THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), AHMEDABAD V. GAUTAM FREIGHT P. LTD., GANDHIDHAM-KUTCH

ITSSA 150/AHD/2016

AI Insights

The case involves the Deputy Commissioner of Income Tax, Central Circle-2(3), Ahmedabad, as the appellant, and Gautam Freight P. Ltd., as the respondent. The appeals and cross objections pertain to the assessment year 2011-12 and challenge the order passed by the CIT(A) under sections 143(3) and 153A(1)(b) of the Income Tax Act, 1961. The main issues revolved around the disallowance of interest payments, timber handling losses, scrap handling expenses, and depreciation claimed on a windmill. The Tribunal examined the arguments and evidence presented by both parties, including previous judgments and the specific circumstances of the case, before arriving at its decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 40455 (ITAT-RAJKOT)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Other Referred Cases: Kandla Exports Corporation vs. ITA No.135/Ahd/2016, CIT vs. Sahu Enterprise (P.) Ltd., Sushee Hi Tech Constructions (P.) Ltd. vs. DCIT, ACIT vs. Spray Engineering Devices Ltd., ACIT vs. Samrat Rice Mills (P.) Ltd., CIT vs. Punjab Stainless Steel Inds., CIT vs. Orissa Cement Ltd., CIT vs. V.I. Baby & Co., CIT vs. H.R. Sugar Factory (P.) Ltd., A. Murali & Co. (P.) Ltd. vs. ACIT, ACIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd., CIT vs. Amod Stamping (P.) Ltd., CIT vs. Rajendra Brothers, CIT vs. Shree Rama Multi Tech Ltd., CIT vs. R.L. Kalthia Engineering & Automobiles (P.) Ltd., CIT vs. Mahanagar Gas Ltd., Reliance Industries vs. Addl. ACIT, Sassoon J David and Co. (P) Ltd vs CIT Bombay, Commissioner of Income-tax vs Motor Industries Company Limited, CIT vs. Dhanrajgiri Raja Narasingirji
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K. C. THACKER; LD; SANJAY PUNGLIA; LD
• Keywords: Set aside; Additional evidence; Business expenditure; Question of law; Depreciation; Onus to prove; Commercial expediency; Gift; Accommodation entries; Source of fund; Earning of tax free income; Avoidance of tax; Rule 8D; Maximum Marginal Rate; Bogus
• Section: 143(3); 22; 133(6); 13; 37; 14A; 142(2A); 36 (1) (iii); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकरअपीलसं./IT(SS)A No.150/AHD/2016 Assessment Year: (2011-12) (HybridHearing) The Dy. Commissioner of Income- Tax, Central Circle – 2(3), 3rd Floor, A- 305, Aayakar Bhavan, Ahmedabad - 380014 Vs. Gautam Freight P. Ltd., Plot No. 24-26, Ward 10-C, GIDC, Area, Gandhidham Kutch – 370201 Öथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAACG7804M (Assessee) (Respondent) CO No. 184 /AHD /2016 Assessment Year: (2011-12) (Hybrid Hearing) Gautam Freight P. Ltd., Plot No. 24-26, Ward 10-C, GIDC, Area, Gandhidham Kutch – 370201 Vs. The Dy. Commissioner of Income- Tax, Central Circle – 2(3), 3rd Floor, A- 305, Aayakar Bhavan, Ahmedabad - 380014 Öथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAACG7804M (Assessee) (Respondent) Assessee by : Shri K. C. Thacker, Ld. A.R. Respondent by : Shri Sanjay Punglia,Ld.CIT (DR) Date of Hearing : 12.12.2024- Re-fixed for clarification on 20/02/2025 Date of Pronouncement : 17/03/2025 आदेश / O R D E R Per Bench, Captioned appeal filed by the Revenue and Cross Objection filed by the assessee, pertaining to Assessment Year (AY) 2011-12, are directed against the common order passed by the Learned Commissioner of Income Tax(Appeals)[(in short “ld. CIT (A)”], under section 143(3) r.w.s. 153A(1)(b) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), vide order dated 20.03.2014. Page | 2 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 2. Grounds of appeal raised by theRevenue in IT(SS)A No. 150/Ahd/2016 for A.Y. 2011-12, are as follows: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs. 26,37,363/- being interest payment u/s 36(1)(iii) though the assessee had made interest free advances out of interest-bearing funds. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs.3,03,29,794/- being disallowance of Timber Handling loss. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs. 50,503/- being disallowance u/s. 14A of the Act. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs. 1,26,70,118/-, being disallowance of scrap handling expenses. 5. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. 6. It is, therefore, prayed that the order of the CIT (A) be set aside and that of the A.O. be restored to the above extent. 3. Grounds of appeal raised by the assessee in CO No. 184/Ahd/2016, for A.Y. 2011-12, are as follows: 1. The Learned CIT (A) has erred in law and on fact in confirming the disallowance of Rs. 32,67,680/- being the depreciation claimed on \"providing easy and free access and keeping the area vacant surrounding lease land where wind mill of the respondent is installed and allowing the same on monthly proportionate basis. 2. The learned CIT (A) has further erred in law and on facts in refusing to expunge the assessing officer's unwarranted observation in the assessment order imputing \"non- cooperative attitude\" on the part of the assessee holding that there is no positive evidence on record justifying expungement thereof and in holding that no prejudice is caused to the assessee on account of the same, disregarding the material placed on record in the appellate proceedings. Page | 3 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 3. The learned CIT (A) has also erred in law and on facts in disregarding the material placed before him and holding that the action u/s 142(2A) of the Act for assigning the case for special audit at the fag end of limitation for completion of assessment was not to unlawfully extend the limitation and that the assessment was not barred by limitation due to illegal exercise of invoking S. 142(2A) of the Act. 4. First, we shall adjudicate Revenue`s appeal in IT(SS)A No.150/AHD/2016.Ground No. 1 raised by the Revenue in IT(SS)A No. 150/Ahd/2017 for AY 2011-12 relates to deleting the addition of Rs. 26,37,363/- being interest payment u/s 36(1)(iii) of the Act, though the assessee had made interest free advances out of interest-bearing funds. 5.We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record.We note that issue under consideration is squarely covered by the decision of the Co-ordinate Bench, in assessee`s own group case, in ITA No.IT(SS)A No.135/Ahd/2016,Kandla Exports Corporation, order dated 28.02.2025. The arguments of ld. DR for the revenue and ld. Counsel for the assessee, were considered in the group case, and both the Counsels have argued in a similar and identical manner, as argued in the case of Kandla Exports Corporation( supra). We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in the case of Kandla Exports Corporation ( supra). In this order, the Tribunal has considered arguments of ld. DR for the Revenue in detail and arguments of ld. Counsel for the assessee in detail, and we find that both the parties have arguedin a similar and identical manner, and same case laws were submitted by both the parties before the Bench, as cited in the case of Kandla Exports Corporation ( supra).The facts and Page | 4 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) findings of the Co-ordinate Bench in the case of Kandla Exports Corporation( supra), are reproduced below. “10.The Summarize and concise groundNo.1 of Revenue, and ground raised by the assessee, in cross objection No.178/Ahd/2016, for assessment year 2012–13, are identical and common, therefore, we shall adjudicate them together, which are reproduced below for ready reference, as follows: (1)Ground No.1 :The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 68,13,140/-, being disallowance of interest u/s 36(1)(iii) of the Act, though the assessee had made interest free advance out of interest bearing funds.[This ground No.1 is in Revenue’s appeal in ITA No.135/Ahd/2016 for A.Y. 2011-12, This ground No.1 is in ITA No. 136/Ahd/2016 of Revenue’s appeal for A.Y.2012-13 is at Rs. 2,18,04,979/-] The assessee, in his cross objection No.178/Ahd/2016, for assessment year 2012–13, has pressed the following ground of appeal: “ The learned CIT(A) has erred in law and on facts in confirming the disallowance made by the assessing officer of Rs.44,40,000/- out of the interest claim” 11. Brief facts of the issue in dispute are stated as under. During the assessment proceedings, the assessing officer called for to ascertain the quantum of secured loan used for business purpose of the concern. On verification of Accounts, it was noticed by the assessing officer that the assessee- firm has taken loan from banks on hypothecation of stock -in- trade and personal properties of partners. The firm has paid interest on such loans amounting to Rs. 3,79,17,821/-, Bank charges Rs. 18,70,159/-, loan documentation charges Rs. 625,989/-. Thus, on borrowed funds interest is given to the banks by the assessee. On verification of Bank Loan Accounts and loan accounts in the computerized accounts, it was observed by the assessing officer that the assessee- firm has given loan to some group concerns, against which there is no business transactions, hence it appears to be not for business purpose and no interest is charged on such loans. Therefore, during the assessment proceedings, the assessing officer, issued notice to the assessee, asking the assessee to furnish the nature of transactions and immediate source of advancement of such interest free advances. 12. In response to the above notice of the assessing officer, the assessee submitted its reply before the assessing officer with documentary evidences, which is reproduced below: Page | 5 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) “As desired we are furnishing herewith copies of the concerned Group concerns, of the bank accounts from the books and also the bank statements. Further, we may submit for your kind information that the assessee-firm has huge funds of Rs. 28,34,76,940/-as against this interest-free advances of Rs.4,35,00,000/- were given us on 31.03.2011. It may further be submitted that out of Rs. 4,35,00,000/- Rs. 2,15,00,000/- were given to M/s. Maharaja Salt Works for purchase of Salt in the earlier year. As the said party has not supplied the Salt to the assessee-firm a Civil suit is filed against them in Gandhidham Court. Therefore, the advance mentioned to that extent are given for commercial consideration having business purpose. Further, there was no relationship attracting Section 40A(2)(b) of Act. As far as Opening Credit Balance of Rs. 1,26,868/-in the Account of M/s. Friends Mercantile Pvt. Ltd., are concern it may be submitted that the assessee-firm maintains two accounts (ie. Bill Account and Loan Account) in their books of M/s. Friends Mercantile Pvt. Ltd., and as per the bill account an amount of Rs. 1,26,868/-is payable to them. Your Honour will kindly see that disallowance is not called for on the facts of the case.” 13. However, assessing officer rejected the contention of the assessee and observed that assessee has paid interest on loan of Rs. 2,44,20,256/-. At the same time, the assessee has given loans and advances against which no interest have been charged. The details of the same are given by the assessing officer in the assessment order in table format, in para No.7.The assessing officer noticed that assessee has not given any specific reply on the points raised above. The assessee has simply stated that the interest free advances have been made out of the interest free capital and surplus funds. However, looking to the capital and reserved surplus of the assessee and the investment in fixed assets, it was found by the assessing officer that no interest free funds were available with the assessee for giving interest free advances to the group concerns. Therefore, as per assessing officer, disallowance u/s 36(1)(iii) of the I.T. Act, 1961, is warranted. In respect of loans and advance given to M/s Maharaja Salt Works Co. Pvt. Ltd. it was submitted by the assessee that the assessee -firm has given advance of Rs. 2,05,00,000/- for the purchase of salt to the company. However, the said party failed to supply salt and the assessee has filed civil suit in the Civil Court, Gandhidham. As this is business advance against the purchase of goods, it should not be considered as interest free loans and advances. However, in respect of other loans and advances the assessee has not proved commercial expediency. Considering above facts, the assessing officer held that the advances were not made due to commercial expediency and for the purpose of business except in the case of M/s. Maharaja Salt Works Co. Pvt. Ltd. The assessee has not proved the nexus that non- interest bearing fund have been utilized for the purpose of giving non- interest bearing loans and advances and have not discharged onus cast upon it. Therefore, the corresponding interest @ 12% on loans and advance which works out to Rs. 68,13,104/- are as under : Page | 6 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 14.Therefore, assessing officer, made the addition in the hands of the assessee, to the tune of Rs.68,13,104/-. 15. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the action of the assessing officer. The ld. CIT(A) observed that the relevant facts are discussed in para 7 of the assessment order and the very same issue was considered by him at length in connection with the appeal for AY. 2009-10. The facts are identical, subject, however, to the facts that as at the year of end, the assessee’s balance sheet clearly shows interest free advances to some individuals totaling to Rs. 2 Crores., about which neither any business relation not any expediency is either prima facie evident, or claimed, or established. Though, as the interest free funds available with the assessee, and therefore, following his decision in AY 2009-10, the ld CIT(A) held that no disallowance u/s. 36(1)(iii) needs to be upheld, therefore, the disallowance of Rs. 68,13,104/- was deleted by the ld. CIT(A). 16. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. Page | 7 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 17. Shri Sanjay Punglia, Ld. CIT(DR), for the Revenue, has vehemently argued that assessee, during the course of assessment proceedings, has not established, the availability of interest free funds, and assessee has not proved the commercial expediency. The learned DR for the revenue, relied on various decisions listed by the assessing officer, in his assessment order and submitted that assessee does not have interest free funds and never established the commercial expediency. The learned DR thus reiterated that the assessee has not discharged the onus of proving that interest free advances have gone out for interest free funds of the assessee. The learned DR for the revenue, relied on the following decisions: (i) Decision of Hon’ble Allahabad High Court in the case of CIT v. Sahu Enterprise (P.) Ltd. reported in (2013) 352 ITR 8 (Allahabad). (ii). Decicion of Hon’ble ITAT, Hyderabad in the case of Sushee Hi Tech Constructions (P.) Ltd. v. DCIT reported in (2013) 33 taxman.com 236 (Hyd.). (iii) Decicion of Hon’ble ITAT, Chandigarh in the case of ACIT v. Spray Engineering Devices Ltd. reported in (2012) 23 taxman.com 267 (Chandigarh). (iv)The Hon’ble ITAT, Delhi in the case of ACIT v. Samrat Rice Mills (P.) Ltd. reported in (2012) 23 taxman.com 350 (Delhi). (v).Hon’ble Delhi High Court in the case of Punjab Stainless Steel Inds. V. CIT, reported in (2010) 324 ITR (Delhi). (vi).The Hon’ble Delhi High Court in the case of CIT v. Orissa Cement Ltd., reported in (2002) 258 ITR 365 (Delhi). (vii)The Hon’ble Kerala High Court in the case of CIT v. V.I. Baby & Co., reported in (2002) 254 ITR 248 (Kerala). (viii)The Hon’ble Allahabad High Court in the case of CIT v. H.R. Sugar Factory (P.) Ltd., reported in (1991) 187 ITR 363 (Allahabad). (ix) Decision of Hon’ble Madras High Court in the case of A. Murali & Co. (P.) Ltd. V. ACIT, reported in (2013) 357 ITR 580 (Madras). 18. The ld. CIT -DR for the revenue, by referring to the above judgements, stated that in the assessee`s case, there are mixed funds and the assessee could not establish any commercial expediency. It is the duty of the assessee to explain before the assessing officer that whatever loans were raised by the assessee, were used for business purposes. If the assessee had advanced certain funds to sister concerns, there would be a very heavy onus on the assessee to discharge before the assessing officer to the effect that inspite of pending terms, loans and working capital loans, on which the assessee is Page | 8 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) incurring liability to pay interest, there was justification to advance loans to sister concerns for non-business purposes. 19.The ld. DR further stated that during the appellate proceedings, the assessee submitted a chart showing interest free advances and interest free funds available, which is placed at page number 11 of the order of the ld. CIT(A). The ld. DR pointed out that first of all, this chart was not there before the assessing officer and such chart was submitted first time before the ld. CIT(A). Hence it is an additional evidence and therefore this matter may be remitted back to the file of the assessing officer for fresh adjudication. The ld. DR further stated that in the above chart, the assessee has used the sundry creditors, as a source of funds, which is not acceptable because the assessee purchases the goods from the sundry creditors, which forms part of the stock of the assessee, hance, no interest free funds available from sundry creditors, therefore, these sundry creditors should not be part of the interest free funds. Therefore, ld. DR contended that since the assessee has mislead the figures, therefore, addition made by the assessing officer may be sustained. 20. On the other hand, Learned Counsel for the assessee, Shri K. C. Thacker, vehemently argued that assessee, has huge funds of Rs.28,34,76,940/-, available, as on 31-03-2011, on which no interest is payable, as against interest-free advances given to parties of Rs.4,35,00,000/-. This included Rs.2,15,00,000/- given to Maharaja Salt Works, as advance for purchase of salt. The said party failed to supply salt. Therefore, a civil suit is filed against Maharaja Salt Works for recovery. Thus, the advance was given for commercial consideration for the purpose of business. There was also no instance of relationship attracting section 40A(2)(b) of the Act. The assessee also furnished the bank accounts, as per books, statement of accounts, from the banks and accounts of these concerns, as called for by the assessing officer. The assessee had also supplied detailed statement showing secured loans, interest-free funds advances etc. by letter filed on 20- 11-2014 for all the financial years 2005-06 to 2011-12, to examine as a bird eye, overall position of the group. The assessing officer in his \"conclusion\" has found that the claim disallowable, making vague observation that looking to the capital and reserved surplus and the investment in fixed assets it was found by the assessing officer that no interest- free funds were available with the assessee for giving interest-free advances to these concerns. Thus, assessing officer has accordingly made disallowance of Rs.68,13,104/-, on the ground that the assessee has not discharged the onus of proving nexus of non - interest bearing fund has been utilized for giving interest-free advances. 21. In this regard, Ld. Counsel submitted that the onus to prove the nexus between the interest bearing loans and interest-free advances is upon the assessing officer and not upon the assessee. The assessee had produced before the assessing officer, the ledger accounts of the concerned parties and also the bank book as well as the bank statements, as demanded by the assessing officer. With these details made available, as required by the assessing officer, it was for the assessing officer to show nexus before making the disallowance of Rs.68,13,104/-. Page | 9 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) Further, the assessing officer states that \"looking to the capital and reserve and surplus and investment in fixed assets\" no interest-free funds were available, when the fact is that there are no fixed assets of the assessee, as the assessee is a trading concern. Thus, the assessing officer has gone by wrong notion that capital and reserves are blocked in fixed assets in making the disallowance. The ld Counsel further submitted that the disallowance is made by the assessing officer invoking section 36 (1) (iii) of the Act, however, from the data furnished it would be seen that the assessee has EPC/PCFC loans taken against the stock and export receivables and mortgage loan against the property, the assessee has submitted the details of stock in trade and sundry debtors (export) aggregating to Rs.32.55 Crores and interest-free funds of Rs.28.34 Crores, during the year. Thus, it is clear that the capital borrowed for the purpose of business has been apparently used for the purpose of business. The assessing officer has disregarded huge interest-free funds of Rs.28.34 Crores, during the year. The assessing officer has relied upon various decisions which are not applicable to the facts of the assessee`s case. The assessing officer has admittedly not established nexus between capital borrowed and interest- free advances, despite of having lot of information and documents before him, and has ignored the substantial interest-free funds available to the assessee. These aspects have been considered in several judicial pronouncements. The ld. Counsel for the assessee, relied on the following binding judgments of the Jurisdictional High Court of Gujarat and others, which are mentioned below: (i). ACIT.v. Gujarat Narmada Valley Fertilizers Co. Ltd. (20 14)222 Taxman 28 (Mag)/42 taxmann.com 579 (Guj.)(HC) (ii). CIT.v. Amod Stamping (P.) Ltd. (2014) 223 Taxman 256 (Guj.)(HC) (iii). CIT v. Rajendra Brothers (2014)52 taxmann.com 334/(2015) 228 Taxman 348(Mag.) (Guj.)(HC) (iv). CIT v. Shree Rama Multi Tech Ltd. (2013) 219 Taxman 162 (Mag.) (Guj.)(HC) (v). CIT v. R.L. Kalthia Engineering & Automobiles (P.) Ltd. (2013) 215 Taxman 9 (Mag.) (Guj.)(HC) (vi). CIT v. Mahanagar Gas Ltd. (2014) 221 Taxman 80 (Mag.) / 42 taxmann.com 40 (Bom.)(HC) (vii). Reliance Industries.v. Addl. ACIT (2014) 159 TTJ 349/55 SOT 8 (Mum.) (Trib.). 22. Learned Counsel further submitted that a chart showing interest free advances and interest free funds available, which is placed at page number 11 of the order of the ld. CIT(A), was submitted by the assessee before the Ld. CIT(A) to explain the overall position of the group and the figures mentioned in that chart were already available before the assessing officer, therefore, just to submit some figures in a presentation form, does not mean that it is an additional evidence, therefore, for the examination of the same figures, the matter should not be remitted back to the file of the assessing officer. Further, learned Counsel also submitted that assessee does not wish to rely on that Page | 10 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) chart, which is placed at page number 11 of the order of the Ld.CIT(A), without helping that chart, the assessee has made out a good case, in his favour. The Ld. Counsel also stated that assessee has not used the sundry creditors, as a source of funds. Apart from the sundry creditors, the assessee has enough interest free funds, which is available, to give interest free advance to sister concern. Therefore, ld. Counsel argued that ld. CIT(A) has passed a speaking order, therefore order of the ld. CIT(A) on this issue, may be upheld. 23. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessing officer has made the disallowance u/s. 36(1) (iii) of the Act, out of claim of interest payment on loans taken by the assessee. We find that the provisions of section 36 (1) (iii) of the Act, are enabling provisions, whereby interest claimed is required to be allowed, as a deduction to the assessee, provided the claim is genuine. For the sake of clarity and also being pertinent, we reproduce the provisions of section 36(1) (iii) of the Income Tax Act 1961, ( to the extent useful for our analysis), as follows: \"Other deductions. 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (i) ……; (ia)……..; (ib)…….- (ii)…….; (iia) [Ommited by the Finance Act,1999, w.e.f. 1-4-2000;] (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession, Provided…… Explanation.-……..,” 24.The above provision mandates that payment of interest on loans borrowed for business purpose shall be allowed. Therefore, the assessing officer is obliged to allow the payment of interest on loans taken for business purpose. If, however, the Assessing Officer seeks to make disallowance of interest by invoking the provision of section 36 (1) (iii) of the Act, it is for the assessing officer to establish that interest is paid on the loans, not used for business or that it is diverted for non-business purpose, provided the assessee has submitted all the details before the assessing officer for this purpose, as and when called by the assessing officer, then burden shifts on the assessing officer to explain the assessee that based on the documents and Page | 11 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) evidences interest bearing funds were used by the assessee for giving interest free advances for non-business purposes. In the assessee`s case under consideration, the assessee submitted details and documents and explained before the assessing officer that had enough interest free funds available for giving interest free advances. There is no failure on the part of the assessee to submit relevant documents and evidences before the assessing officer to prove that sufficient interest free funds available in the Balance Sheet of the assessee. We find that in the assessee`s case, the assessee has taken interest-bearing loans for specific purposes, and the facts that these loans are actually used for the stated business purposes could be verified from paper- book pages 281 & 282 of the assessee`s paper book. We find that the issue of interest-free advances made to the parties, as mentioned by the Special Auditor, the assessing officer required the assessee to make compliance, as shown below. \"You are requested to furnish copies of the bank accounts as appeared in your account books and bank statements furnished by the banks, through which the transactions of advancing amounts were made by you with the aforesaid parties so that the immediate source of funds can be examined.\" The above question of the assessing officer, reflects the assessing officer's intention to find immediate source of interest-free advances to the listed parties, as per the mandate of the section 36(1) (iii) of the Act. In the order of assessing officer, under appeal, the assessing officer has recorded that the accounts called for by him were produced by the assessee, including documents and evidences. The assessing officer has, however, not brought on record facts/material based on his examination of the accounts and has not established the immediate source of interest-free advances to be the interest-paid loans received by the assessee. When the burden shifts on the assessing officer, then it is duty of the assessing officer to find out the mistakes and errors in the documents so submitted by the assessee. The whole exercise is to be based on facts and it is the duty of the assessing officer to marshal all the facts and come to a logical conclusion about the income of the assessee for the year under consideration. For that we rely on the Judgment of Hon'ble Supreme Court in case of Sreelekha Bannerjee (491 ITR 122), wherein it was held that “ ..... before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence, which it has in possession ...” 25. We find that instead, the assessing officer made unverified and wrong statement that \"no interest-free funds were available with the assessee\" and irrelevant statement that \"the assessee has also not furnished any details or evidence to establish that impugned advances were given for business expediency\". The assessing officer has failed to realize that the obligation to establish business expediency would arise on the part of the assessee only when the assessing officer has discharged his obligation to show ( provided the assessee has filed all documents and evidences, as required by the assessing officer, to explain the interest free funds) that any part of interest-bearing loans have been diverted for non-business purposes. In this regard, reliance is placed upon the judgment of Hon'ble Delhi High Court, reported in (2011) 331 ITR 0502, wherein it was held as follows: Page | 12 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) \"12. In the instant case, from the orders of the CIT (A) and that of Tribunal, as reproduced above, in paras 3 and 6, we note that the assessee was maintaining a bank account with mixed common funds in which all deposits and withdrawals were made. There was no specific instance noted by the assessing officer in respect of any direct nexus between the borrowed fund and the said advances made to the subsidiaries. The assessing officer had made general observations without going into the depth of the matter and without pointing out any specific instance where an interest- bearing borrowing was advanced to the subsidiaries or establishing that the borrowings made by the assessee were not for business purposes.\" 26. We find that the issue of disallowance u/s.36 (1) (iii) of the Act, out of the claim of interest, arose in the assessment proceedings, on account of the report of the Special Auditor, who had only mentioned that the assessee has taken loans from Banks/Financial institutions and has paid interest. The Special Auditor, then, gave a list of parties who were given interest-free loans and also provided their ledger accounts (page 19/paper-book). When the Spl. Auditor was able to provide such information/ledger accounts from the books of account, obviously he had scanned through the entire ledger meticulously and thoroughly. However, while he could find the accounts listed by him, his discerning eye failed him to find accounts reflecting huge interest-free receipts by assessee from sister concerns, despite there being ledger accounts of sister concerns, reflecting interest free funds provided to the assessee. Further, the Spl. Auditor mentioned in his list, accounts of Friends Mercantile Pvt. Ltd. and Gautam Freight Pvt. Ltd, in receipt of interest-free advances from assessee, entailing disallowance of Rs.40,49,780/- but again failed to notice the ledger accounts of the very same parties, reflecting huge amounts owed to them by the assessee, towards purchases and services expenses. The ld Counsel submitted before the Bench, two ledger accounts, not noticed by the Spl. Auditor and also by the Assessing Officer, and working of interest impact of these accounts vis-à-vis the disallowance of Rs.40,49,780/- made in respect of the said parties. It would be noticed that as a matter of fact, considering the amount due to these two parties in trading accounts, interest payable to them worked out to more Rs.62,46,112/-, than the interest disallowed by the assessing officer. Therefore, even on facts, the disallowance of Rs.40,49,780/- is the result of lack of inquiry by the assessing officer. Further, scanning of the entire ledger and picking up and choosing only such accounts (of interest-free advances) by the Spl. Auditor, again failed him to notice the accounts of other sister concerns providing huge interest-free funds to assessee, like: (i) Friends & Friends Shipping Pvt. Ltd., (ii) Friends Salt Works and Allied Industries and (iii) Kandla Agro& Chemicals Pvt. Ltd. Therefore, ld Counsel argued that assessee have sufficient interest-free funds that the assessee has used for interest-free advances. Even before the CIT (A), assessee mentioned that assessee has huge interest free funds received from sister concerns. The assessee submitted ledger accounts of these three sister concerns, Friends & Friends Shipping Pvt. Ltd., Friends Salt Works and Allied Industries and Kandla Agro& Chemicals Pvt. Ltd., with corresponding bank- Page | 13 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) books to corroborate the transactions in the ledger accounts and working of interest that would have been payable at the rate of 12% (applied by the assessing officer) but not actually paid. This would make it amply clear that the Group as a whole followed a policy not charge interest when funds are made available to sister concerns, as these advances are out of interest free funds. 27. We find that learned CIT (A) gave importance to the fact that all the Group concerns happened to make such interest-free advances to one or the other concern, as per the needs of the business of the Group, which is more or less the same and complimentary to each other. The CIT (A) also noticed that similar disallowances were made in almost every case when each such concern happened to have received interest-free loans or given interest-free loans at some point of time. The ld Counsel pointed out that two concerns of the group, namely, Friends Mercantile Pvt. Ltd. and Gautam Freight Pvt. Ltd, in respect of which disallowance of over Rs.40 lakhs has been made, were in the subsequent year recipients of interest-free loans from the assessee. The CIT (A) also took notice of the fact that all the concerns were in paying tax in the highest tax-bracket and therefore there was no justification in making such disallowances in every case. 28. It is also a settled-principle that ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his business. The Hon'ble Apex Court in the case of Sassoon J David and Co. (P) Ltd vs CIT Bombay (118 ITR 261)(SC) held that expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction for the same. Even the Hon'ble Karnataka High Court in the case Commissioner of Income-tax vs Motor Industries Company Limited (1907) (223 ITR 112) was of the view that the commercial expediency of a businessman's decision to incur, an expenditure cannot be tested on the touchstone of strict legal liability to incur such an expenditure. Such decisions in the very nature of things have to be taken from a business point of view and have to be respected by the authorities no matter that it may appear, latter, that the expenditure incurred was unnecessary or avoidable. The assessing officer ought not to have questioned the commercial prudence of the transaction entered into by the assessee, businessman, when there was nothing on record to show that the transaction was not genuine. It is a settled principle of law that business or commercial expediency has to be judged from the perspective of the businessman and not of the Revenue, since it is the businessman who is being benefited from the services rendered and also it is he who knows to what extent the benefit ensures to him. Reliance in this regard may be placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Dhanrajgiri Raja Narasingirji, reported in 91 ITR 544 (SC), wherein it was held that \"it is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur the expenditure. 29. We find that assessee pleaded before the assessing that advances are out of interest-free funds available with the assessee and filed copy of accounts of parties and bank statements and subsequently also pleaded business expediency. The ld CIT(A) noted that all the business concerns of the group are assessed at the maximum marginal rate and therefore question of inference of any tax avoidance does not arise. It is also stated that the different concerns of the group have interdependent business operations and business activity of one concern cannot be carried out without availing services from other concerns. In this background, the requirements Page | 14 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) of business fund by each concern have to be examined. If one concern of the group faces urgent requirement of fund and the other concern is in a position to provide the same so that business interest of both the concerns are protected, any amount advanced without charging interest to/from such concerns is necessarily for the purpose of business/commercially expedient and in respect of providing/receiving such non- interest bearing advances, no question of making any disallowance should arise, as held by the Supreme Court in the case of S A Builders v. CIT 288 ITR 1, the findings of the Hon`ble court is reproduced below: “…..In our opinion, the decisions relating to Section 37 of the Act will also be applicable to Section 36(1)(iii) because in Section 37 also the expression used is \"for the purpose of business\". It has been consistently held in decisions relating to Section 37 that the expression \"for the purpose of business\" includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if a third party also benefits thereby. Thus in Atherton vs. British Insulated & Helsby Cables Ltd (1925)10 TC 155 (HL), it was held by the House of Lords that in order to claim a deduction, it is enough to show that the money is expended, not of necessity and with a view to direct and immediate benefit, but voluntarily and on grounds of commercial expediency and in order to indirectly to facilitate the carrying on the business…The expression \"commercial expediency\" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of. business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. We agree with the view taken by the Delhi High Court in CIT vs. Dalmia Cement (Bhart) Ltd. (2002) 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits......” 30.During the course of hearing, based on the audited balance-sheets for respective years, the ld. Counsel has also submitted the following position of interest-free funds from year to year to buttress the argument that the assessing, in the face of submissions made, and easily verifiable from the records available with him and produced before him, clearly erred in not appreciating the argument canvassed before him that the interest free advances have been made clearly out of interest-free funds available with the assessee and that there really remained nothing further to be established. The assessing has ignored this fact and has taken recourse to section 36(1)(iii) by making disallowance in all connected group cases. Therefore, we find that judgements on which ld DR for the revenue has relied, are distinguishable on facts and do not apply to the assessee under consideration. We find that the disallowance is made by the assessing officer by invoking section 36 (1) (iii) of the Act. From the data furnished it would be seen that the assessee has EPC/PCFC loans taken against the stock and export receivables and Page | 15 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) mortgage loan against the property. The assessee has submitted the details of stock in trade and advance against goods aggregating to Rs.60.74 Crores and interest-free funds of Rs.46.84 Crores during the year. Thus, it is clear that the capital borrowed for the purpose of business has been apparently used for the purpose of business. The assessing officer, has disregarded huge interest-free funds of Rs.46.84 Crores, during the year. Thus, we find that assessing officer has admittedly not established nexus between capital borrowed and interest-free advances, despite of having data and information with him, and has ignored the substantial interest-free funds available to the assessee. These aspects have been considered in several judicial pronouncements, some of which are binding judgments of the Jurisdictional High Court of Gujarat, which are as follows: (i). ACIT.v. Gujarat Narmada Valley Fertilizers Co. Ltd. (2014)222 Taxman 28 (Mag.)/42 taxmann.com 579 (Guj.)(HC) (ii). CIT.v. Amod Stamping (P.) Ltd. (2014) 223 Taxman 256 (Guj.)(HC) (iii). CIT v. Rajendra Brothers (2014) 52 taxmann.com 334 / (2015) 228 Taxman 348(Mag.) (Guj.)(HC) (iv). CIT v. Shree Rama Multi Tech Ltd. (2013) 219 Taxman 162 (Mag.) (Guj.) (HC) (v). CIT v. R.L. Kalthia Engineering & Automobiles (P.) Ltd. (2013) 215 Taxman 9 (Mag.) (Guj.)(HC) 31. Therefore, we find that it is not the case of the assessing officer that the interest free advances given by the assessee were withdrawn by the sister concern and utilized for personal purpose such as buying of property by the directors or making donations or gifts, as is the case, in many of the decisions cited by the assessing officer. In fact, short term advances to meet with urgent requirements of sister concerns with whom regular business is also transacted on daily basis, is squarely covered under the phrase \"for the purpose of business\" occurring in section 36(1)(iii) as well as 37(i) of the Act. Thus, there is no tax-avoidance angle also, there can be no justification for assessing officer to have made a disallowance when firstly advance is made out of interest free funds and secondly the interest-bearing loans are deployed for the purposes for which the funds are borrowed and also there is manifest business expediency, and assessing officer has not demonstrated the personal or non-business or purely charitable use by the recipient. For that reliance is placed on the judgement of the jurisdictional High Court of Gujarat in the case of RL Kalthia Engineering & Automobiles (P.) Ltd,[2013] 33 taxmann.com 14 (Gujarat), wherein it was held as follows: “6.It is well established proposition that when the Revenue fails to establish any nexus between the borrowed funds and the funds diverted/lent, any denial of allowances of interest under Section 36[1](iii) is not permissible. In the instant case, as both the authorities have held concurrently on the basis of material available that sufficient amount of interest-free funds were available with the assessee-respondent and therefore also, there is no justification in interfering with the decision of both these authorities. Resultantly, the question of law proposed is answered accordingly.\" Page | 16 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 32.Deployment of fund available with one concern of the group, whether or not interest bearing, to other sister concern, to meet with business requirements of later with which the former has extensive business, cannot be termed as used not for business purpose as the term \"for the purposes of business\" is of wide import, and includes even the business of the associate. Therefore, we are of the view that when the recipient is not demonstrated by the assessing officer to have utilized the interest-free funds for personal, non-business or purely charitable purpose, the prudence of the businessman himself in making the interest-free advance is critically relevant and possibly decisive for a finding of business expediency, particularly if and when the recipient of interest free funds is also taxed at maximum rate. The facts of the case, in our view are also thus squarely covered by the Supreme Court decisions in the cases of M/s. S A Builders (supra) Gujarat HC decisions in Kalathia Engineering and Gujarat Narmada Valley Fertilizers ( supra). Therefore, based on these facts and circumstances, we do not find any infirmity in the order of the ld. CIT (A).That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed.” 6.As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench, in assessee`s own group cases, in ITA No.IT(SS)A No.135/Ahd/2016,Kandla Exports Corporation(supra), and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). We find no reason to interfere in the said order of the Coordinate Bench, therefore, respectfully following the binding judgment of the Coordinate Bench(supra), we dismiss the grounds raised by the revenue. 7. In the result, ground No.1 raised by the revenue, is dismissed. 8. Now we shall take, ground No.2 raised by the revenue, which relates to deleting the addition of Rs.3,03,29,794/-, being disallowance of Timber Handling loss. 9. Brief facts of the issue in dispute are stated as under. During the assessment proceedings, the assessing officer noticed the discrepancy pointed out by the Auditor wherein, it was pointed out by the special Page | 17 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) auditor thatthe company has debited damages on handing imported pinewood logs of Rs. 303,29,794/-, such expenses are debited in Timber Log Handling Expense, on 31-03-2011 and credited to (i) M/s. Laxman Timber Pvt. Ltd, (ii) M/s. Punjab Saw Mills Pvt. Ltd. (iii) M/s. Pooja Timber Store and (iv) M/s. Radheshyam Raviprakash Timber Pvt. Ltd. The assessing officer noticed thatno evidences and explanation, on this issue were furnished, by the assessee, however, the assessee submitted P&Land Reconciliation and debit note raised by parties etc. Therefore, the assessing officer, issued a show-cause notice to the assessee to explain the transaction. 10. In response to the notice of the assessing officer, the assessee submitted its reply before the assessing officer, with necessary documents and evidences, which is reproduced below. “Kind reference is invited to our previous written submission Dated 27.10.2014 filed in compliance with your notice Dated 29.09.2014. In the said written submission, we had mentioned that the issue raised at Point 2 will be separately explained as another notice on the said issue was also received by us. We now submit our explanation in the matter in respect of damages claimed during the year as follows : 2. Beforeexplaining the issue we are enclosing herewith the details/documents called for as per your second notice bearing No. DCIT/CC- 2(3)/Gautam Freight Pvt. Ltd./2014-15 Dated 10.10.2014 as mentioned below:- i) Name & address of the parties for whom we have carried out handling of Timber Logs are are submitted before the assessing officer, the assessing officer, reproduce the same on page number 15 of the order. ii) Ledger account of the above parties from our books are enclosed which also contains the details of payment received from them. iii) No written agreement has been executed for carrying out of handling operation. However, copy of quotation issued by us are enclosed which contains the details of work carried out by us and our handling charges thereof. iv) Copy of Debit Notes issued by them in respect of damages caused to Timber logs due to mis-handling are enclosed. Page | 18 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) v) Distance from KPT to various plots of the above referred parties where the goods were ultimately delivered are approx. 18 to 22 Km. vi) In handling of the logs for removal from one place to another or to the lorry these have to be lifted by various equipments and dropped. In such activity sometimes through human error the logs gets broken and loses significantly its value as it does not remain useful for furniture work but only as fire-wood. The parties concerned in this particular case claimed damages immediately after the handling job was completed and delivered a Statement showing losses suffered due to mis-handling of Timber logs according to them and demanded compensation towards such losses. vii) As the transportation are carried out through our own vehicles hence no bilty/LR issued by us which may kindly be noted. viii) When the parties demands, damages element of exaggeration is not ruled out. We cannot therefore proceed on the basis of their claim. Normally we send our executives for inspection and verification of the logs delivered by us and to assess the extent of damages. There would be some conflict as differences would arise. However, after some rounds of negotiations some settlement has to be found to the dispute. This process necessarily takes time and when the differences are ultimately settled the accounting takes place after receipt of debit note. 3. Referring to the point No. 2 on this issue in the previous notice. The Special Auditor has observed that we have debited damages on handling imported pine/hard wood logs of Rs.3,03,29,794/- in Timber Log Handling Expenses on 31-03-2011 and credited to the following parties accounts:- a. M/s. Laxman Timber Pvt Ltd b. M/s Punjab Saw Mills Pvt. Ltd c. M/s Pooja Timber Industry d. M/s Pooja Timber Store e. M/s. Radheshyam Raviprakash Timber Pvt. Ltd. It is also mentioned that no evidence on the issue were furnished during audit. 3.2.In this regard we have to submit that the expenses are debited in the accounts which are supported by vouchers with attached debit notes of the above-named parties which are self-explanatory. As a matter of fact, during the audit by the Team of auditors they have never thought it fit to discuss any point for clarification and whatever they understood was kept to them. If only they had considered it appropriate to discuss the issues before preparing the Special Audit Report most of the observations would not have found place in the Special Audit Report. The main reason was that the junior members of the Team could not clear their confusion as the Special Auditor never even once considered it necessary to lead the Team, or at the least come only for discussing the issues noticed by the Team before finalizing the Special Audit report. We submit that the voucher supporting the claim of damages and the attached debit note issued Page | 19 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) by the party claiming damages, as also the handling charges received from the said party credited as income were all produced and verified by the auditors has not demanded any other specific evidence during the Audit. 3.3 As is evident from the observation in the Audit Report we have handled the import logs by the above-named parties during the year. Such handling services involved import through scores of vessels during this period. In such work we have to unload the logs from ship to the wharf and further to shift the same from wharf to the specified plot of the party. In case of specific requirement of the party, logs are once shifted from wharf to our plot for verification of the same and then further shifted to the specified plot of the party. In the process the logs have to be handled (through Cranes/grabs/teeth buckets all of which equipments are mounted on Pay-Loaders) several times for lifting and dropping on the plot or on the trucks for transportation. In this process the logs are sometimes damaged and the party claims damages from us. In the cases of the above-named parties, we are enclosing herewith details of imported logs handled by us, our charges and the claim of damages presented to us by the said Parties. You will kindly see from these party-wise separate details the claims for damages raised against us by them as under : Sr. No. Name of the Party Total Debit Note Amount 1. M/s. Radhe Shyam Ravi Prakash Timbers Pvt. Ltd. Rs. 2,07,48,449/- 2. M/s. Laxman Timbers Pvt. Ltd Rs. 35,17,669/- 3. M/s. Punjab Saw Mills Pvt. Ltd Rs. 39,21,015/- 4. M/s. Pooja Timber Store Rs. 81,39,643/- 5. M/s. Pooja Timber Industries Rs. 43,15,798/- That the said parties made a claim to the extent of Rs. 4,06,42,604/-. However, there were disputes with these Parties as our executives made visits for inspection of logs delivered to the Parties' plots and did not find the extent of damages claimed by them to be fully acceptable. However, after negotiations and considering the long- term business relations and in the interest of our goodwill and reputation of fairness in business dealings, it was decided and settled with the Parties concerned as to the extent of damages acceptable to us. Accordingly we informed the parties that we shall admit the claims of damages to the extent as shown below;- Sr. No. Name of The Party Total Debit Note Amount 1. M/s. Radhe Shyam Ravi Prakash Timbers Pvt. Ltd. Rs. 1,50,00,000/- 2. M/s. Laxman Timbers Pvt. Ltd Rs. 25,27,872/- 3. M/s. Punjab Saw Mills Pvt. Ltd Rs. 25,98,392/- 4. M/s. Pooja Timber Store Rs. 65,00,000/- 5. M/s. Pooja Timber Industries Rs. 37,03,530/- Page | 20 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) Accordingly, these parties have issued Debit Notes of Rs. 3,03,29,794/-,for the amounts mentioned above in col. 3. We have debited these amounts to the Handling Expense A/c and credited the concerned Parties' accounts in our books. We are enclosing herewith the accounts of these parties from our books and contra A/c from the books of the said parties for kind perusal and record. In view of this factual position, it would be appreciated that the damages caused to the party have been allowable” 11. However, the assessing officer had rejected the above reply of the assessee and held that the assessee has debited damages on handling imported pinewood logs of Rs. 3,03,29,794/-, on 31-03-2011 and credited to M/s Radheshyam Timber Pvt. Ltd, M/s. Laxman Timbers Pvt. Ltd., M/s. Punjab Saw Mills Pvt, Ltd., M/s. Pooja Timber Store and M/s. Pooja Timber Industries. Though the handling loss was occurred during the F.Y. 2010-11, relevant to assessment year 2011–12, however,the assessee has not furnished sufficient evidence,therefore, the amount to Rs. 3,03,29,794/- , being handling loss of Timber logs was disallowed and added to the total income of the assessee. 12.Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has deleted the addition, made by the assessing officer. The ld CIT(A) noticed that assessee filed detailed affidavit of the party confirming the minutest details about the loss claimed by it and allowed by assessee. It is also not the allegation of the assessing officer that in lieu of damages allowed by the assessee, any cash is received back. There is also no positive evidence gathered even during the course of search to even prima facie indicate that bogus nature of the allowance of log handling damages honoured by the assessee. Thus, in light of detailed rebuttal filed by the assessee before ld CIT(A) vide submissions dated 16/1/2016, each and every objection of the assessing Page | 21 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) officer stands satisfactorily replied. Moreover, and on the top of it all, the ld CIT(A) noticed that as against the profit of Rs.9.76 crores during F.Y.2007-08, the profits disclosed during the year has increased to Rs.15.71 crores showing healthy increase. Considering these facts and circumstances, the ld. CIT(A) deleted the addition, therefore, the revenue is in appeal before us. 13. Learned DR for the revenue argued thatthere was no written agreement in support of handling loss. Besides, during the assessment proceedings, the assessee submitted only few documents and details, which is not sufficient to allow the claim of the assessee, therefore, learned DR submitted that the addition made by the assessing officer, may be sustained. 13.On the other hand, ld. Counsel for the assessee pleaded that during the assessment proceedings as well as, during the appellate proceedings, assessee has filed sufficient documents and evidences, before both the authorities. In support of each reason given by the assessing officer for not accepting the explanation given by the assessee, the ld Counsel stated that before ld CIT(A) detailed written submissions have been filed, vide the assessee's letter dated 16.01.2016 duly accompanied by paper book. All the documents were before the assessing officer also. The assessee has submitted written submissions dated 07.11.2014 made to the assessing officer, and copy of account of M/s. Radhesham Raviprakash Timbers Pvt. Ltd., and copy of quotation dated 24.03.2008 addressed to M/s. Radhesham Raviprakash Timber Pvt. Ltd., (as per which the assessee has also undertaken to compensate for loss occurring to the party as mutually agreed), copy of the debit note dated 23.03.2009 with supporting details, and contra account from the books of M/s Radhesham Raviprakash Page | 22 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) Timbers Pvt. Ltd were also submitted. In reply to the assessing officers direction to produce the party for verification, the assessee filed latter dated 19.11.2014 (page 33) in which it is mentioned that the concerned parties have given their written reply by RPAD in response to notice u/s 133(6) of the Act, issued by the assessing officer, which has reached the office of the assessing officer. A detailed affidavit executed by Mr. Pratik Singhal director of M/s. Radhesham Raviprakash Timbers Pvt. Ltd. confirming the factum of loss suffered, quantification thereof, and the related debit note issued by them is also submitted. Therefore, ld. Counsel for the assessee, pleaded that based on these documents and evidences, which were also filed by the assessee, before the assessing officer, the ld. CIT(A) has allowed the claim of the assessee, by passing the speaking order. Therefore, order passed by the ld. CIT(A) may be upheld. 14. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. In our considered view, it was wholly erroneous on the part of the assessing officer to make the addition without understanding the nature of the assessee`s business. During the appellate proceedings, the assessee submitted the exhaustive reply given to the assessing officer and taken note of by him in the assessment order. In support of each reason given by the assessing officer for not accepting the explanation given by the assessee, detailed written submissions have been filed, vide the assessee's letter dated 16.01.2016 duly accompanied by paper book. During the assessment proceedings, the assessee has submitted written submissions dated 07.11.2014 made to the assessing officer, in respect of account of M/s. Radhesham Raviprakash Timbers Pvt. Ltd., copy of quotation dated 24.03.2008 addressed to M/s. Radhesham Raviprakash Timber Pvt. Ltd., Page | 23 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) (as per which the assessee has also undertaken to compensate for loss occurring to the party as mutually agreed), copy of the debit note dated 23.03.2009 with supporting details, and contra account fromthe books of M/s Radhesham Raviprakash Timbers Pvt. Ltd. In reply to the assessing officers direction to produce the party for verification, the assessee filed latter dated 19.11.2014 (page 33) in which it is mentioned that the concerned parties have given their written reply by RPAD in response to notice u/s 133(6) of the Act, issued by the assessing officer and has also reached the office of the assessing officer. A detailed affidavit executed by Mr. Pratik Singhal director of M/s. Radhesham Raviprakash Timbers Pvt. Ltd, confirming the factum of loss suffered, quantification thereof, and the related debit note issued by them is also enclosed with the assessee's aforesaid reply dated 19.11.2014. (paper book pg. No. 33 to 282, similar affidavits executed by M/s. Pooja Timber Industry, M/s. Pooja Timber Store, M/s. Laxman Timber Pvt. Ltd, and M/s. Punjab Sawmill Pvt. Ltd., have also been filed alongwith the reply dated 19.11.2014, for supporting such claim relating to succeeding assessment years.). All these documents were submitted before the assessing officer.The copies of returns of income for AYs 09-10 to 11-12 on page nos. 283-285 filed by RRTPL show returned incomes of Rs. NIL, Rs. 67.94 Lacs and Rs. 95.70 lacs respectively. The assessing officer has, however, not taken any cognizance of these evidences while completing the assessment on the same date. Copy of the paper book was sent/ handed over by the ld CIT(A) to the Assessing officer for his report/comments in regard to the genuineness of the claim of handling loss. There is no specific comment or objection in regard to veracity of the above documents which were also filed before the assessing officer on 20/11/2014 vide the assessee's letter dated 19.11.2014. Page | 24 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 15. The assessee has submitted following written submissions, before the ld. CIT(A), which are very useful, as various aspects have been explained by the assessee, therefore the same are reproduced below: “The next grievance of the assessee is with regard to the disallowance of Rs.55,75,665/-, being the loss on account of timber handling activity. On this issue the assessing officer issued notice based on the Auditor's observation and subsequently issued another notice dt. 10-10-2014 calling for various details and explanation. The assessee submitted detailed reply furnishing each and every information/material called for by the assessing officer. The assessee's reply is reproduced by the assessing officer on pages 13 to 16 of the order under appeal. The same deals with every issue raised by the assessing officer in his notice and is self-explanatory, hence the facts stated therein are not repeated here. After incorporating the said reply in the order under appeal the assessing officer has disallowed the claim of timber handling loss of Rs.55,75,665/-on the grounds mentioned in the 'Conclusion' part of the order as follows. (i)That the loss is debited on 31-03-2009 though the debit note is dated 23-03- 2009. (ii)That the assessee did not furnish evidence/explanation during the Audit (iii)That document/evidence not produced during the assessment proceedings. (iv). That agreement with the concerned parties to the effect that any such loss will be borne by the assessee is not filed. (v). That the assessee failed to produce the party for verification of the facts on 14-11-2014 as specifically called for by order sheet entry dt.10-11-2014. (vi). That during the search the P&L accounts as on 30-03-2011 were found which did not show debit of such loss. (vii). For the last stated reason it is held by the assessing officer that the same is accommodation entries made for avoidance of tax. Accordingly, the assessing officer has disallowed the loss in timber handling to the extent of Rs. 55,75,665/-. On the above reasons given by the assessing officer for the disallowance our para-wisesubmissions are as follows. i. Our submission reproduced in the order under appeal would show that we have filed before the assessing officer related quotations and also the debit notes of claim of damages which was paid by us. The quotations would suggest the beginning of the handling job and the debit notes would show the ultimate result of that job. The first ground that the loss occurred between April, 2008 to December, 2008 but the debit note was issued on 23-03-2009 would show that the assessing officer has not appreciated the facts explained by the assessee in the detailed submission. It is clearly stated that the claim of damages cannot be readily admitted by the assessee. It is explained that the assessee sends executives to determine the damage, and the value of damage. There would be some conflict of opinion and the issue is settled after Page | 25 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) negotiations. It is only then the debit note is issued. Therefore it cannot happen that the client would be able to issue debit note immediately on occurring of damage. Similarly, making entry on 31-03-2009 for the debit note dt.23-03-2009 cannot make the loss non-genuine. ii. As for the assessing officer's observation that we did not furnish the evidence/explanation during audit, the assessing officer has failed to take due note of paragraph 3.2. of our submissions. The Auditor has acknowledged the fact that the debit notes issued by the parties concerned were available for verification. Still if the Auditor had any issues of confusion/doubt he could have discussed the matter with the assessee before finalizing the report. It was however a fact that although this was a highly paid job the Special Auditor did not make a single visit for the Audit work and only depended on team of juniors sent for such an important work. The assessing officer has not appreciated the facts stated in this paragraph of our submission in the right perspective. iii. Here again the assessing officer has made factually wrong statement. The evidence supporting the claim was the debit note in each instance of loss. This is part of the enclosures to the Special Audit Report of the Auditor. Further,it would be noticed from our reply that we have complied with and furnished every material/information demanded by the assessing officer. iv. We have specifically informed that no such agreement was entered into and the handling job was customarily undertakenbased on personal negotiations and discussion. However, the quotations produced before the assessing office rspecifically deals with the issue of compensation to be paid to of damage caused to their goods. These quotations Mr. clients in case of given by us bear the signature of both the parties, we being the giver of the quotation and the client accepting the quotation and the terms mentioned therein. This is also an agreement based on which the handling jobs were undertaken by the assessee. v. As regards the issue of calling the assessee for producing parties concerned we have to submit that the assessing officer by order sheet entry dt. 10-11-2014 directed to produce the parties on 14-11-2014. The time allowed for producing the third parties was too short. Further, we have fled a letter dt. 19-11-2014 on 20-41-2014, which is part of the paper-hook wherein we informed the assessing officer that in spite of our persuasion the parties have not agreed to travel to Ahmedabad at such a short notice. However, these parties have submitted confirmation of having received the damages through sworn affidavits which we have filed before the assessing officer with a forwarding letter on 20-11-2014. These affidavits of all the concerned parties are also made part of the paper book. The learned assessing officer has ignored our submission filed before him and also the sworn affidavits of the parties to whom the damages have been paid by the assessee. vi. The year under appeal being 2009-10, the issue raised regarding the P & L account dt. 30-03-2011 has no relevance. Further, in assigning the special audit u/s 142A of the Act, the Auditor was specifically asked by the Department to examine the reasons for difference between the P & L account dt 30-03-2011 found during the search and the final account submitted with statutory audit report and the return. After such verification the Auditor has commented in his special audit report that the profit Page | 26 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) is properly disclosed in the final accounts. The learned assessing officer has failed to take note of the Auditor's comments contained in his Special Audit Report. Therefore, the assessing officer is not justified in taking this issue as a reason for not accepting the timber handling loss. vii. The assessing officer has mentioned that for the above stated last reason he takes the claim of loss as accommodation entries. Considering however the fact that this aspect was specifically assigned to the Special Auditor for examination and report and the Auditor has not reported any discrepancy and found the profit in the final accounts 'properly disclosed, there is no validity of this being the single most important reason for disallowing the loss. From our submissions dealing with the para-wise grounds of the assessing officer for making the disallowance of the loss it would be seen that the assessing officer had no valid reason for making the disallowance. It is therefore prayed that the disallowance of Rs. 55,75,665/- may kindly be deleted.” 16. The Ld CIT(A) after going through the entire documents and evidences submitted before the assessing officer, noticed that the assessing officer asked the assessee to produce the recipient parties in person for verification of the expenses, though their confirmations and contra- accounts were received by assessing officer u/s 133(6) of the Act, as has been verified by CIT(A) from his records. It was submitted before the assessing officer, however, that the damage to the imported pinewood, with regard to which the debit notes have been received and honoured, occurred during the handling of the imported pine-wood, the work for which has been undertaken by the assessee and corresponding handling receipt are already disclosed. It was further seen that the assessee has filed the copies of relevant accounts, copies of the debit note (which was also available with Special Auditor), the basis of computation of the loss incurred, the relevant bills seized and quotations for the work undertaken by the assessee to support the genuineness and the lesser and reduced amounts thus finally charged to and received from the parties concerned. The related documents were also furnished to the assessing officer and are available on page nos.33 to 285 of paper book of the assessee. The assessee vide letter dated 19/11/2014 also submitted the copies of detailed Page | 27 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) affidavits acknowledging the transactions with the assessee and the fact of loss suffered during the course of handling by the parties concerned, PAN of the recipient parties/copies of returns and the fact that apart from the debit-note and quotations, there were no written agreements with regard to the terms containing damage suffered by the recipient parties. Vide para 3.2 of the submission before the assessing officer, the assessee also explained how the damage to logs occurs, how the party raised the claim and how the debit note on reduced and negotiated amount was finally honoured and entered in the books on 31/3/2010. Based on these facts, we do not find any infirmity in the conclusion reached by the CIT(A). 17. We find that the assessing officer's observation that no supporting documents were produced during assessment is also factually wrong in as much as the debit-note and contra-accounts received u/s 133(6) of the Act,were very much available with assessing officer. Similarly, while the absence of written agreement for meeting a business liability cannot, per se in law be a ground for disallowance, the assessee in fact has given a copy of the quotation under which the work is executed and which contains the damage-liability clause, hence this objection of assessing officer has also no merit. Further, in view of the detailed and voluminous evidence supporting the claim already available with the assessing officer and even replies u/s 133(6) of the Act, filed by M/s Radhesham Raviprakash having been received by the assessing officer, his insistence on \"production of party\" is superfluous, and in CIT(A)`s considered opinion, a mere tool to lend the colour of justification to the proposed addition. When the assessee filed confirmation and contra-accounts with PAN of the party issuing the debit-note which stands honoured, as per accounts of the assessee, therefore, ld CIT(A) noticed that there is full discharge of requisite onus Page | 28 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) by the assessee. A further and heavy burden on the assessee, without any adverse material unearthed or brought on record by the assessing officer to doubt the veracity of the evidences filed by the assessee, has no justification in law. Once confirmations, contra-account and PAN of the party is filed, it is the onus of the assessing officer to cross-verify the same including departmental record or carry out enquiries to cast at least prima facie doubt on the veracity of evidences filed by the assessee, which has not been done by the assessing officer. Thus, insistence of the assessing officer for production of oral evidence of Radhesham Raviprakash is disapproved, and the fact of \"non-production\" used as basis of addition is also disapproved and considered not tenable. In any case, the assessee did filed detailed affidavit of the party confirming the minutest details about the loss claimed by it and allowed by assessee. It is also not the allegation of the assessing officer that in lieu of damages allowed by the assessee, any cash is received back. There is also no positive evidence gathered even during the course of search to even prima facie indicate bogus nature of the allowance of log handling damages honoured by the assessee. In the wake of above delineation, we see no error in the conclusion drawn by the CIT(A) in this regard. The CIT(A) in our view, has rightly allowed the claim of the assessee. We, thus, decline to interfere with the conclusion so drawn by the CIT(A) whose order is under challenge by the revenue. Hence, we dismiss the ground raised by the Revenue. 18. In the result, ground No.2 raised by the revenue, is dismissed. 19. Coming to ground No.3 raised by the revenue, which relates to deleting the addition of Rs. 50,503/- being disallowance u/s. 14A of the Act. Page | 29 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 20. Brief facts qua issue are thatduring the assessment proceedings, the assessing officer noticed that assessee- company has made investment in quoted shares of Rs. 100,96,228/- and received dividend of Rs. 98,050/-. Therefore, assessing officer, during the assessment proceedings, issued a show cause notice to the assessee to furnish the details of allocation of expanses towards investments in Shares andif the investments have been made in earlier years, then furnish the proof that investment have not been made out of borrowed funds. 21. In response to the notice of the assessing officer, the assessee submitted its reply before the assessing officer stating that during the year under consideration no investment was made in the Quoted Share of the Group Companies. The observation of the Special Auditor appears to be factually incorrect. 22. However, the assessing officer rejected the above contention of the assessee and held that since the assessee has earned dividend of Rs.98,050/-, which has been claimed as exempt income. Therefore, the assessing officer held that sub-section (2) of section 14A of the Act, is squarely applicable to the assessee- company and working of disallowance was made by the assessing officer under rule 8D of the I.T. rules 1962 and therefore, an addition was made, by the assessing officer to the tune of 50503/-. 23. On appeal, the ld. CIT(A) deleted the addition, therefore the revenue is in appeal before us. The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, ld. Counsel for the assessee, relied on the findings of the assessing officer. Page | 30 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 24.We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We find that during the year under consideration no investment was made in the Quoted Share of the Group Companies, by the assessee. Therefore, we do not find any error in the findings of the ld CIT(A), hance, ground raised by the revenue is dismissed. 25. In the result,ground No.3 raised by the revenue, is dismissed. 26. Ground No.3, raised by the Revenue, relates to deleting the addition of Rs. 1,26,70,118/-, being disallowance of scrap handling expenses. 27.Brief facts of the issue in dispute are stated as under. During the assessment proceedings, the assessing officer noticed that during the course of search, on 15-06-2011, at residential premises of Shri Tribhuvan A. Singhvi, the profit & loss of various concerns, including Gautam Freight Pvt. Ltd, was found and seized for the period from 01-04-2010 to 31-03-2011. The Page No. 12 of annexure A/1, pertains to profit & loss account of Gautam Freight Pvt. Ltd, and on verification of the said page, it was found that there was variation in the expenses on various dates. That is computer printout taken on 15-06-2011, print out taken on 31-03-2011 from main server.During the course of assessment proceedings, the assessee- company has furnished explanation in respect of difference of profit & loss account, as per Hard Disk and as per Server. On verification of the same it wasnoticed by the assessing officer that in respect of Page | 31 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) Scrap/HMS Handling Expenses, the assessee has shown difference as under: 1. As per Hard Disk Rs. 2,23,02,976/- 2. As per Server Rs. 3,56,11,553/- Difference Rs. 1,33,08,577/- In this connection, the assessee has furnished ledger account of Scrap/HMS handling expenses and two debit note issued by MTC Business Pvt, Ltd, on 01-03-2011 and 30-03-2011, of Rs. 73,05,549/- and Rs. 66,72,591/- respectively. In the ledger account, no details of payment have been given except cash payment and JV of Rs. 66,20,625/- and Rs. 60,49,493/-, in the name of MTC Business Pvt; Ltd. The assessing officer observed that assessee has not furnished the basis and working of scrap/HMS handling expenses, therefore, assessing officer, disallowed the expenses of Rs. 1,26,70,118/- and added to the total income of the assessee. 28.Aggrieved by the order of the Assessing Officer, the assessee, carried the matter in appeal before the Ld. CIT(A), who has deleted the addition made by the assessing officer. Therefore, the revenue is in appeal before us. 29. Learned DR for the revenue submitted, that the assessee has not submitted the basis of expenditure,therefore, there is a doubt whether such expenditure relates to assessee`s business or not. TheScrap/HMS handling expenses, are for the purpose of the business or not has not proved by the Page | 32 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) assessee, with necessary document and evidences. Therefore, addition made by the assessing officer may be sustained. 30. On the other hand, learned Counsel for the assessee defended, the order passed by the ld. CIT(A) and stated that ld. CIT(A) has passed a reasoned and speaking order, therefore, the same may be upheld. 31. We have heard the Learned Counsel appearing on behalf of the respective parties at length.The ld CIT(A) observed that as per the papers seized from the residence of Shri Tribhuvan A. Singhvi, the scrap/HMS handling expenses were Rs.2,23,02,976/-andassessing officer appears to have wrongly mentioned the date as from 01.04.2010 to 31.03.2011 andthe seized papers, as explained to ld CIT(A) are copy of accounts, as on 30.03.2011. It further appears that the search party took back-up of accounting data, as appearing on the hard disk, as on 08.03.2011, as also copy of accounting data, as per the main server at the time of the search. There was obvious difference between the data as on 08.03.2011 (hard disk) and the data as on 31.03.2011 (main server). The assessee filed a detailed reconciliation before the assessing officer, as per his letter dated 27.10.2014, duly accompanied by relevant accounting entries and invoices in support of the amount of difference under each head between the above period. The Page no. 486 to 489 is in support of the difference of Rs. 1,33,08,575/- being the difference in scrap/HMS handling expenses as per data on the hard disc and the main server, the data obviously representing the affairs as on two different dates.The ld CIT(A) noticed that as per the assessment order, the difference to be reconciled is Rs. 133.08 lacs, but the assessing officer makes addition of Rs. 126.70 lacs. The assessee submitted the reconciliation and accompanying debit-note for brokerage charges for MV Georget K and MV Lake Arfura dated 1/3/2011 and Page | 33 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 30/3/2011 for amounts of Rs. 73,02,549/ and Rs. 66,72,591/- respectively, which includes service tax and other cess, issued by the vessel-brokers M/s MTC Business Pvt. Ltd. The assessing officer takes note of the scrap/HMS handling account and debit notes in the order, but observing that \"the assessee has not furnished the details and documentary evidence regarding basis and working of scrap/HMS handling expenses\", the assessing officer makes the disallowance. We find that no further evidences were called for by the assessing officer, apart from asking the assessee to reconcile the figures. The assessee submitted the reconciliation as called for with supporting rationale. The difference is shown to be reconciled with a rider that service tax included in one of the debit notes seem to have been left out to be accounted even in the figure of Rs.3,56,11,553/-. In other words, the difference to be reconciled and getting reconciled is Rs.1,39,75,140/- and not Rs.1,33,08,577/-. Be that as it may, on examination of the respective debit notes and the copy of scrap/HMS handling expenses account, the ld CIT(A)find that about the due explanation of difference and reconciliation offered by the assessee both before assessing officer and before CIT(A). It is therefore held that there is no merit in the addition, and therefore the ld CIT(A) deleted the addition. 32. In the result, ground No.4 raised by the Revenue, is dismissed. 33.Now, we shall take assessee`s CO No. 184/Rjt/2017.In this cross objection, the assessee, has only one effective ground, pertaining to depreciation on wind mill to the tune of Rs. 32,67,680/-.( other grounds of the cross objection were not pressed by the assessee, so we dismissed them). Page | 34 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) 34.We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer. On the other hand, ld. Counsel for the assessee submitted that entire structure comprising the civil work and the machinery put together is called a \"Windmill\" for which the rate of depreciation prescribed under the Rules is 80%. There is no separate existence of the civil work or the machinery not mounted upon the civil work of special type carried out for the purpose. Therefore, the depreciation is correctly claimed on the total cost of windmill. 35.We find that assessee is entitled to claim depreciation on civil work connected with windmill and the cost machinery/windmill. However, on the cost of the land, the depreciation is not allowed, as the land, does not depreciate. That is, except the depreciation on land cost, the assessee is entitled to claim depreciation on civil work for the purpose of installation of windmill and cost of machinery/ windmill. Therefore, we direct the assessing officer, to allow the depreciation on civil work, connected with windmill, and the cost of machinery/windmill, excluding land cost. Statistical purposes, this ground of cross objection, is allowed. 36. In the result, the effective ground of the cross objection, of the assessee, is allowed for statistical purposes, in above terms. 37. In the combined result, appeal of the revenue is dismissed, whereas cross objection filed by the assessee is allowed for statistical purposes, in above terms. Page | 35 DCIT v. Gautam Freight P. Ltd. ITA No.150 & 184/Ahd/2016 (AY 2011-12) Order is pronounced on 17/03/2025 in the open court. Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot *Ranjan Ǒदनांक/ Date:17 /03/2025 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order Assistant Registrar/Sr. PS/PS ITAT, Rajkot "