Jyotindra International, Palanpur vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL " C " BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI, A.M.) I.T. A. No. 2914 /AHD/2011 & C.O. No. 4/AHD/2012 (Assessment Year: 2008-09)

A.C.I.T., B.K. Circle, V/S M/s. Jyotindra International Palanpur Jyotindra Group Compound Ahmedabad High Way, Palanpur

M/s. Jyotindra International V/S A.C.I.T., B.K. Circle, Jyotindra Group Compound Palanpur Ahmedabad High Way, Palanpur PAN No. AABFJ6484E (Appellant) (Respondent)

I.T.A. No. 2148/AHD/2012 & C.O. No. 218/AHD/2012 (Assessment Year: 2009-10)

A.C.I.T., B.K. Circle, V/S M/s. Jyotindra International Palanpur Jyotindra Group Compound Ahmedabad High Way, Palanpur

M/s. Jyotindra International V/S A.C.I.T., B.K. Circle, Jyotindra Group Compound Palanpur Ahmedabad High Way, Palanpur PAN No. AABFJ6484E (Appellant) (Respondent)

Appellant by : Shri M.K. Singh, Sr. D.R. Respondent by : Smt. Urvashi Sodhan, A.R.

(आदेश )/ORDER

Date of hearing : 11-12-2014 Date of Pronouncement : 04-03-2015 2 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

PER SHRI ANIL CHATURVEDI,A.M.

1. These appeals filed by the Revenue and CO of the assessee are against the order of CIT(A)-XX, Ahmedabad dated 12.09.2011 & 5.07.2012 for A.Y. 2008-09 & 2009-10) respectively.

2. Before us both the parties submitted that though the appeals pertaining to 2 different assessment years but some of the grounds are identical in both the years and therefore both the appeals can be heard together. We therefore proceed to dispose of all the appeals together for the sake of convenience and thus proceed with the facts for A. Y. 2008-09.

3. The facts as culled out from the material on record are as under.

4. Assessee is a partnership firm stated to be engaged in the business of manufacturing, trading and exporting Phyllium and other agro based products. Assessee filed its return of income for A.Y. 08-09 on 29.09.2008 declaring total income of Rs. 4,33,130/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 28.12.2010 and the total income was determined at Rs. 2,14,12,590/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who vide order dated 12.09.2011 granted partial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A) Revenue as well as Assessee are now in appeal before us;-

5. The grounds raised by the Revenue reads as under:-

1. "1). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.25,56,814/- made by the Assessing Officer, on account of interest expenses:

2). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.2,60,700/- made by the Assessing Officer on account of stamp duty for pledge agreement and processing fees charged by bank.

3). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.15,04,328/- made by the Assessing Officer, on account of repairs, renovation, building road, labour charges and maintenance expenses.

4). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.9,64,104/- made by the Assessing Officer, on account of machinery reconditioning charges of existing plant and machinery.

3 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

5). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.74,66,684/- made by the Assessing Officer, on account of disallowance of expenses u/s.40(a)(ia) of the Act.

6). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.63,51,462/- made by the Assessing Officer, on account of seeds purchases expenses u/s.40A(2).

7). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.13,00,000/- made by the Assessing Officer, on account of milling charges expenses.

8). On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad ought to have upheld the order of the Assessing Officer.

9). It is therefore, prayed that the order of the Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad may be set-aside and that of the Assessing Officer be restored."

6. On the other hand, the grounds raised by the Assessee in its CO reads as under:-

1. Ld. CIT (A) erred in law and on facts in directing AO to verify bills issued for Inland Transport and Ocean Freight in support of the proposition advanced by the appellant that they were only reimbursement of expenses. Ld. CIT (A) ought to have granted relief claimed by the appellant rather than issuing direction to AO to examine when complete bill wise details were already submitted before AO during the assessment proceedings.

2. Ld. CIT (A) erred in confirming disallowance of Rs. 5,75, 370/- made by AO out of Terminal Handling charges u/s 40(a)(ia) of the Act without taking into consideration submissions made by the appellant.

Ld. CIT (A) ought to have deleted such disallowance of legitimate business expenses.

We now first take up Revenue's Appeal in ITA No. 2914/AHD/2011.

1st ground is with respect to deletion of addition of Rs. 25,56,814/-.

7. On perusing the Balance Sheet, A.O noticed that Assessee had taken loan from bank and on account of interest to bank debited Rs. 33,95,149/-. AO also noticed that Assessee had also paid interest of Rs. 3,59,788/- to others. A.O also noticed that Assessee had advanced loans and advance of RS. 2,04,28,883/- to Jyotindra Brothers and Rs. 28,14,882/- to Jyotindra Herbal Industries, both being specified parties u/s. 40A(2b). Assessee was asked to explain as to why proportionate interest expenses on the amount advanced to its sister concerns not be disallowed and was also asked to furnish the cash flow statement. In response to the query of the AO, Assessee inter alia submitted that the amount received from bank was against the security of goods and receivables and therefore it was not possible to siphon off the funds to provide 4 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 interest free loans. It was further submitted that the amount that was advanced to its sister concerns was in the nature of trade advance for a very short term and was towards the purchase of goods. It was further submitted that the amount that has been advanced was out of the interest free capital and unsecured loan and the interest paid was for genuine business expenditure. The submission of the Assessee was not found acceptable to the A.O. A.O noted that the interest free advance taken by Jyotindra Brothers from the Assessee has been advanced further by them on which it was charging interest. A.O was therefore of the view that Assessee was diverting its profit to other concerns and therefore did not accept the contentions of the Assessee. He thereafter considering the average interest cost to Assessee on the loans, worked out proportionate interest expenses at Rs. 25,56,814/- and disallowed the same. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:-

3.5 As stated by the AO himself, interest paid to Dena Bank of Rs. 33,95,149/- was paid to the Bank on cash credit limit against security of goods. Interest paid to three other parties was of Rs.3,59,788/--. As regards the interest paid on Cash Credit Limit, one cannot say that there was diversion or siphoning of funds. As against the interest paid to other parties of Rs.3,59,788/- the interest disallowed by the AO works out to Rs.25,56,814/-. The AO did not establish any nexus between the interest bearing funds and the interest free advances. Appellant is having sufficient interest free funds. In the light of the decisions relied on by the AR, impugned disallowance is not in accordance with law. It is seen that for the assessment year under consideration i.e. 2008-09, both the debtor firms - Jyotindra Brothers and Jyotindra Herbal Industries returned income of Rs.1,19,530/- and Rs. Nil (after set off of brought forward depreciation of Rs.

1,95,723/-) respectively. Impugned disallowance is deleted. This ground of appeal is allowed.

8. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

9. Before us, ld. D.R. submitted that during the course of assessment proceedings, Assessee was asked to submit cash flow statement in support of its contention that no borrowed funds have been diverted to the sister concerns but Assessee did not submit the cash flow statement. He further submitted that Assessee has not demonstrated the availability and use of interest free funds for advancing the loans and advance to its sister concerns. He thus supported the order of A.O. Ld. A.R. on the other hand submitted that Assessee has taken loan from bank under PCL and against pledge of goods. In case where the limits were in the nature of 5 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 pledge, the banks keep the goods purchased out of the funds secured under its lock and key, therefore, it was not possible to siphon off the funds to provide interest free loans. She further submitted that Assessee was having sufficient interest free funds in the form of share capital and unsecured loan. She pointed to page 16 of the paper book to demonstrate that the aggregate capital and interest free unsecured loan was to the extent of Rs. 7.65 crore which was far in excess of the amount advanced. She further submitted that the cash flow statement was furnished before A.O. She also placed reliance on the decision of Hon'ble Gujarat High Court in the case of Raghuvir Synthetics 355 ITR 222 and the decision in the case of Bombay High Court in the case of Reliance Utilities 313 ITR 340. She thus supported the order of CIT(A).

10. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to disallowance of interest. We find that AO in the order has noted that Assessee was asked to furnish the cash flow statement and Ld. DR before us has also submitted that cash flow statement was not submitted by the assessee. Before us though Ld. AR has submitted that the cash flow statement was submitted but she could not point out the same from the paper book. We further find that CIT(A) while deleting the addition has passed on the burden of proving the nexus between the interest bearing funds and availability of interest free advances on the AO. We are of the view that AO can only prove the nexus provided the required information is made available to him. As seen in the present case, no material has been placed on record to demonstrate that the cash flow was submitted to the AO. Before us it was also submitted that the loans obtained from Bank was in the nature of pledge and therefore the funds could not have been diverted. We however find that Assessee has not placed the sanction letter of the bank from which the terms and conditions of the bank loan received by the assessee could be ascertained. In such a situation, we are of the view that the issue needs re-examination at the end of AO. We therefore remit the issue to the file of AO to re-examine the issue afresh and thereafter decide the matter in accordance with law. The assessee is 6 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 also free to furnish additional documents in support of its contention and is also directed to furnish all the required information promptly before AO so as to enable him to decide the issue. In the result, this ground is allowed for statistical purposes.

Ground No. 2 is with respect to deletion of addition of Rs. 2,60,700/- on account of stamp duty for pledge agreement and processing fees charged by the bank.

11. During the course of assessment proceedings, on perusing the details of bank charges, A.O noticed that it included Rs. 1,00,700/- on account of stamp duty charges and Rs. 1,60,000/- as processing fees. The Assessee was asked to justify its claim of revenue expenditure to which it was interalia submitted that Rs. 1,00,700/- was paid towards stamp duty for pledge agreement entered with Dena Bank for working capital limits and with respect to payment of Rs. 1,60,000/-, it was submitted that it was the processing fees charged by the bank. The submissions of the Assessee was not found acceptable to the A.O as he was of the view that the expenditure were in the nature of capital expenditure and should have been capitalized. He accordingly disallowed the aggregate amount of Rs. 2,60,700/- and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:-

4.3 AO observed that out of the Bank charges debited by the appellant of Rs.9,11,000/- an amount of Rs.

1,00,700/- was paid towards stamp duty and Rs.1.6 lakhs was paid towards processing fee of the credit agreement with Dena Bank, He held that these expenses were in the nature of capital expenditure and hence disallowed the sum of Rs.2,60,700/-. The contentions of the learned AR in brief are that the expenditure incurred was towards pledge agreement for borrowing of working capital from the Bank and therefore in the light of the decisions cited at 60 ITR-52(SC), 326 ITR-29(P&H), 48 DTR 452(Mum.) and Ahmedabad Tribunal's decision, the impugned disallowance is unwarranted. 4.4 I am inclined to accept the contentions of the appellant. Since the expenses were incurred towards the pledge agreement with the Bank for borrowing working capital, it cannot be said that any capital asset has come into existence. Therefore, the question of capitalizing the incidental expenses does not arise, Hence impugned disallowance is deleted, This ground of appeal is allowed.

12. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

7 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

13. Before us, ld. D.R. relied on the order of A.O. On the other hand, Ld. AR reiterated the submissions made before CIT(A) and supported his order.

14. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deleting the addition has noted that the expenses incurred towards pledge agreement with the bank was for borrowing working capital availed from bank and by incurring the expenditure no capital asset has come into existence. Before us no material has been placed on record by the Revenue to controvert the findings of CIT(A) and thus this ground of Revenue is dismissed.

Ground n. 3 is with respect to deletion of Rs. 15,04,328 on account of repairs etc.

15. On perusing the details of expenditure, A.O noticed that Assessee had paid Rs. 6,30,422/- to Welldor Engineers and from the copy of the invoices, he noticed that the payment was for purchase of doors, windows, ventilators. He also noticed that payment of Rs. 1,00,580/- was made to Vishwas Trading towards purchase of paints, oil paints, primer etc. On verification of the bills of Bhavanbhai Prajapati amounting to Rs. 4,22,818/-, he noticed that it was for dredging of earth, RCC granite fitting, wall plaster etc. The Assessee was asked to justify the expenses as revenue expenses to which Assessee interalia submitted that the payments were made for renovation of the offices and factory premises and were revenue in nature. The submission of the Assessee was not found acceptable to the A.O, as he was of the view that the expenditure incurred was for overhauling of assets which would give a benefit of enduring nature. He was further of the view that the nature of expenditure incurred confirmed that some capital work has definitely been carried out by the Assessee. He accordingly treated the amount paid to Welldor Engineers as capital expenditure and 40% of the expenditure was considered by him to be as labour charges for fitting of doors, windows, partition etc and it was also treated as capital expenditure. Similarly, from the payment to Vishwas Trading, he considered the 8 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 expenses to be capital in nature and 40% of the expenses towards labour charges as capital expenses. With respect to the payment made to Bhawanbhai Prajapati, he noted that the expenditure was for building a new road which was considered by him to be capital expenditure and therefore disallowed the same. AO however allowed depreciation on the expenditure treated as capital expenses. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:

5.3 Having considered the contentions of the AR, I am inclined to agree with the AR. As seen from the assessment order AO was not able to controvert the contention of the appellant that the expenditure was only towards repairs and renovation. AO merely relied on the fact that the expenditure incurred was substantial compared to the w.d.v of the assets. I am of the view that the amount of expenditure alone does not alter the character of the expenditure. Therefore, AO is directed to allow the expenditure as Revenue expenditure. As the entire work of repairs and renovation was given on contract, making addition at the rate of 40% which works out to Rs.3,03,770/- towards alleged labour charge payments In unwarranted.

Thus, the entire disallowance of Rs. 16,7.1,475/- is deleted. AO is directed to withdraw the depreciation allowed on the said amount at the rate of 10% which worked out to Rs. 1,67,147/-.

16. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

17. Before us, ld. D.R. relied on the order of A.O. On the other hand, Ld. AR reiterated the submissions made before CIT(A) and supported his order.

18. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deleting the addition has noted that simply on the basis of quantum of expenditure vis-à-vis the WDV of assets, the expenditure cannot be treated as capital expenses. He has further given a finding that the entire work of repairs and renovation was given on contract and therefore the addition at 40% towards labour charge payments was also unwarranted. Before us no material has been placed on record by the Revenue to controvert the findings of CIT(A) and thus this ground of Revenue is dismissed.

Ground no. 4 is with respect to deletion of Rs. 9,64,104/- on account of machinery reconditioning charges.

9 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

19. On perusing the details of expenses of machinery parts and machinery reconditioning expenses, A.O noticed that Assessee has purchased certain machineries which has been claimed as Revenue expenditure. The list of expenses is tabulated at page 9 of the assessment order. Assessee was asked to justify its claim of expenses as revenue expenses to which Assessee interalia submitted that it had incurred heavy expenditure for repairs and reconditioning of the old machineries. It was also submitted that while repairing, the core machinery consisting of grinder and pulveriser were untouched and the other ancillary machineries were extensively renovated and replaced. It was further submitted that no new asset has come into existence by incurring the expenditure. The submissions of the Assessee was not found acceptable to the A.O, for the reason that as against the factory machinery of Rs. 36,84,203/-, Assessee had incurred total expenditure of Rs. 29,89,498/- under the head "reconditioning of machinery" which according to AO would yield enduring benefit to Assessee and therefore the expense was capital in nature. He therefore out of the total expenditure incurred, identified the expenditure which were of larger value and which according to him constituted towards the core part of machinery, and the aggregate of such expenditure amounting to Rs. 11,34,240/- was treated as capital expenditure but allowed depreciation on the same. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:-

"6.2 In the assessment order, AO held the expenditure of Rs.l 1,34,240/- towards repair and reconditioning of Plant and Machinery was in the nature of capital expenditure. Accordingly, he disallowed the same and allowed depreciation on the said amount. The reasoning given by the Officer while making the disallowance is the same lines as discussed at para-5,2 of this order. Learned AR contended that the machineries purchased were part of the core or main machinery (and were not machinery put to use independently). Following the findings given by me at para-5.3, I hold that impugned disallowance is not sustainable. It is deleted. Simultaneously, AO is directed to withdraw the depreciation allowed on the said amount @ 15%, which worked out to Rs. 1,70,136/-.

20. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

21. Before us, Ld. DR supported the order of AO and on the other hand Ld. AR supported the order of CIT(A).

10 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

22. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deleting the addition has noted that for treating the expenses to be capital in nature, A.O merely relied on the fact that the expenditure incurred by the assessee was substantial as compared to the WDV of the assets. Ld. CIT(A) further held that the amount of expenditure alone does not alter the character of the expenditure. Before us no material has been placed on record by the Revenue to controvert the findings of CIT(A) and thus this ground of Revenue is dismissed.

Ground No. 5 is with respect to deletion of expenses u/s. 40(a)(ia) of the Act.

23. During the course of assessment proceedings, A.O noticed that Assessee had paid Rs. 90,03,637/- to Soham Logistic Pvt. Ltd on account of Inland Transportation Charges (Rs. 17,32,335/-), Ocean Freight (Rs. 56,74,349/-), Terminal Handling Charges (Rs. 6,67,159/-) and Fees for Services rendered (Rs. 8,69,794/-). He also noticed that Assessee had deducted TDS only on payment of Rs. 9,61,583/-. The Assessee was asked to show cause as to why the expenses amounting to Rs. 80,42,054/- on which TDS was not deducted be disallowed to which Assessee interalia submitted that the inland transportation charges were collected by Soham Logistic Pvt. Ltd. and they in turn have paid to others and Soham Logistic Pvt Ltd has deducted TDS on the payments made by it. Assessee also produced a letter from Soham Logistic Pvt. Ltd. stating that it had made payments on behalf of Assesse as well as other parties. The reasons given by the assessee for non deduction of TDS from inland transportation charges was not found acceptable to the A.O. as he was of the view that the letter of Soham Logistic Pvt Ltd has not pointed out the details of payment received from Assessee on which it has made TDS payments and therefore it remained unverifiable. With respect to payment of Rs. 56,74,349/- towards ocean freight it was assessee's submission that the payment of Ocean Freight was to non resident Foreign Companies or their agents and therefore no TDS was required to be deducted in view of CBDT Circular No. 23 dated 19.09.1995.

11 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

The submissions of the Assessee on account of non deduction of TDS on Ocean Freight was not found acceptable to the A.O as he noticed that the payment was made to Soham logistic Pvt. Ltd. and it was the agent of the assessee. A.O was therefore of the view that the payment made to Soham Logistic Pvt Ltd was neither to a non resident ship owner nor to an agent of any non resident ship owners and therefore the payment does not come under the purview of CBDT Circular No. 723. He accordingly disallowed the expenditure u/s. 40(a)(ia) of the Act. With respect to payment of Rs. 6,67,159/- to Soham Logistic Pvt. Ltd. towards Terminal Handling Charges, A.O noted that TDS was deducted by the Assessee only on Rs. 91,789/- and further there was no evidence of deduction of TDS on the balance amount. He accordingly considered the expenses of Rs. 5,75,370/- made on account of Terminal Handling Charges on which no TDS was deducted to be not allowable u/s. 40(a)(ia) of the Act. He thus disallowed the aggregate payment of Rs. 80,42,054/- u/s. 40(a)(ia) of the Act. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A) who decided the issue by noting as under:-

7.3 As seen from para-8 of the assessment order, the AO observed that appellant deducted tax only of Rs.9,61,583/- out of the payment made of Rs.90,03,637/- to Soham Logistics Pvt. Ltd.( the clearing and forwarding agent of the appellant). Since no tax was deducted on the balance payment of Rs.80,42,054/- it was disallowed by the AO u/s,40(a)(ia). The said amount consists of 3 components namely Inland Transportation charges of Rs.17,92,335/-; Ocean freight charges of Rs.56,74,349/- and -Terminal handling charges of Rs.5,75,370/-.

7.3(i) Regarding the Inland Transport Charges, at para-8.2.1 of the assessment order, AO observed that appellant's contention that TDS was made by M/s. Sohan Logistic Pvt.Ltd. ( which in time paid the said sum to others) remain unsubstantiated and therefore, the said sum of being disallowed. The second component is Ocean freight payment of Rs.56,74,349/-. The contentions of the learned AR in this regard are that the above sums were only reimbursement of expenses paid by Soham Logistics Pvt. Ltd. to foreign non-resident shipping company. There was no mark up or service charge component in this amount. No TDS is required to be deducted when the expenses are only reimbursement and there is no element of profit or income. In support of this contention, he relied on the Ahmedabad Tribunal's decision dt. 13-05-2011 in the case of M/s. Satya Exim Pvt. Ltd. in ITA No.l335/Ahd/2010. The issue involved in the said case was disallowance u/s 40(a)(ia) of C & F charges and Ocean freight and Octroi charges. At para-7 of the said decision it was held that "no TDS is required to be deducted in the present case for reimbursement of expenses for which separate bills were raised by the commission agent and hence the provisions of Section 40(a)(ia) is not applicable to such payments. " Respectfully following the decision, AO is directed to verify whether separate bills were raised for the above sums and if so to delete disallowance of above sums (since this plea was not taken before the AO).

7.3(ii)The third component is Rs.5,75,370/-. AO observed that out of the Terminal Handling Charges of Rs.6,67,159/- tax was deducted only on Rs.91,789/-. Therefore, he disallowed the balance payment of Rs.5,75,370/-. During the course of appellate proceedings the learned AR fairly conceded that the necessary details/evidence in this regard were not available. It is also to be noted that appellant deducted tax on part of the payment, which shows its liability to deduct tax on this payment. Hence impugned disallowance is upheld.

12 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

24. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

25. The ld. D.R. submitted that in the present case it was not a case of short deduction of tax but the case was of no deduction of tax on certain items. The ld. D.R. further submitted that CIT(A) with respect to deduction of tax on ocean freight had remitted the issue to the file of A.O but as per provisions of Section251 of the Act, CIT(A) has no power to set aside the matter to AO. He thus supported the order of AO. Ld. A.R. on the other hand reiterated the submissions made before A.O and CIT(A). She further pointed to the breakup of charges paid to Soham Logistic Pvt Ltd which was placed at page 26 & 27 of the paper book. She also submitted that TDS was deducted wherever it was applicable. She further placed reliance on the decision in the case of Om Satya Exim Pvt. Ltd. vs. ITO (ITA No. 1335/A/2010) order dated 13th May, 2011, decision in the case of ACIT vs. P.P. Overseas ITA No. 733/Mum/2010 order dated 18.02.2011, decision of Hon'ble Gujarat High Court in the case of Gujarat Narmada Valley Fertilizers Co. Ltd. 35 Taxman.com 638 and the decision of Calcutta High Court in the case of S.K. Tekriwal G.A. No. 2069/A/2012. She also placed on record the copy of the aforesaid decisions.

26. We have heard the rival submissions and perused the material on record. We find that the payment of Rs. 90,03,637/- to Soham Logistics Pvt Ltd comprises of payment towards Inland Transportation Charges, Ocean Freight, Terminal Handling Charges and Fees for Services rendered.

(a) With respect to Inland transportation charges, we find that it is Assessee's submission that Soham Logistic Pvt. Ltd., to whom the payments have been made has in turn have made the payment to the transporters and thus it is in the form of reimbursement and there is no mark up. On the other hand, we find that the A.O while disallowing the payment has noted that Soham Logistic Pvt. Ltd. has not given details of the payment received from the 13 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 Assessee on which it has made the TDS and the same remained unverifiable. We further find that there are no details in support of the A.R's contention that there is no mark up on Inland transportation charges and the payments made the assessee are in the form of mere reimbursements. We further find that there is no finding of CIT(A) about payments made the Assessee to be in the nature of reimbursement. We therefore feel that the issue needs to be re-examined at the end of A.O. We therefore remit the issue to the file of A.O to decide the issue afresh in the light of submissions made by the Assessee and in accordance with law. The Assessee is also directed to furnish all the necessary details called for by the A.O to decide the issue.

(b) With respect to Ocean freight we find that it is A.R's contention that the Ocean freight was paid to Non Resident Foreign Companies and therefore in view of CBDT Circular No. 723 dated 19.09.1995 no TDS was required to be deducted. On the other hand we find that the A.O while making the addition has noted that Soham Logistic Pvt. Ltd. was Assessee's custom agent and not an agent of Non Resident Foreign Companies or was agent of non residents. Before us also no material has been placed on record by the Assessee to demonstrate that the Sohan Logistics Pvt Ltd to whom the Ocean freight was paid by the Assessee, were Non Residents or were agents of Non Residents. We further find that while allowing the claim of Assessee, CIT(A) has also not given any finding with respect to the residential status of the person to whom the Ocean freight has been paid. We further find the Circular No. 723 dated 19/09/1195 [reported in (1995) 128 CTR (st) 6], on the issue of TDS from payment made to foreign shipping companies at para 5 notes as under:

"There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or charterers for carriage of passengers etc shipped at a port in India. Since the agent acts on behalf of the non-

resident ship-owner or charterer, he steps into the shoes of the principal.

14 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

Accordingly, provisions of section 172 shall apply and those of section 194C and 195 will not apply."

On perusing the aforesaid circular, we are of the view that provision of section 194C & 195 of deduction of TDS to the agents would not apply only when the agent is a shipping agent of non-resident ship-owner or charterer and not otherwise. In the present case, in view of no material on record to demonstrate that Soham Logistic Pvt Ltd was agent of non-resident ship- owners, we find that A.O was justified in disallowing the expenditure on Ocean freight u/s. 40(a)(ia) of the Act.

(c) With respect to payment to Terminal handling charges, it is Assessee's submission that it has deducted the TDS but on the contrary it is A.O's observation that TDS was deducted only of Rs. 91,789/-, and no evidence of deduction of TDS on other payments was furnished before A.O. We also find that CIT(A) has also not given a categorical finding about the deduction of TDS by Assessee on the other payments of Terminal Handling charges. In view of these facts, we are of the view that the matter needs to be re- examined at the end of A.O. We therefore set aside the ground with respect to the disallowance of Terminal handling charges to the file of A.O to verify the contention of the Assessee and thereafter decided the issue in accordance with law and after giving a reasonable opportunity of hearing to the Assessee.

(d) With respect to deduction of TDS on the fees for services rendered, it is assessee's contention that the TDS has been deducted but on the other hand it is Revenue's contention that on all the bills TDS has not been deducted and it is not the case of short deduction but the case is of no deduction of TDS. Before us no details of such expenses have been placed on record by both the parties so as to justify thier respective stands. We therefore feel that this issue of payment of TDS on account of services rendered also needs to be re-examined. We therefore set aside this portion of ground to the A.O to 15 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 decide the issue in accordance with law and after giving a reasonable opportunity to the Assessee. The Assessee is also directed to furnish to all the necessary details called for by the A.O.

27. In the result, this ground of Revenue is partly allowed for statistical purposes.

Ground no. 6 is with respect to deletion of addition on account of seed purchases expenses.

28. During the course of assessment proceedings, A.O noticed that Assessee has purchased seeds from various parties including Jyotindra Brothers, a person specified u/s. 40(a)(2b) of the Act. On the basis of the details examined by him, he noticed that Assessee has purchased seeds from its sister concerns at a higher rate than the purchase from outside parties. The Assessee was asked to show cause as to why no disallowance be made u/s. 40(a)(2b) of the Act to which Assessee interalia submitted that Assessee has purchased different quality and specification of psyllium seeds and therefore the rates varied. It was further submitted that no favour in terms of price was given to its sister concerns. The submission of the Assessee was not found acceptable to the A.O, for the reason that Assessee had not submitted any proof of its claim of purchasing different quality and specification of seeds from Jyotindra Brothers. He therefore concluded that Assessee had purchased goods from Jyotindra Brothers at a higher rate. He thereafter worked out the payment of Rs. 63,51,462/- to be unreasonable out of the total purchases of Rs. 3.17 crores from Jyotindra Brothers and accordingly disallowed the same. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:-

1.2 As seen from the para-9 of the assessment order, AO observed that appellant made purchases of Rs.3,17,57,310/- from M/s. Jyotindra Brothers,; a person falling under section 40A(2)(b); the purchases were made at much higher price compared to the purchases from other parties.

Accordingly, he held that 20% of the purchase amount was to be disallowed u/s.40A(2)(b), which works out to Rs.63,51,462/-. The contentions of the learned AR are that the quality of the goods purchased determine the price and therefore the comparison made was improper; the rate of 16 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 purchases from Jyotindra Brothers compares well with the rate of purchases from Chokshi Shaileshkumar & Bros.; and keeping in view the fact that M/s. Jyotindra Brothers is also assessed at maximum rate of tax and the case laws relied on, there can be no case for disallowance, Appellant's contentions are tenable. It is seen that for the AY 2008-09, M/s. Jyotindra Brothers ( a firm) filed return of income admitting income of Rs. 1,19,530/-. It cannot be said that there was any idea to avoid payment of tax. Impugned disallowance is not sustainable. It is deleted. This ground of appeal is allowed.

29. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

30. Before us, the Ld. DR supported the order of A.O. On other hand, Ld. A.R. reiterated the submissions made before A.O and CIT(A). She further submitted that A.O without discharging the burden of proving that the payment was excessive or unreasonable having regard to the fair market value of the goods, made the additions. It was further submitted that Jyotindra Brothers is also taxed at the maximum rate and thus there was no intention to divert any profit in the form of unreasonable or excessive payments. She thus supported the order of CIT(A).

31. We have heard the rival submissions and perused the material on record. Before us it is Assessee's contention that the prices paid to the sister concerns were comparable to the price paid to outsiders and no undue advantage has been passed on to the sister concerns. CIT(A) while deleting the addition has given a finding that the transaction of purchase could not have been with an idea to avoid payment of taxes. Before us Revenue has not placed any material on record to controvert the submissions of the Assessee or the findings of CIT(A). In view of these facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed.

Ground no. 7 is with respect to deletion on account of addition of milling expenses.

32. On perusing the details submitted by the Assessee, AO noticed that Assessee has debited milling expenses of Rs. 13 lacs which was paid to Jyotindra 17 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 Industries, a person specified u/s. 40(a)(2b) of the Act. Assessee was asked to give justification of the expenses more so, when no such expenses were incurred by the Assessee in previous years. In reply to the show cause notice, Assessee interalia submitted that the amount was paid for getting the job work done by Jyotindra Industries and further TDS was deducted before making the payment. It was also submitted by the Assessee that due to the constraint of production capacity, job work was entrusted to Jyotindra Industries and it was an exceptional circumstances which did not occur in earlier years. The submission of the Assessee was not found acceptable to the A.O. more so when Assessee did not furnish any documentary evidence to support its contention of the emergency situation. He also noticed that Assessee had not given any details of expenses date wise nor any documentary evidence like challans of sending and receiving the goods. He accordingly concluded that in the absence of proof of genuineness of expenses, the milling expenses cannot be allowed and accordingly disallowed Rs. 13 lac. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:-

9.3 The contentions of the learned AR in this regard are that all the necessary evidences were furnished to the AO; M/s. Jyotindra Industries is an Income-tax assessee; and making disallowance without any further enquiries was uncalled for. Appellant's contentions are tenable. Necessary details were furnished to the AO. Tax was deducted on the said payment. The firm M/s. Jyotindra Industries is engaged in the business of milling and did milling for other parties also. It filed return of income of A.Y.2008-09, admitting income of Rs.4,35,590/-. Therefore, it cannot be said that this payment was done with a view to avoid payment of tax. Impugned disallowance is unwarranted. It is deleted. This ground of appeal is allowed.

33. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

34. Before us, ld. D.R. pointed to the findings of A.O and submitted that no evidence about the transportation of goods etc were furnished by the Assessee nor any evidence of the emergency situation has been pointed by the Assessee which necessitated the payment of milling expenses in the year under consideration more so when no such payments were made in earlier years and therefore the A.O was fully justified in making the disallowance. He further submitted that CIT(A) deleted the addition mainly for the reason that the tax was deducted on the payments made to Jyotindra Industries and Jyotindra Industries was an 18 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 income tax payee. He submitted that merely that the recipient has paid the tax cannot be the ground for deleting the addition. He thus supported the order of AO. Ld. AR on the other hand reiterated the submissions made before lower authorities and supported the order of CIT(A).

35. We have heard the rival submissions and perused the material on record. We find that A.O while disallowing the expenses has noted that no evidence like challans for sending and receiving the goods have been submitted by the assessee. Before us also no material has been placed on record by the Assessee in the form of challans, transportation receipts bills etc to demonstrate that there was movements of goods between the premises of Assessee and Jyotindra Industries. From the copy of the audit report for year ending 31st March, 2009 of Jyotindra Industries placed at page 128 of the paper book, it is seen that Assessee is located at Sri Sarvodya Industries Compound, Disha Road Palanpur, Gujarat whereas the address of the Assessee is "Jyotindra Group Compound 4 km. Ahmedabad Highway S.H. 41 Palanpur and therefore during the course of hearing, the ld. A.R. was asked to as to whether the Assessee and Jyotindra Industries are located in the same compound to which no satisfactory reply was given by ld. A.R. Further the exceptional reasons which necessitated the payment has also not been placed before us. We further find that CIT(A) has also not given any finding on the issues raised by A.O. In view of the these facts, we are of the view that A.O was fully justified in making the disallowance, we therefore uphold the action of A.O. and thus this ground of Revenue is allowed.

36. In the result, the appeal of Revenue is partly allowed We now take up C.O.NO. 4/AHD/2012 for A.Y. 2008-09 of Assessee.

37. The grounds raised by C.O. reads as under:-

1. Ld. CIT (A) erred in law and on facts in directing AO to verify bills issued for Inland Transport and Ocean Freight in support of the proposition advanced by the appellant that they were only reimbursement of expenses. Ld. CIT (A) ought to have granted relief claimed by the appellant rather 19 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 than issuing direction to AO to examine when complete bill wise details were already submitted before AO during the assessment proceedings.

2. Ld. CIT (A) erred in confirming disallowance of Rs. 5,75,370/- made by AO out of Terminal Handling charges u/s 40(a)(ia) of the Act without taking into consideration submissions made by the appellant.

Ld. CIT (A) ought to have deleted such disallowance of legitimate business expenses.

Ground no. 1 is with respect to directions given by CIT(A) to AO.

38. Before us both the parties submitted that the present ground is connected with ground of no. 5 of Revenue's appeal

39. Before us, Ld. AR submitted that even though before CIT(A) it was submitted that the Inland transportation and Ocean freight paid to Soham Logistic Pvt. Ltd were in the nature of reimbursement of expenses. and there was no mark up or service charge component and therefore no TDS was required to be deducted as there was no element of profit or income, CIT(A) directed the A.O. to verify on the contention of the Assessee and thereafter decide the issue. Before us Assessee is aggrieved by the directions given by CIT(A) to AO and submits that since the details were furnished, CIT(A) should have granted relief claimed by the Assessee rather than directing the A.O to verify and then decide. Ld. DR on the other hand submitted that u/s. 251 CIT(A) does not have power to remand.

40. We have heard the rival submissions and perused the material on record. We find that the CIT(A) has directed the AO to verify the details and thereafter decide the issue. We find that u/s 251(1) CIT(A) can only confirm, reduce, enhance or annul the assessment. By Finance Act, 2001 w.e.f. 01-06-2001, the words "he may set aside" has been omitted meaning thereby that CIT(A) has no power to set aside. We also find that the issue raised in this ground is connected with ground no. 5 of Revenue's appeal. While deciding the ground of Revenue hereinabove and for the reasons given therein the matter has been set aside by us the file of AO with directions contained therein. Since the present ground in interconnected no separate adjudication is required and therefore this ground for 20ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 similar reasons is set aside with ground no. 5 of Revenue's appeal and thus allowed for statistical purposes.

Ground no. 2 is with respect to confirming disallowance out of Terminal handling charges.

41. A.O while scrutinizing the details of Terminal handling charges had noted that against the total payment of Rs. 6,67,159/- made by the Assessee to Soham Logistic Pvt. Ltd., TDS was deducted only on Rs. 91,789/- and Assessee could not give any evidence about deduction of TDS with respect to the balance amount. He therefore considered the balance amount of Rs. 5,75,370/- on which TDS was not deducted as covered by provisions of Section 40(a)(ia) and accordingly disallowed the same. CIT(A) while deciding the issue has noted that before him. Ld. A.R. had fairly conceded about the non availability of details or evidence and he therefore upheld the disallowance made by A.O. Aggrieved by the order of CIT(A), Assessee is now before us.

42. Before us, ld. A.R. submitted that TDS wherever applicable was deducted and further relied on the decision in the case of CIT vs. S.K. Tekriwal (G.A. No. 2069/A/2012). Ld. D.R. on the other hand submitted that the decision of Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra) would not be applicable to the facts of present case as in the present case, the case was with respect to no deduction of tax whereas in the case before Hon'ble Calcutta High Court, the case was with respect short deduction of tax. He thus supported the order of A.O and CIT(A).

43. We have heard the rival submissions and perused the material on record. We find that A.O while disallowing the expenditure has noted that Assessee did not furnish any details in support of its claim of deduction of TDS. We further find that CIT(A) has also noted that before him , the A.R of the Assessee have expressed his inability to furnish the necessary details or evidence. Before us also no details 21 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 of the same has been furnished by the Assessee. We further find that the ratio of the decision relied upon by ld. A.R. are not applicable to the present case as in that case, it was not a case of non deduction of tax, was a different case of difference in rate of deduction of TDS (i.e. whether TDS to be deducted u/s 194C or 194I of the Act). In view of the aforesaid facts, we therefore find no reason to interfere with the order of CIT(A) and thus this ground of Assessee is dismissed.

44. In the result, the C.O of the Assessee is partly allowed.

ITA NO. 2148/AHD/12 for Revenue's appeal for A.Y. 2009-10

45. We now take up the grounds raised by Revenue reads as under:-

1. The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 5,72,512/- being depreciation on BMW car treating it as a commercial vehicle.

2. The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.11,55,370/- made by the Assessing Officer, on account of interest expenses.

3. The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs.9,62,408/- made by the Assessing Officer, on account of factory building expenses.

4. The Ld. Commissioner of income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 17,37,360/- made by the-Assessing Officer, on account of machinery reconditioning charges of existing plant and machinery.

5. The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 45,63,471/- made by the Assessing Officer, on account of disallowance of expenses u/s.40(a)(ia) of the Act.

6. The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 39,80,322/- made by the Assessing Officer, on account of purchases expenses u/s.40A(2)(b) of the Act.

7. The Ld. Commissioner of Income-Tax (Appeals)-XX, .Ahmedabad has erred in law and on facts in deleting the addition of Rs.32,11,600/- made by the Assessing Officer, on account of milling charges u7s.40A(2)(b) of the Act

8. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad ought to have upheld the order of the Assessing Officer.

Ground no. 1 is with respect to disallowance of depreciation of BMW car.

46. During the course of assessment proceedings, A.O noticed that Assessee has purchased a BMW car and had claimed depreciation at 50%. The Assessee was asked to justify the claim of depreciation at 50% to which Assessee interalia submitted that 50% depreciation is allowable on new commercial vehicle as per 22 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 the notification of CBDT. The submission of the Assessee was not found acceptable to the A.O, as he was of the view that BMW car was sports Luxury Seden which did not fall in the category of commercial vehicles and therefore disallowed the claim of 50% depreciation but however allowed the depreciation at the normal rate applicable to vehicles. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:-

3.2. I have considered the submissions made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. In the case of Daleep S. Chandani Vs. ACIT 14 SOT 233 (Mum) relied on by the A.R., the issue for consideration was whether Maruti Zen car purchased by the assessee was a commercial vehicle or not and whether it was entitled to higher depreciation or not. In the said decision, it was held as under.-

"Further the Explanation to this proviso defines that the Expression "commercial vehicle" would mean.... "light motor vehicle" and the "light motor vehicle" as defined in the Motor Vehicles Act, 1988, means any transport ': vehicle or omni bus, the gross physical weight of either of which or motor car or a Tractor or Road Roller the unladen weight of which does not exceed 75,00 kgs. Thus a motor car not exceeding the specified weight is covered under the definition of "light motor vehicle". It is further provided that commercial vehicle would not include "maxi-cab " and "motor-cab as per provisions of Motor Vehicle Act means any motor vehicle constructed or adapted to carry more than six passengers but not more than twelve passengers excluding the driver for hire or reward. Similarly the term "motor-cab" also excludes any motor vehicle for hire or reward. If the provisions of Explanation to this proviso and the definition of maxi-cab and motor cab as given in Motor Vehicles Act, 1988 are read together then motor vehicles used for hire or reward would not be covered under this proviso to section 32 of the Act, and such motor vehicles would be covered under entry (2)(ii) of Item-3 of Part-A of Appendix-I to rule 5 of the Rules.

This conclusion further leads to an interference that the Legislature has given benefit of higher depreciation to the assessee not engaged in the business of Motor Buses, Motor Lorries and Motor Taxies on hire and defining such light motor vehicles as commercial vehicles though intentionally excluding vehicles commercially exploited for yielding income from the definition of commercial vehicle further supports the case of the assessee. We also find sufficient force in the contention of the assessee that different entries exist in Appendix-I for different categories of motor vehicles for providing depreciation at a specified rate depending upon the period of acquisition and the purpose for which they are deployed. Therefore, nomenclature of commercial vehicle should not be construed to deprive the assessee of higher depreciation when all the conditions specified in the Act and the Rules have been met by the assessee. We also hold that, till such car is used by the assessee for its business purpose the assesses would get the depreciation at the rate of 40 per cent as per the IIIrd proviso to section 32 of .

Thus, Ground Nos 1 to 3 of the assessee stand accepted. "

The issue under consideration is identical to the issue decided upon in the above mentioned order, though the said judgment pertains to A.Y. 1999-2000. The observations of the AO at para-4 of the assessment order on the issue are general. Therefore in the light of the above mentioned order, I hold that the BMW car bought by the appellant does fall in the category of commercial vehicles and is entitled to depreciation @ 50% as against 7.5% allowed by the AO. Disallowance of depreciation of Rs.5,72,512/- is not in accordance with law. It is deleted. This ground of appeal is allowed.

47. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

48. Before us. Ld. D.R. submitted that the BMW car purchased by the Assessee cannot be considered as commercial vehicle entitled to 50% depreciation. He 23 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 thus supported the order of A.O. The ld. A.R. on the other hand reiterated the submissions made before A.O and CIT(A) and further placed reliance on the decision of Bombay Tribunal in the case of Dilip Chandani vs. ACIT (2007) 233 (Mum).

49. We have heard the rival submissions and perused the material on record. It is an undisputed fact that Assessee had purchased a BMW car and has claimed depreciation @ 50% considering it to be commercial vehicle. The definition of "commercial vehicle has been given in Note 6 of the Appendix 1 which defines "commercial vehicle" as "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicles", & "medium passenger motor vehicle" but does not include "maxicab", "motor cab", "tractor", & "road rollers". The definition of various types of vehicles specified herein above shall have the meanings respectively as assigned to them in S. 2 of Motor Vehicles Act, 1988. As per the definition of Motor Vehicle Act, heavy goods vehicle & heavy passenger motor vehicle among other things stipulates that a heavy vehicle would be one with the unladen weight which exceeds 12000 kg & the light motor vehicle vehicle's apart from other things in the Act would be one whose weight does not exceed 7500 kgs. Before us no copy of the Registration certificate issued by Motor Vehicle Authorities has been placed on record to demonstrate as to the nature of the vehicle i.e. whether the vehicle is heavy motor vehicle or light motor vehicle being considered by them. Further there is no finding by the A.O or CIT(A) that it has been used for the purpose of business nor any material has been placed by the Assessee to demonstrate its use for the purpose of business. In view of the aforesaid facts, we are of the view that the matter needs reexamination at the end of AO. We therefore set aside the issue to the file of AO to decide the issue afresh in accordance with law and after giving a reasonable opportunity of hearing to Assessee. In the result, this ground of Revenue is allowed for statistical purposes.

24 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10

50. Before us, both the parties submitted that the ground no. 2 to 7 are identical to the grounds for A.Y. 08-09 of Revenue's appeal except for the amounts and the submissions made by them while arguing the grounds for A.Y. 08-09 would equally apply to present grounds.

51. We have heard the rival submissions and perused the material on record. In view of the submissions of both the parties stated herein that the grounds being similar to that of A.Y. 2008-09, we for the similar reasons given hereinabove while deciding the appeal for Revenue for A.Y. 2008-09 and for similar reasons decide the grounds of the Revenue in similar manner.

52. In the result, the appeal of Revenue is partly allowed for statistical purpose.

Now we take up C.O. NO. 218/AHD/2012 for A.Y. 2009-10 of Assessee.

53. The grounds raised by the C.O reads as under:-

1. Ld. CIT (A) has erred in law and on facts in upholding the disallowance of deduction u/s 80IB of Rs 2,67,837/- by holding that the loss of earlier year ought to have been reduced. Ld. CIT (A) ought to have granted relief claimed by the assessee and allowed the deduction u/s 80IB.

2. Ld. CIT (A) has erred in not allowing the deduction u/s 80IB by relying on decisions of Hon'ble ITAT while decision of Hon'ble High Court being in favor of the assessee.

54. During the course of assessment proceedings, A.O noticed that Assessee has claimed deduction u/s 80IB to the extent of Rs. 69,29,936/- for unit-2. He also noticed that Assessee has incurred loss of Rs. 10,71,346/- during A.Y. 08-09 in Unit-2. A.O was of the view that for calculating the deduction under 80IA. The loss incurred for A.Y. 08-09 in Unit-2 should have been reduced and thereafter the deduction should have been claimed. A.O noted that Assessee was asked to show cause as to why deduction u/s. 80IB not be recalculated to which Assessee did not submit any reply. A.O therefore recalculated the deduction under 80IB and the excess deduction of Rs. 2,67,837/-as worked out by him was disallowed. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who 25 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 following the Special Bench decision in the case of ACIT vs. Goldmines Shares & Finance Pvt. Ltd. 113 ITR 209 uphold the order of A.O by holding as under:-

10.2. I have considered the submissions made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. As admitted by the Id.AR himself, impugned disallowance is in accordance with the Ahmedabad Tribunal's Special Bench decision in the case of ACIT Vs. Goldmines Shares & Finance Pvt. Ltd. 113 ITR 209 and Ahmedabad Tribunal's decision in the case of Vodafone Essar Gujarat Ltd. In view of the Special Bench decision which is binding on the lower authorities and also keeping in view the fact that the High Court decision relied on by the A.R. is not of the jurisdictional High Court, I am of the view that the disallowance made by the AO is in accordance with law. It is upheld. These grounds of appeal are dismissed.

55. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.

56. Before us, ld. A.R. submitted that for the purpose of calculation of deduction under 80IB, the loss of earlier year is not required to be adjusted and for which she placed reliance on the decisions in the case of Sheri Exports vs. JCIT (2013) 33 Taxman.com 446 (Mum), Anil Lad vs. DCIT (2012) 25 Taxman.com 454 (Banglore) and the decision in the case of Jivraj Tea & Industries Ltd vs. ACIT (2014) 42 Taxman.com 462 (Ahm). The ld. D.R. on the other hand submitted that CIT(A) has decided the issue following the Special Bench decision in the case of ACIT vs. Goldmines (supra) which is binding decision. He thus supported the order of A.O and CIT(A).

57. We have heard the rival submissions and perused the material on record. We find that while computing he deduction under 80IB, A.O has reduced the loss for A.Y. 08-09 and on the recalculated figure granted deduction and the action of A.O was upheld by CIT(A) by following the decision of Special Bench in the case of Goldmines Shares (supra). Before us, ld. A.R. has not brought any contrary binding decision of jurisdictional High Court in her support. We further find that the Co-ordinate Bench of Tribunal in the case of Deloitte Consulting India P. Ltd vs. DCIT (2013) 155 TTJ (Hyd) 367 and after relying on the decision of Apex Court in the case of Honda Siel Power Products Ltd vs. CIT (2007) 295 ITR 466 held that a decision of Special Bench of the Tribunal on a particular issue is binding unless contrary decision of higher court is brought to its notice. We 26 ITA Nos. 2914/A/11 & 2148/A/12 & C.O Nos. 4 & 218/AHD/2012 . A.Ys. 2008-09 & 2009-10 therefore respectfully following the aforesaid Special Bench decision relied by CIT(A), find no reason to interfere with the order of CIT(A) and thus this ground of Assessee is dismissed.

58. In the result, the C.O. of Assessee is dismissed.

59. In the result, the appeals of Revenue and CO of Assessee for 2008-09 are partly allowed and CO of Assessee for A.Y. 2009-10 is dismissed.

Order pronounced in Open Court on 04 - 03 - 2015.

Sd/- Sd/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad