1. The two appeals are filed by the assessee. The relevant asst. yrs.
1996-97 and 1997-98. The appeals are directed against the orders passed by the CIT(A)-XXVII, Mumbai on 4th Oct., 1999 and 18th Dec, 2000, respectively. The appeals arise out of the assessments completed under Section 143(3) of the IT Act, 1961.
2. In the appeals filed for the asst. yr. 1996-97 the first issue raised by the assessee-company is that of the disallowance of expenses pertaining to guest house/rest house amounting to Rs. 1,10,707. The expenses disallowed by the assessing authority, consisted of municipal taxes, repairs, maintenance, etc. pertaining to guest house/rest house.
The allowability of expenses of above nature incurred for the maintenance of guest house has been considered by Special Bench of the Tribunal Delhi in the case of Eicher Tractors Ltd. v. Dy. CIT (2002) 77 TTJ (Del)(SB) 681 : (2003) 84 ITD 49 (Del)(SB). The Special Bench has held therein that Section 37(4) is a specific provision whereas Sections 30, 31 and 32 are general provisions and as the former overrides the latter, the expenditure relating to maintenance of guest house is not allowable as deduction in computing the taxable income of an assessee. In view of the above, we hold that the CIT(A) has rightly upheld the disallowance of Rs. 1,10,707. This issue is, therefore, decided against the assessee and accordingly, the relevant ground No.11 is dismissed.
2.1 The second issue raised by the assessee-company in this appeal is that of the disallowance of depreciation on assets purchased and leased back to Haryana State Electricity Board, Madhya Pradesh State Electricity Board, Karnataka Power Corporation Ltd. & Golden Finalease (P) Ltd. This issue is covered in the detailed grounds raised by the assessee in sub-grounds 1 to 11 of the main ground III.3. According to the assessee-company, the assessee had purchased Electrostatic Precipitation System from Haryana State Electricity Board as per invoice dt. 28th Sept., 1995. The said system purchased by the assessee from Haryana State Electricity Board were in fact Air Pollution. Control Equipments located at the Thermal Power Station of the Haryana State Electricity Board at Panipat in its Unit IV. The equipments were purchased by assessee-company for a consideration of Rs. 5,55,05,000. The purchase price was determined on the basis of the valuation report of M/s M. Choudhary & Associates, Registered and Approved Valuers at New Delhi. Thereafter, the assessee-company entered into a lease agreement with Haryana State Electricity Board on 28th Sept., 1995 whereby the assessee-company agreed to lease-back the Electrostatic Precipitation System to Haryana State Electricity Board for a period of 72 months. This agreement provided an option to the lessee (Haryana State Electricity Board) to renew the lease for a further period of 120 months. The equipment was leased out to Haryana State Electricity Board after accepting an interest-free security deposit of Rs. 2,20,02,000 which is 40 per cent of the cost of the equipments leased out. As per the terms of the lease agreement, the security deposit is refundable to the lessee. Likewise, the assessee-company had purchased Instrumentation and Monitoring System for monitoring energy flow from Madhya Pradesh Electricity Board on 28th Sept., 1995. The said instrumentation and monitoring system was located at Satpura, Korba and Amarkantak Thermal Power Stations of Madhya Pradesh Electricity Board. The purchase was made for Rs. 5,61,00,000. The purchase price was determined on the basis of valuation report prepared by Shri Aditya K. Rai, chartered engineer at Jabalpur. As in the case of Haryana State Electricity Board, the instrument system purchased from Madhya Pradesh Electricity Board were leased back to themselves for a period of 120 months. The lease-back was made on the basis of lease agreement executed on 28th Sept., 1995.
In this case also, the assessee-company had received an interest-free security deposit of Rs. 1,12,00,000 which is refundable after expiry of the lease agreement. The assessee again had entered into a lease agreement with Karnataka Power Corporation Ltd. for lease-back of Handling & Automatic Electrical Load Monitoring System purchased from the said company, Karnataka Power Corporation Ltd. on 27th March, 1996.
At the time of purchase, the said equipment system was located at the Raichur Thermal Power Station of Karnataka Power Corporation. The lease agreement was executed for a period of 120 months. In this case also, the assessee-company had accepted an interest-free security deposit at 45 per cent of the cost of equipments. The cost, of Rs. 10,14,24,150 was determined on the basis of the valuation report of Shri R. Arvind Kumar, chartered engineer, Bangalore. As a fourth instance of transaction, the assessee-company had purchased cinematograph positive and negative films from M/s Golden Finalease (P) Ltd. for a price of Rs. 6,00,01,000 in September, 1995. The purchase price was worked out on the basis of the books of account of Golden Finalease (P) Ltd., duly certified by M/s Govind and Associates, a practising firm of chartered accountants at Madras. After the purchase of the films, they were leased back to M/s Golden Finalease (P) Ltd. on the basis of a lease agreement.
4. The assessee-company in computing its taxable income for the asst.
yr. 1996-97 claimed depreciation at the rate of 1.00 per cent on the purchase of instruments and equipments leased back to the State Electricity Board and on the cinematograph films leased back to M/s Golden Finalease (P) Ltd. The claim of the assessee-company regarding depreciation at the rate of 100 per cent has been examined and considered by the assessing authority in a very detailed manner in his 74 pages assessment order. The claim of the assessee-company towards depreciation at the rate of 100 per cent has been declined by the AO.The main reason stated by the assessing authority to decline the claim of depreciation in respect of the purchase from and lease-back to Haryana State Electricity Board was the information gathered in the course of search conducted under Section 132 of the Act on 7th Dec, 1998 in the case of M/s Virtuous Finance Ltd., who syndicated the sale and lease-back transaction of the assessee-company with Haryana State Electricity Board. Another reason pointed out by the AO is that is all the lease agreements, the lessees had an option to buy-back the leased assets after the expiry of the period of the lease agreements.
Therefore, it was the contention of the assessing authority that the real intention of the assessee was not to lease-back the assets and earn lease rent thereon but to claim the benefit of 100 per cent depreciation. The AO has stated that in all the cases, the assessee has appointed the nominees of the lessees as power of attorney holders to make such sale of instruments on the expiry of the respective lease period.
5. In first appeal, the CIT(A) agreed with the assessing authority that the sale and lease-back transactions need to be treated as sham transactions and, therefore, the assessing authority was justified in not allowing the depreciation as claimed by the assessee-company.
6. Shri S.E. Dastur, who argued for the assessee-company contended that the findings of the lower authorities are mainly dictated by the decision of the Supreme Court in the case of McDowell & Co. Ltd. v. CTO and that of Special Bench of Tribunal, Mumbai, in the case of Mid East Portfolio Management Ltd, v. Dy. CIT (2003) 81 TTJ (MumbaiXSB) 37 : (2003) 87 ITD 537 (Mumbai)(SB). The learned senior counsel submitted that the impact of the decision of the Supreme Court in McDowell's case has been explained in a subsequent, judgment of the Supreme Court in the case of Union of India and Anr. v. Azadi Bachao Andolan and Anr. (2003) 184 CTR (SC) 450 : (2003) 283 ITR 706 (SC) whereby the rigours of the judgment of the Supreme Court in McDowell's case (supra), which has always been pursued by the Revenue authorities, has been diluted. The learned senior counsel submitted that the Supreme Court has held in the subsequent decision that any tax planning done by an assessee within the four corners of law is legitimate and the transaction cannot be treated as sham only for the reason that the assessee makes out a saving in the quantum of taxes paid by it.
7. The learned senior counsel relied on various clauses of the agreements entered into by assessee-company with the lessees. He explained that in all these cases, the purchases of machineries and equipments have been proved beyond doubt. The payment of consideration also has been established. The receipt of security deposit has been established. The assessee has received lease rentals from all the four parties as stipulated in the lease agreements and such lease rentals have been offered for tax in the hands of the assessee-company. All the concerned parties have confirmed their respective roles in all these four transactions of sale and lease-back. Except raising some apprehension regarding the bona fides and genuineness of lease transactions, the AO has not brought any material or evidence on record to discredit or disprove any of the contentions or arguments of the assessee-company. The respective lessees were the owners of the respective assets before the impugned transactions were entered into.
The equipments and machineries were purchased by the assessee on the basis of valid valuation reports, lawful negotiations, verifiable invoices and on payment of consideration. None of these essential elements are disputed by the Revenue. Once the assessee purchased all those instruments and machineries from the concerned lessees, the assessee-company became the absolute owner of those properties and assessee-company had all the time dominion over those properties. It is in exercise of that property right that the assessee-company has entered into a set of lease agreements on the basis of which the very same instruments and machineries were leased-back to the respective lessees. Therefore, there is nothing on record to brand these transactions as sham transactions. So long as the transactions are genuine, the decision of the Supreme Court in McDowell & Co. Ltd. case and the decision of the Special Bench in the case of Mid East Portfolio Management Co. Ltd.'s case (supra) would not apply as in the present case.
8. The learned senior counsel submitted that the issue is straightaway covered by the recent decision of the Orissa High Court in the case of Industrial Development Corporation of Orissa Ltd. v. CIT . In that case also, the issue was that of allowing the depreciation on the machinery purchased and lease-back. The Revenue could not bring in any evidence to show that the transaction was not genuine. Considering the effect of the decision of Supreme Court in Union of India v. Azadi Bachao Andolan (supra), the Orissa High Court held that the assessee was entitled for 100 per cent depreciation. The learned senior counsel further relied on the decision of the Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. where again the Court has considered the ratio laid down by the Supreme Court in McDowell & Co. Ltd. 's case (supra) as well as in the case of Azadi Bachao Andolan (supra) and has held that on genuine transactions, the ratio laid down in McDowell's case (supra) has no application. The learned senior counsel submitted that the issue of depreciation raised in the present appeal is squarely covered by the above decisions of High Courts and, therefore, the lower authorities have erred in law in declining to allow the claim of deduction at the rate of 100 per cent made by the assessee-company.
9. Mrs. Anuradha Bhatia, the learned CIT, appearing for the Revenue contended that the facts and circumstances of the present case are exactly identical to the facts considered by the Special Bench of the Tribunal Mumbai in the case of Mid East Portfolio Management Ltd. v.Dy. CIT (supra). She submitted that after a detailed examination of the facts, terms and conditions of the lease agreements and circumstances of the case, the Special Bench has come to a definite finding that the transaction entered into by the assessee in that case was a colourable device to evade the payment of tax and, therefore, covered by the decision of the Supreme Court in McDowell & Co. Ltd. v. CTO (supra) and further held, therefore, that the assessee was not entitled for 100 per cent depreciation. She submitted that the Special Bench decision of the Tribunal ditto, applies to the present case.
10. The learned CIT further explained that the assessing authority has examined the relevant details of the transactions in an exhaustive manner and has made out a very clear case that the intention of the assessee was not to buy any machinery and lease-back the same for the purpose of earning, any lease rent. The only object of the assessee was to claim 100 per cent depreciation. That is a clear instance of colourable device employed by the assessee to reduce its legitimate tax liability. The CIT(A) also has examined various aspects of the lease agreements and has come to a concurrent finding in agreement with the assessing authority.
11. The learned CIT further explained that the Special Bench has laid down a series of tests to be applied before adjudicating similar issues. The tests laid down by the Special Bench are such as whether the parties had any intention to pass the properties in the equipment, whether the equipment identified and ascertained with reasonable clarity, whether the equipment was properly valued, what are the terms of the lease agreement or whether they were only arrangement for the security of the loan, etc. etc. The facts of the present case do not answer any of the tests laid down by the Special Bench as stated above.
She, therefore, submitted that this is a clear case of financing transactions and not lease transactions.
12. The learned CIT further submitted that the Supreme Court in the case of Union of India v. Azadi Bachao Andolan (supra) has not given the assessee any free hand to evolve any type of colourable device to evade payment of tax. The Court has upheld only such transaction which comes within the four corners of law. Any other dubious transaction is still open for scrutiny and the assessing authorities are justified in coming to proper conclusions on the basis of the facts of the respective case.
13. We heard both sides in detail and considered the issue. We have gone through the assessment order as well as the first appellate order wherein the various details of the issue are discussed at length. The AO in fact has mentioned a search action under Section 132 conducted in the case of Virtuous Finance Ltd. But a perusal of the events recorded by the assessing authority in the assessment order does not bring out any material against the assessee other than the materials already disclosed by the assessee before the assessing authority. In the light of the details collected in the course of search, it is stated by the assessing authority that various papers of the Haryana State Electricity Board were perused by him. But we find that those papers of Haryana State Electricity Board perused by the AO in the light of the search were not any fresh materials or evidence. All those papers were always with the Haryana State Electricity Board and accessible to the Department and furnished by the assessee-company. Therefore, we are of the considered view that the highlighting of the search action in the assessment order is somewhat misleading.
14. So also, the assessing authority has relied on a confessional statement as a prima facie evidence against the case of M/s Golden Finalease (P) Ltd. As pointed out by the learned senior counsel, the statement did not have any evidentiary value as the statement was extracted at the back of the assessee-company and the assessee-company never had an opportunity to rebut it either by cross-examination or by any other mode known to procedural law.
15. The assessing authority has stated that enquiries were made with Electricity Board regarding the transactions. All the Electricity Boards have consistently stated before the Revenue that the equipments and machineries as stated by the assessee were purchased by the assessee during the relevant previous'year. None of the parties to the lease transactions has ever denied the factum of purchase. They have confirmed the receipt of consideration. They have confirmed the payment of security. They have confirmed the payment of regular lease rentals.
All such confirmations are properly supported by documents, books of account and published reports. Therefore, we have to come to a conclusion that apart from the strong suspicion entertained by the assessing authority regarding the genuineness of the transaction, no verifiable evidence or material has been brought on record to discredit the contention of the assessee that it had entered into lease transactions with those parties. The assertions and claims made by the assessee-company are supported by books of account, lease agreements, invoices, bank details, return of income wherein lease rentals were disclosed as income, etc. etc. When all these documents support the case of the assessee-company, how it is possible to reject its contention only on the basis of suspicion or presumption howsoever strong it might be 16. It is in this context we have to refer to the decision of the Orissa High Court in the case of Industrial Development Corporation of Orissa Ltd, v. CIT and Ors. (supra). In the said case, the Court has observed as follows:Union of India v. Azadi Bachao Andolan (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC), the Supreme Court has made it very clear that an act which is otherwise valid in law cannot be treated as non est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interest. In other words if a transaction is otherwise valid in law and results in reduction of tax to an assessee, the same cannot be brushed aside on the ground that the underlying motive of entering into the transaction by the assessee was to reduce its tax liability to the state.
17. In the present case, the Revenue has not even established that the underlying motive of the assessee-company in claiming depreciation at the rate of 100 per cent has resulted in some economic detriment, or prejudice to the Revenue. Even though the assessee-company is claiming depreciation at the rate of 100 per cent, the assessee-company is disclosing lease rentals as its taxable income for a period of more than 5 years, on a regular basis. The depreciation is claimed only by the assessee-company. The lessees are not claiming depreciation.
Therefore, if at all any detriment is alleged in this case, that is only relative/presumptive and not absolute.
18. In the present case, the Revenue has not established that the transactions were sham transactions. The lease agreements executed by the assessee-company had the transactions entered into thereupon are not prohibited by law. They are within the four corners of law.
Therefore, in obedience of the decision of the Orissa High Court as stated above, we have to hold that the assessee is entitled to claim depreciation at the rate of 100 per cent on the assets leased out by it to the four parties mentioned above.
19. It is the argument of the Revenue that the impugned transactions involved in the present case did not answer the tests laid down by Special Bench in the case of Mid East Portfolio Management Ltd, (supra). The property in the equipments has been transferred from the respective lessees to the assessee in this case. This is clear from the invoice and payment details. There is no dispute that the equipments were identified with reasonable clarity. The purchases were made on the basis of purchase price worked out on the basis of valuation reports furnished by approved valuers. They have given detailed valuation reports. The terms of the lease agreements do not bring out any case that the transactions were of a nature other than lease transactions.
The conduct of the parties supports the contention of the assessee. The existence of equipments/machineries is established; their user has been established and in such circumstances, there cannot be a case that the present case does not answer the call of the tests laid down by the Special Bench in Mid East Portfolio Management Ltd. 's case.
20. The view expressed by the Orissa High Court has been further fortified by the Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. (supra). In the said judgment, the Court has held as follows:In Union of India v. Azadi Bachao Andolan (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC), the Supreme Court has approved the decision of the Madras High Court in M.V. Valliapan v. ITO , wherein the Madras High Court had held that the decision in McDowell & Co. v. CTO cannot be read as . laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee must be looked upon with disfavour. In view of the aforesaid legal principle laid down by the Supreme Court, it is clear that the principles laid down by the IRC v. Duke of Westminster 19 Tax Cases 490 are still applicable in this country and it is open to assessee to arrange their affairs in such a manner that it would not attract tax liabilities, if it can be managed within the permissible limit of law.
21. The Calcutta High Court has held in Competent Authority v. Smt.
Bani Roy Chowdhari that where the transferor or transferee is Government or statutory bodies, there cannot be any scope for collusion between parties. The Court further held that when Government or statutory body is party to a transaction, question of evasion of tax does not arise. In the present case three out of four lessees are State Government undertakings. In the facts and circumstances, we find that there is no evidence to hold that the transactions were sham and therefore, the decisions of the Orissa High Court as well as the Gauhati High Court apply to the case and the claim of the assessee for depreciation at the rate of 100 per cent need to be accepted as genuine. Therefore, we direct the assessing authority to grant the depreciation allowance as claimed by the assessee. This issue is decided in favour of the assessee.
22. The third issue raised by the assessee in this appeal relates to the computation of deduction available under Section 80HHC. This issue is grounded in paragraph IV of the grounds of appeal. The first aspect of the issue is that the lower authorities have erred in reducing 90 per cent of the interest received by the assessee from the quantum of business profit for the purpose of computing the deduction under Section 80HHC. The alternative contention of the assessee is that if at all exclusion of interest is called for in computing the profit, net interest may be excluded instead of gross interest received. The issue of netting of interest in the context of deduction under Section 80HHC has been considered by Special Bench of the Tribunal, Delhi Benches in the case of Lalsons Enterprise v. Dy. CIT (2004) 82 TTJ (Del)(SB) 1048 : (2004) 89 ITD 25 (Del)(SB). In view of the above Special Bench decision, we direct the assessing authority to give the benefit of netting of interest to the assessee if it is established that there is a clear business nexus between the interest earned by the assessee-company and interest paid by the assessee-company.
23. The second aspect of the issue is whether the sales of scrap should form part of the total turnover or not. We agree with the assessing authority that the scrap sale should form part of the total turnover.
Therefore, this point is decided against the assessee.
24. The fourth and last issue raised by the assessee and explained in ground No. V is against the levy of interest under Section 234B. This is only a consequential ground which does not call for an independent adjudication.
25. The assessee is partly successful in its appeal filed for the asst.
yr. 1996-97. VTA No. 382/Murn/2001 - Asst. yr. 1997-98 26. The first issue raised by the assessee is in respect of its claim of deduction under Section 80-IA of the Act. Sec. 80-IA provides for deduction of income where an assessee has set up in any part of India system for generation and distribution of power. The assessee-company had set up two DG sets for captive consumption of power. The lower authorities declined the claim of deduction made by the assessee under Section 80-IA on the ground that the power generated from captive plants was not entitled for the deduction. Reliance was placed on the decision of the Calcutta High Court in the case of Universal Electronics Ltd. v. CTT .
27. Shri S,E. Dastur, the learned senior counsel appearing for the assessee contended that the assessee has satisfied the conditions laid down in Section 80-IA and, is therefore, entitled for the deduction provided therein. The learned senior counsel relied on the decision of the Supreme Court in the case of Textile Machinery Corporation Ltd. v.CIT and the decision of the Bombay High Court in the case of CIT v. Sahney Steel & Press Works (P) Ltd. 28. We considered the matter. The exemption provided in Section 80-IA is available to an assessee, among others, who has set up a plant for generation of power. It does not speak anything about consumption of the power generated by the assessee. There is no fetter against the assessee using the power for self-consumption. The only condition to be satisfied is that the assessee should generate power. In such provisions of law relating to exemption, there is no scope for any intendment to bring out hypothetical fetters and restrictions. The law should be read and understood in its literal sense. Therefore, we are of the considered view that the assessee has generated power from the two DG sets implanted by it, and therefore, the assessee-cornpany is entitled for the deduction under Section 80-IA on the income imputable from the generation of power.
29. The proposition regarding the manufacturing of articles for self consumption and claiming eligible deduction thereon was examined by the Supreme Court in the case of Textile Machinery Corporation Ltd. v. CIT (supra). In that case, the assessee, a heavy engineering concern, manufacturing boilers, machinery parts, wagons, etc. set up two new units, a steel foundry division and a jute mill division. The steel foundry division started manufacturing some castings, which the appellant was previously buying from market and the castings were used by the other existing division of the assessee itself. The assessee claimed exemption of tax under Section 15C of the IT Act, 1922 in respect of the profit from the steel foundry division which was denied by the Revenue authorities. The Supreme Court held that self-consumption of the article produced in the casting business of an assessee was not a decisive test in construing Section 15C. The above decision of the Supreme Court was later followed by the Bombay High Court in CIT v. Sahni Steel & Press Works (P) Ltd. (supra) where the Court has held that the articles manufactured by the new unit and consumed by the assessee itself for its existing business was not relevant in considering deduction available under Section 80J of the IT Act, 1961. We are of the considered opinion that our finding is supported by the above judicial pronouncements.
30. The exemption itself was introduced as an incentive to increase the power generation in the country. The said objective is made clear in the memorandum explaining the provisions of the Finance Bill, 1993 introduced in the Parliament (200 ITR (St.) 140). The above object has further been clarified in its Circular No. 657 issued by CBDT on 20th Aug., 1993.
31. Therefore, we direct the assessing authority to grant the deduction under Section 80-IA to the assessee on the profits imputable to power generation made out of two DG sets.
32. Having held that the assessee is entitled for the deduction available under Section 80-IA, the next question is what should be the price attributable to the power generated and consumed by the assessee.
The answer to the question is readily available in Sub-section (8) of Section 80-IA, which reads as below: Where any goods held for the purpose of the eligible profits are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of transfer, then for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date.
The above concept of transfer pricing is also apparent in Rule 7 of IT Rules, 1962 provided for determining the income from agricultural produces consumed by the agriculturist-assessee in his business as raw material. The rule provides that in the case of income which is partially agricultural income and partially income chargeable as business income, in determining that part which is chargeable to income-tax, the market Value of any agricultural produce which has been raised by the assessee and utilized as a raw material in such business shall be deducted at the prevalent market value. This principle has been considered and upheld by the Supreme Court in the case of Thiru Arooran Sugars Ltd. v. CIT . Therefore, we direct the assessing authority to work out the profits on the basis of the price of the power generated by the assessee at the average of the annual landed cost of electricity purchased by the assessee from Karnataka State Electricity Board during the impugned previous year. It may be determined on the basis of payment details available from the bills issued by the Karnataka State Electricity Board, during the year under consideration.
34. The second issue raised by the assessee for the asst. yr. 1997-98 is with reference to the disallowance of expenditure incurred in maintaining guest house/rest house. This contention is rejected and the issue is decided against the assessee as done in the appeal for the asst. yr. 1996-97.
35. The third issue raised by the assessee is with reference to the disallowance of Rs. 18,40,239 being the cost of presentation articles.
The assessee has claimed deduction of the said amount towards cost of articles presented to various persons. But the assessee has not furnished details of the gifts and the names and addresses of the persons to whom the gifts were given. Therefore, the claim was disallowed by the lower authorities. It is the case of the assessee that similar claim was allowed by the assessing authority for the asst.
yrs. 1987-88 and 1996-97 and facts being the same, there is no reason to deviate from the consistent approach adopted in the past. The learned senior counsel further relied on the decision of Special Bench of the Tribunal, Bombay, in the case of ITO v. French Dyes & Chemicals (I) (P) Ltd. 36. We considered the matter. In the case cited by the learned senior counsel, the Tribunal was in fact examining the admissibility of secret commission paid by the assessee. Even though the commission paid was secret, the result of the' payment of commission was apparent. The turnover of the assessee had increased as a result of payment of such commission. It was also proved that it was a trade practice. It was in such special circumstances that the Tribunal has come to a conclusion that such a secret commission could be allowed as a deduction in computing the taxable income. But in the present case, the assessee has not established any such nexus between the presentation of articles and the turnover of the business. Therefore, the ratio of the decision as such cannot be applied here. In the present case, it is the case of the Revenue that the details were not furnished. We are not inclined to take a different view from the CIT(A) on this point. This ground is rejected and the disallowance is confirmed.
37. The fourth issue raised by the assessee for the asst. yr. 1997-98 is the question of depreciation on assets purchased and leased-back.
This issue has been discussed in detail and decided in favour of the assessee while dealing with the assessee's appeal for asst. yr.
1996-97. Following suit, this issue is decided in favour of the assessee and the ground is allowed.
38. The fifth issue raised by the assessee is regarding the eligible profit of the business for the purpose of deduction under Section 80HHC. As far as the interest is concerned, we repeat the direction given for earlier asst. yr. 1996-97 so that the AO may consider the nexus and the possibility of netting of interest. As far as the scrap sales are concerned, we hold that it forms part of assessee's total turnover.
39. The assessee is partly successful in its appeal for asst. yr.
1997-98.
40. In result, these two appeals filed by the assessee are partly allowed.