DCIT CC 39, MUMBAI V. ETCO TELECOM LTD, MUMBAI

ITA 863/MUM/2011

• Counselvise Citation: 86319914 RSA 2011
• Duration Of Justice: 2 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 26-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Keywords: Bogus purchase; Search and seizure; Source of fund
• Section: 40A(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 743/MUM/2011 ASSESSMENT YEAR : 2005-06 M/S. ETCO TELECOM LTD. 142, ANDHERI INDUSTRIAL ESTATE OFF VEERA DESAI ROAD, ANDHERI (W) MUMBAI-400 053. PAN NO.AAACP 3383 N VS. DCIT CC - 39 MUMBAI. (APPELLANT) (RESPONDENT) ITA NO. 863/MUM/2011 ASSESSMENT YEAR : 2005-06 DCIT CC - 39 MUMBAI. VS. M/S. ETCO T ELECOM LTD. ANDHERI (W) MUMBAI-400 053. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI K.C.P. PATNAIK DATE OF HEARING : 26/08/2013 DATE OF PRONOUNCEMENT : 30 / 0 8 /2013 O R D E R PER B. RAMAKOTAIAH, AM: THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AGA INST THE ORDERS OF THE CIT(A)-41, MUMBAI DATED 19.11.2010. W E HAVE HEARD THE LD. COUNSEL AND THE LD. DR AND PERUSED THE PAPER BO OK ON RECORD FILED BY ASSESSEE. 2. BRIEFLY STATED, THE ASSESSEE COMPANY BELONGS TO THE ETCO GROUP WHEREIN SEARCH AND SEIZURE OPERATIONS HAVE BEEN UND ERTAKEN ON ITA NOS.743 & 863/M/11 A.Y.05-06 2 11.04.2007 AND THE GROUP DECLARED THE AMOUNT OF RS. 7,08,69,757/- AS UNDISCLOSED INCOME IN THE HANDS OF DIFFERENT CONCER NS/PERSONS OF THE GROUP. ACCORDINGLY FOR THE ASSESSMENT YEAR UNDER C ONSIDERATION THE ASSESSEE COMPANY DECLARED INCOME AT 1% OF SALES AT RS.16,95,239/-. IN ADDITION, THE ASSESSEE ALSO DISALLOWED INTEREST AT RS.1,85,597/- AND DISALLOWANCE U/S. 14A AT RS.2,000/-. CLAIM U/S. 35D WAS ALSO WITHDRAWN. IN THE COURSE OF ASSESSMENT, AO AFTER EX AMINING THE FUNDS AVAILABILITY CAME TO A CONCLUSION THAT FUNDS ARE MI XED FUNDS, ACCORDINGLY THE INTEREST EXPENSES CAN NOT BE CONSIDERED AS FULL Y UTILIZED FOR THE PURPOSES OF BUSINESS, THEREFORE, ESTIMATED 50% OF T HE INTEREST CLAIMED AS NOT PERTAINING TO BUSINESS AND AFTER CONSIDERING TH E AMOUNT ALREADY DISALLOWED BY ASSESSEE MADE AN ADDITION OF RS.6,53, 593/- TO THE DECLARED INCOME. FURTHER, HE ALSO NOTICED THAT THE ASSESSEE PURCHASED GOODS FROM M/S. TRITON INFOTECH PVT. LTD. AND DURIN G THE COURSE OF SEARCH, THE DIRECTOR OF THE COMPANY ADMITTED THAT T HESE ARE ACCOMMODATION BILLS PROVIDED. ON THE BASIS OF THE S AME, AO CAME TO THE CONCLUSION THAT THE ASSESSEE COULD HAVE PURCHASED F ROM GREY MARKET BY SAVING ON LOCAL TAXES LIKE SALES TAX AND VAT ETC. A S SALES ARE DECLARED BY ASSESSEE, HE WAS OF THE OPINION THAT THE GOODS COUL D HAVE BEEN PURCHASED AT 20% LESS THAN THE PRICE SHOWN AND THER EFORE, REDUCED THE PRICE OF PURCHASES BY AN AMOUNT OF RS.55,72,000/-. SINCE THE ASSESSEE ALREADY OFFERED 1% SALES IN THE RETURN, CORRESPONDI NG AMOUNT WAS REDUCED THEREBY MAKING THE DISALLOWANCE AT RS.52,92 ,000/- . IN ADDITION TO THE ABOVE THE ASSESSING OFFICER ALSO WORKED OUT DISALLOWANCE U/S. 14A AT RS.68,000/- AS AGAINST RS.2,000/- DISALLOWED BY ASSESSEE. 2.1 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, LD. CIT(A) DELETED THE DISALLOWANCE OF INTEREST, RESTRICTED TH E DISALLOWANCE OF PURCHASES AND RESTORED THE DISALLOWANCE OF SECTION 14A TO AO AFTER DETERMINING A REASONABLE AMOUNT. THEREFORE, ASSESSE E AND REVENUE ARE IN APPEAL. ITA NOS.743 & 863/M/11 A.Y.05-06 3 ITA NO.743/M/2011 (ASSESSEES APPEAL):- 3. IN THIS APPEAL, ASSESSEE RAISED ONLY ONE GROUND PERTAINING TO UPHOLDING THE DISALLOWANCE OF RS.11,20,000/- OUT OF PURCHASES MADE FROM M/S. TRITON INFOTECH PVT. LTD. IT WAS THE SUBM ISSION OF THE LD. COUNSEL THAT THE REVENUE DID NOT PROVE THE BOGUSNES S OF THE PURCHASES, THEREFORE, CIT(A) IS NOT CORRECT IN RESTRICTING THE AMOUNT ON THE BASIS OF ALTERNATE SUBMISSION MADE BY THE ASSESSEE BEFORE HI M. IN THE ALTERNATE, IT WAS ALSO SUBMITTED THAT AO WHILE WORKING OUT THE DISALLOWANCE GAVE BENEFIT OF 1% OF SALES OFFERED AS INCOME. THEREFORE , THE ADDITION TO THAT EXTENT SHOULD BE RESTRICTED. 3.1 THE LD. DR HOWEVER, REITERATED THE FACTS AS STA TED IN THE ORDER OF ASSESSING OFFICER AND ALSO SUBMITTED THAT THE REVEN UE IS IN CROSS APPEAL ON THE SAME ISSUE. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXA MINED THE RECORD. EVEN THOUGH THERE IS NO DETAILED DISCUSSION BY AO I N THE ASSESSMENT ORDER, IT SEEMS THE INVESTGATION UNIT MADE ENQUIRIE S AND TOOK STATEMENT FROM DIRECTOR OF M/S. TRITON INFOTECH PVT. LTD. THA T THE SAID COMPANY WAS ONLY GIVING ACCOMMODATION BILLS. THIS ASPECT WAS NO T FULLY OBJECTED TO BY THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEE DINGS OR BEFORE CIT(A). THEREFORE, THE FINDINGS OF AO TO THAT EXTEN T ARE NOT REBUTTED. FURTHER, AS SEEN FROM THE ASSESSMENT ORDER, AO DID GIVE CREDIT TO THE PURCHASES BY NOT DISALLOWING THE ENTIRE AMOUNT. ON PERUSING THE ORDER OF CIT(A), WE DO NOT SEE ANY REASON TO DIFFER FROM THE SAME AS LD. CIT(A) RESTRICTED THE AMOUNT OF ADDITION FROM ADHOC 20% DO NE BY AO WITHOUT ANY BASIS, TO A REASONABLE AMOUNT ON THE BASIS OF S O CALLED SAVING OF THE LOCAL TAXES. HIS ORDER IS AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT , ORDER OF THE AO AND FACTS OF THE CASE IN BRIEF ARE THAT THE AO HAS OBSERVED THAT THE APPELLANT COMPANY HAS SHOWN PURCHASES FROM M/S. TRITON ITA NOS.743 & 863/M/11 A.Y.05-06 4 INFOTECH PT. LTD AMOUNTING TO RS.2,78,60,000/- DURI NG THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF SEARCH ST ATEMENT OF SHRI KRISHNAKUMAR GUPTA, DIRECTOR OF M/S. TRITON INFOTEC H PVT LTD. WAS RECORDED WHO HAS STATED THAT GOODS WERE NOT SOLD TO THE APPELLANT COMPANY AND ONLY BILLING WAS MADE BY HIS COMPANY. D URING THE ASSESSMENT PROCEEDINGS, THE AO HAS HELD THAT ALTHOU GH THE PURCHASES ARE NOT PROVED FROM M/S. TRITON INFOTECH PVT LTD. BUT SALES SHOWN BY THE APPELLANT COMPANY WERE CONFIRMED BY THE RESPECTIVE PARTIES. THEREFORE, THE AO HAS CONCLUDED THAT PURCHASES WERE NOT MADE FROM M/S. TRITON INFOTECH PVT LTD. BU T PURCHASED FROM GREY MARKET TO AVOID THE SALES TAX, VAT AND OTHER L OCAL TAXES. THUS, THE INCOME OF THE APPELLANT HAS INCREASED AND THE A O HAS ADOPTED AN ESTIMATE @ 20% OF THE PURCHASE OF RS.2,78,60,000 /- AND PROPOSED ADDITION OF RS.55,72,000/-. AFTER ALLOWING THE RELIEF OF 1% DECLARED DURING THE COURSE OF SEARCH AN ADDITION OF RS.52,92,000/- WAS MADE. ON THE OTHER HAND, THE APPELLANT HAS SUBM ITTED THAT SINCE THE SALES HAVE BEEN CONFIRMED BY THE AO, THER EFORE, PURCHASES CANNOT BE REJECTED. THE APPELLANT HAS ALSO GIVEN A REASONABLE VIEW TO ESTIMATE THAT ON SOFTWARE ITEMS, SALES TAX 4% IS APPLICABLE. THEREFORE, THE AMOUNT OF SALES TAX ON SOFTWARE ITEM S TO THE VALUE OF RS.2,80,000/- @ 4% WILL BE AT RS.11,20,000/-. THE A PPELLANT HAS FURTHER REDUCED 1% OF SALES ALREADY OFFERED FOR TAX BUT THE AO HAS ALLOWED THIS RELIEF IN THE ASSESSMENT ORDER ITSELF WHICH IS NOT ACCEPTED. THE ARGUMENT OF THE A.R. IS SEEMS TO BE G ENUINE BECAUSE THE AO HAS ALLEGED THAT THE PURCHASE HAVE BEEN MADE FROM THE GREY MARKET TO AVOID SALES TAX AND TO INCREASE PROFIT TO THIS EXTENT. HOWEVER, THE A.O. HAS ESTIMATED THE LOCAL TAX @ 20% AND DISALLOWED RS.55,72,000/-. THE ESTIMATE ADOPTED BY THE AO IS WITHOUT ANY EVIDENCE AND SUBSTANCE. ON THE OTHER HA ND THE A.R. HAS ADOPTED THE ACTUAL SALES TAX RATE APPLICABLE @ 4%. THEREFORE, IT HAS TO BE ACCEPTED. KEEPING IN VIEW THE FACTS AND C IRCUMSTANCES THAT THE ESTIMATE SHOULD BE BASED ON FACTS AND SUBS TANCES, THEREFORE I AM OF THE VIEW THAT DISALLOWANCE ON ACC OUNT OF PURCHASES IS RESTRICTED TO RS.11,20,000/- IN PLACE OF RS.55,7 2,000/- DISALLOWED BY THE A.O. THUS THE GROUND OF APPEAL IS PARTLY ALL OWED. 4.1 TO THE EXTENT OF CIT(A)S ORDER IN RESTRICTING THE AMOUNT TO RS.11,20,000/- IS CONFIRMED. HOWEVER, WHILE RESTRI CTING THE SAME LD.CIT(A) SHOULD HAVE GIVEN CREDIT OF 1% OF SALES O FFERED BY THE ASSESSEE TO THE EXTENT OF RS.2,80,000/-. THIS BENEFIT ALSO I S TO BE GIVEN TO THE ASSESSEE AS WAS DONE BY AO. AO IS DIRECTED TO GIVE FURTHER BENEFIT OF 1% ITA NOS.743 & 863/M/11 A.Y.05-06 5 OF THE SALES OFFERED BY THE ASSESSEE. ACCORDINGLY, ASSESSEES GROUND IS PARTLY ALLOWED. ITA NO.863/MUM/2011 (REVENUES APPEAL) :- 5. THE REVENUE HAS RAISED FIVE GROUNDS ON THREE ISS UES. 6. GROUND NO.2 PERTAINS TO THE DISALLOWANCE OF THE AMOUNT OF BOGUS PURCHASES WHICH WAS RESTRICTED TO RS.11,20,000/- BY THE LD. CIT(A) AS AGAINST DISALLOWANCE OF RS.55,92,000/-. THIS ISSUE WAS ALREADY DISCUSSED IN DETAIL IN ASSESSEES APPEAL. FOR THE R EASONS STATED, THEREIN WE DO NOT FIND ANY REASON TO CONSIDER THE REVENUE G ROUND AS AO WITHOUT ESTABLISHING ANY THING SIMPLY DISALLOWED 20% OF THE PURCHASES. WE DO NOT SEE ANY REASON TO CONSIDER THE GROUND. THEREFOR E, THE SAME IS REJECTED. 7. GROUND NO.3 PERTAINS TO ALTERNATE CONTENTION OF THE REVENUE STATING THAT THE DISALLOWANCE IS AS PER PROVISIONS OF SECTION 40A(3). THIS GROUND IS RAISED FOR THE FIRST TIME BEFORE ITAT AS NEITHER AO NOR CIT(A) CONSIDERED THAT PURCHASES ARE MADE IN CASH AND HENC E, PROVISIONS OF SECTION 40A(3) ARE CALLED FOR. SINCE, THE FACT THAT PURCHASES ARE MADE IN CASH WAS NOT ON RECORD, THIS GROUND CAN NOT BE CONS IDERED AT ALL AS AO ALSO HAD NOT INVOKED THE SAID PROVISION WHILE MAKIN G DISALLOWANCE. THEREFORE, THE GROUND IS REJECTED. 8. THE GROUND NO.4 ALSO DOES NOT ARISE IN THE FACTS OF THE CASE. IT WAS THE CONTENTION THAT ENTIRE BOGUS PURCHASES SHOULD B E DISALLOWED AS PER THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF LI FE LINE DRUG AND INTERMEDIATE LIMITED IN ITA NO.5535/MUM/2007. WE WE RE NOT INFORMED ABOUT THE FACTS IN THE ABOVE CASE AND HOW SAME IS A PPLICABLE. BE THAT AS IT MAY, WE WERE SURPRISED AT THE GROUND RAISED BY T HE REVENUE THAT ENTIRE AMOUNT IS DISALLOWABLE. THERE IS A FINDING BY AO TH AT THE SALES ARE ITA NOS.743 & 863/M/11 A.Y.05-06 6 GENUINE. THERE IS ALSO A FINDING THAT THE ASSESSEE DID TRADE IN GOODS STATED TO HAVE BEEN SOLD. AO GAVE A FINDING THAT EV EN THOUGH THE PURCHASES FROM M/S TRITON INFOTECH LTD. ARE BY WAY OF ACCOMMODATION BILLS, IT CAN NOT BE RULED OUT THAT ASSESSEE DID PU RCHASE FROM GREY MARKET. AO ONLY DISALLOWED 20% OF THE SO CALLED PUR CHASES WHICH WAS RESTRICTED TO THE POSSIBLE SAVINGS AND TAX AT 4%. I N VIEW OF THE FACTUAL POSITION IN THIS CASE AND FACT THAT AO ONLY RESTRIC TED TO 20% OF PURCHASES CLAIMED, IT IS SURPRISING THAT THE REVENUE NOW CONT ENDS THAT THE ENTIRE AMOUNT IS DISALLOWABLE. WHEN ASSESSING OFFICER DID NOT MAKE DISALLOWANCE OF ENTIRE AMOUNT, ITAT CAN NOT IMPROVE UPON THE ORDER OF ASSESSING OFFICER. THEREFORE, THE GROUND CAN NOT BE ENTERTAINED AND ACCORDINGLY REJECTED. 9. GROUND NO.5 IS WITH REGARD TO DISALLOWANCE OF AM OUNT U/S. 14A. LD. CIT(A) DIRECTED AO TO MAKE DISALLOWANCE ON A RE ASONABLE BASIS FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE VS. DCIT 328 ITR 81) . IT IS THE REVENUES CONTENTION THAT THE SAID DECISION WAS NOT ACCEPTED,THEREFORE, THE G ROUND IS RAISED. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF L D. CIT(A) WHICH DIRECTED AO TO FOLLOW THE PRINCIPLES LAID DOWN BY THE HON'BL E JURISDICTIONAL HIGH COURT. WE DO NOT SEE ANY REASON TO INTERFERE WITH T HE DIRECTION. ACCORDINGLY GROUND REJECTED. 10. THAT LEAVES US WITH GROUND NO.1, WHICH IS AS UN DER :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT NO DISALLOWANCE OF INTEREST EXPENSES IS CALLED FOR ON ACCOUNT OF INTER EST ON BORROWED FUND RELATING TO INTEREST FREE LOANS GIVEN BY THE A SSESSEE ON THE GROUND THAT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE COMPANY ARE MORE THAN THE LOANS GIVEN IGNORING THE FACT THE ASSESSEE COMPANY HAS NOT FURNISHED SUCH STATEMENT VIDE QUEST IONNAIRE DATED 13.5.2009 AND THEREFORE, PRESUMPTION THAT ASSESSEE COMPANY HAS USED OWN FUND TO GIVE INTEREST FREE LOANS CAN NOT B E RAISED IN THE PRESENT CASE. ITA NOS.743 & 863/M/11 A.Y.05-06 7 11. AS STATED EARLIER, ASSESSEE CLAIMED INTEREST EX PENDITURE TO THE TUNE OF RS.16,78,379/-. AO GAVE A FINDING THAT ASSESSEE HAS ADVANCED LOANS OF RS..58.72 CRORES OUT OF WHICH ADVANCES OF RS.54. 68 CRORES WERE INTEREST FREE. THE ASSESSING OFFICER WAS OF THE OP INION THAT SINCE FUNDS ARE MIXED AND THERE WAS A POSSIBILITY OF USE OF INT EREST BEARING FUNDS AND PROVIDING THEM AS INTEREST FREE LOANS CAN NOT BE RU LED OUT. SINCE THE ASSESSEE DID NOT PROVIDE THE NECESSARY DETAILS, HE MADE A DISALLOWANCE OF 50% OF INTEREST EXPENSES AND AFTER REDUCING THE AMO UNT ALREADY ADDED BACK BY ASSESSEE, ASSESSING OFFICER MADE AN ADDITIO N OF RS.6,53,593/-. LD. CIT(A) DELETED THE SAID ADDITION. 12. THE LD. DR REITERATED THE FACTS AS STATED IN TH E ASSESSMENT ORDER AT PAGE-3 WHEREAS THE LD. COUNSEL SUBMITTED THAT THE A SSESSEE HAS RS.77.23 CRORES OF OWN FUNDS. FURTHER, IT WAS SUBMI TTED THAT THE ASSESSEE HAS EARNED INTEREST OF RS.86,67,205/- AND PAID INTEREST OF RS.60,91,806/-, THUS HAVING NET INCOME OF RS.24,75, 399/-. IT WAS SUBMITTED THAT THE INTEREST PAID INCLUDED INTEREST PAID TO BANK AT RS.16,78,379/- OUT OF WHICH ASSESSING OFFICER DISAL LOWED 50% OF THE AMOUNT. HE ALSO SUBMITTED THAT THE ASSESSEE ITSELF DISALLOWED AN AMOUNT OF RS.1,85,597/- BEING PROPORTIONATE TO DISALLOWANC E ON LC DISCOUNTING CHARGES, BILL DISCOUNTING ,BANK INTEREST AND OTHER INTEREST AND REFERRED TO THE WORKOUT IN PAGE 15 OF THE PAPER BOOK FILED. IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAS ALREADY CONSIDERED PART OF THE AMOUNT FOR DISALLOWANCE AND IT HAS MORE FUNDS THAN AMOUNT ADVA NCED. NO DISALLOWANCE IS REQUIRED ON THE BASIS OF PRINCIPLES AVAILABLE ON THE ISSUE. HE REFERRED TO THE DETAILED SUBMISSION MADE BEFORE LD. CIT(A) IN THIS REGARD. 13. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE R ECORD. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AGREE THAT TH E FINDINGS OF THE LD. ITA NOS.743 & 863/M/11 A.Y.05-06 8 CIT(A) AND AS SUBMITTED ASSESSEE HAD ITS OWN INTERE ST FREE FUNDS IN THE FORM OF SHARE CAPITAL, RESERVES AND DEBENTURES TO A N EXTENT OF RS.41.00 CRORES AND BALANCE INTEREST FREE LOANS AND OTHER FU NDS TOTALING TO RS.77.23 CRORES. FURTHER, THE ASSESSEE ITSELF DISAL LOWED PROPORTIONATELY INTEREST TO THE TUNE OF RS.1,85,597/-. THESE ASPECT S WERE RIGHTLY EXAMINED AND CONCLUDED BY THE CIT(A) AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT , ORDER OF THE AO AND BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY HAS RECEIVED INTEREST FREE LOANS OF RS.30 CRORES FROM T HE BANKS AND PAID INTEREST OF RS.16,78,379/-. ON THE OTHER HAND, THE APPELLANT HAS ALSO ADVANCES LOANS TO OTHERS AMOUNTING TO RS. 58.7 2 CRORES OUT OF WHICH 54.68 CRORES WERE INTEREST FREE LOANS. THE AO HAS ADMITTED THAT THE APPELLANT COMPANY HAS ITS OWN FUNDS AND GI VEN INTEREST FREE LOANS BUT BECAUSE OF THE NEXUS OF OWN FUNDS AN D INTEREST FREE LOANS WAS NOT ESTABLISHED, THEREFORE AN AD HOC DISA LLOWANCES OF RS. 6,53,593/- WAS MADE. BEFORE ME, THE APPELLANT HAS S UBMITTED THAT THE COMPANY HAS INTEREST FREE FUNDS AMOUNTING TO RS.77,23,84,188/- AND ONLY INTEREST FREE LOANS ARE GIVEN AMOUNTING TO RS.54.68 CRORES WHICH IS OUT OF THESE FUNDS AND NO DISALLOWANCES IS FOR. THE APPELLANT HAS ALSO RELIED ON DECISION O F HONBLE COURTS (SUPRA) WHERE IT IS HELD THAT NO DISALLOWANCE OF IN TEREST CAN BE MADE IF THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE. MOREOVER, THE APPELLANT HAS ALSO ITSELF DISALLOWED RS1,85,597 /- IN THE COMPUTATION OF INCOME. FROM THESE FACTS OF THE CASE , IT IS OBSERVED THAT THE APPELLANT HAS RS. 77.23 CRORES INTEREST FR EE FUNDS AVAILABLE WITH HIM AND ADVANCED LOAN OF RS. 54.68 CRORES AS I NTEREST FREE. THE AO HAS NOT DENIED THESE FACTS BUT ONLY ON THE PRESU MPTION THAT POSSIBILITY OF USE OF INTEREST BEARING FUNDS FRO NO N BUSINESS PURPOSES COULD NOT BE RULED OUT AND MADE AN AD HOC DISALLOWANCE OF 50% OF INTEREST EXPENSES. SINCE ON THE FACTS OF THE CASE, IT IS CLEAR THAT THE APPELLANT HAS ITS OWN FUNDS OUT OF WHICH I NTEREST FREE LOANS HAVE BEEN GIVEN. THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATI ON VS. CIT AND OTHER DECISIONS OF HONBLE COURTS (SUPRA) IT IS HEL D THAT THE DISALLOWANCE MADE BY THE AO ON AD HOC BASIS IS NOT SUSTAINABLE, HENCE DELETED. GROUND OF APPEAL IS ALLOWED. 13.1 WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ABOVE ORDER, ACCORDINGLY GROUND IS REJECTED. IT SEEMS THAT THE L D. CIT(A) MENTIONED INTEREST FREE LOANS OF RS.30.00 CRORES FROM THE BAN KS IN HIS ORDER AT LINE ITA NOS.743 & 863/M/11 A.Y.05-06 9 NO.3 WHICH IN FACT IS FROM DEBENTURES. HOWEVER, THI S MISTAKE DOES NOT MAKE ANY EFFECT ON THE FINAL OUTCOME OF THE ORDER, AS SOURCE OF FUNDS ARE INTEREST FREE. HENCE, GROUND NO.1 IS REJECTED. 14. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND REVENUES APPEAL IS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- (DR. S.T.M. PAVALAN) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 30/08/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.