYEES TO WHOM IT STANDS PAID. THAT IS, NO ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 8 CASE FOR DISALLOWANCE IS MADE OUT, WHILE THE ASSESS EES CASE, AS WE UNDERSTAND, CONTINUES TO BE THE SAME. THE LD. CIT(A), IN APPEA L, FOLLOWED HIS EARLIER ORDER, I.E., FOR AY 2006-07, OBSERVING THE FACTS OF THE CASE AND , THUS, THE RESPECTIVE CASES OF THE PARTIES, TO BE SIMILAR. AGGRIEVED, THE ASSESSEE IN APPEAL. 6. THE INTEREST, IN THE MAIN, IS TO BCCL, FROM W HICH RS. 35 CRORES, CARRYING INTEREST @ 8% P.A., WAS OUTSTANDING AS AT THE END O F THE IMMEDIATELY PRECEDING YEAR. WE HAVE ALREADY FOUND THE SAME TO HAVE BEEN UTILIZE D FOR BUSINESS PURPOSES. FURTHER, EVEN IF THERE WERE TO BE A FINDING AS TO S OME PART THEREOF HAVING BEEN EXPENDED FOR NON-BUSINESS PURPOSES, THE FUNDS BEING FUNGIBLE, AS SOON AS FRESH FUNDS ARE PLOUGHED BACK OR INFUSED BY THE ASSESSEE IN ITS BUSINESS, THE SAME (UNLESS DEDICATED FOR A PARTICULAR PURPOSE UNDER THE TERMS OF THEIR RAISING) OR THE FUNDS GENERATED BY THE BUSINESS OPERATIONS, WOULD TO THAT EXTENT SUBSTITUTE THE BORROWED FUNDS QUA THE NON-BUSINESS PURPOSE. IN OTHER WORDS, THERE CA N BE NO CONTINUING PRESUMPTION AS TO UTILIZATION FOR A NON-BUSINESS PU RPOSE, AND THE FACTS OF EACH YEAR HAVE TO BE CONSIDERED SEPARATELY. THE ASSESSEE RETU RNING INCOME, PRIOR TO FINANCIAL EXPENSES AND DEPRECIATION, AT RS. 13.42 CRORES, THE REVENUES CASE IS WHOLLY WITHOUT MERIT. WE DECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWED AND THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DECEMBER, 2012 SD/- SD/- (I.P. BANSAL) (SANJAY ARORA) JUDICAL MEMBER AC COUNTANT MEMBER MUMBAI, DATE: DECEMBER 26, 2012 TNMM ITA NO. 3114/MUM/2011 ITA NO. 3115/MUM/2011 ITA NO. 1863/MUM/2011 9 COPY TO: 1. APP E L L ANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER ASST. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI