ORDER Per Joginder Pall, Accountant Member . These two appeals have been filed by assessee against two orders dated 24 8 2005 of CIT(A), Ghaziabad, for assessment years 2001 02 and 2002 03 respectively. Since issues involved in both appeals are common, these were heard together and are being disposed of by this consolidated order for sake of convenience. 2. At outset, assessee has raised following common additional ground for both assessment years : "1. That CIT(A) erred on facts and in law in enhancing assessed income of appellant alleging that payment made on account of lump sum fee and royalty was neither revenue expenditure (as claimed by appellant), nor capital expenditure (as treated by Assessing Officer), without providing reasonable opportunity of being heard as provided in section 251(2) of Act." assessee has submitted that it had filed returns of income for both assessment years declaring therein loss of Rs. 68,14,22,302 and Rs. 93,03,99,726 for assessment years 2001 02 and 2002 03 respectively. In return of income filed for assessment year 2001 02, assessee had claimed deduction of lump sum fee amounting to Rs. 28,67,00,000 paid to M/s. Honda Motor Company Ltd., Japan (in short HMCL ) under technical collaboration agreement (in short TMC ) and royalty of Rs. 12,38,37,000 paid to HMCL at rate of 4 per cent of sale for assessment year 2001 02. Similar deduction amounting to Rs. 29,20,07,000 towards instalment of lump sum fee and Rs. 15,60,93,000 being royalty was claimed as deduction for assessment year 2002 03. Assessing Officer disallowed claim of assessee on ground that technical know how received by assessee related to setting up its plant and, therefore, impugned expenditure was capital in nature. Similar reasoning was given by Assessing Officer for treating royalty payments also as capital expenditure. When matter was taken in appeals before CIT(A), CIT(A) held that impugned expenditure was indeed diversion of income to holding company. action of CIT(A) has resulted in enhancement of income. As per provisions of sub section (2) of section 251 of Act, CIT(A) was under statutory duty to issue show cause notice to assessee before enhancing income. Since ld. CIT(A) failed to issue such notice, assessee has contended that action of CIT(A) for enhancing income is illegal, invalid and ab initio assessee void . has contended that this is purely legal issue for which relevant facts are already on record. additional ground raised by assessee deserves to be admitted. Reliance has been placed on two judgments of Hon ble Supreme Court in cases of Corpn. Jute of India [1991] 187 ITR 688 and v. CIT National Thermal Power Co. Ltd. CIT [1998] v. 229 ITR 383. 3. ld. CIT, DR, Sh. P.C.K. Solomon, his letter dated 25 5 2006 has submitted that vide revenue has no objection to admittance of additional ground of appeal for both assessment years. 4. We have heard both parties and considered respective submissions. Considering fact that issue raised under additional ground directly arises from order of CIT(A) and is legal in nature for which relevant facts are already on record, additional ground raised by assessee for both assessment years is admitted. Two judgments of Hon ble Supreme Court in case of Corpn. of India Jute ( supra) and National Thermal Power Co. Ltd. ( support this view. Therefore, supra) also we order accordingly. 5. As regards merits of additional ground, ld. counsel for assessee, Sh. Ajay Vohra, drew our attention to provisions of sub section (2) of section 251 which provides that ld. CIT(A) shall not enhance assessment or reduce amount of refund unless assessee has had reasonable opportunity of showing cause against such enhancement or reduction. He submitted that this necessarily implies that CIT(A) must issue show cause notice to put assessee to notice for enhancement of income. He submitted that in this case, no such show cause notice was issued by CIT(A). Therefore, this is jurisdictional defect and enhancement made by CIT(A) deserves to be quashed. He relied on judgment of Delhi High Court in case of Gedore Tools (P.) Ltd. [1999] 238 ITR 268, where it has been held that CIT(A) v. CIT is required to issue notice under section 251(2) before making enhancement of assessment. He also relied on judgment of Hon ble Supreme Court in case of CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443. Thus, he submitted that impugned orders of CIT(A) for enhancing income may be quashed. 6. ld. CIT, DR his letter dated 25 5 2006 submitted that sub section (2) of vide section 251 only provides that CIT(A) shall not enhance assessment unless appellant had reasonable opportunity of showing cause against such enhancement. There is no statutory notice prescribed under Act for issuing show cause notice for enhancement of income. law only requires that assessee must be made aware of proposed action and his reply must be considered before enhancing income. He produced before us copy of order sheet entries made by CIT(A) on 26 7 2005 and 10 8 2005, where assessee was duly informed about proposed action of CIT(A). reply dated 10 8 2005 filed by assessee has been duly incorporated by CIT(A) on pages 6 to 19 of impugned order for assessment year 2001 02 and thereafter, ld. CIT(A) has given his own reasoning for treating lump sum fee payments and royalty payments as diversion of income to holding company. Thus, he submitted that ld. CIT(A) has complied with statutory requirement of issuing notice before enhancing income and, therefore, there was no illegality in action of ld. CIT(A) as alleged by assessee. 7. We have heard both parties and carefully considered rival contentions with reference to facts, evidence and material on record. provisions of sub section (2) of section 251 read as under : "(2) Commissioner (Appeals) shall not enhance assessment or penalty or reduce amount of refund unless appellant has had reasonable opportunity of showing cause against such enhancement or reduction." bare reading of above provision shows that ld. CIT(A) is under statutory duty to issue show cause notice and provide reasonable opportunity to assessee before enhancing such income. order sheet entries made on 26 7 2005 and 10 8 2005 by CIT(A) are extracted as under : "26 7 2005 Sh. K.L. Gupta, Manager, Taxation attended. Requested for adjournment. On next date of hearing further points are to be explained since Honda Siel Car India Ltd. is 99.9 per cent subsidiary to Honda Motors Company of Japan then how payment in name of technical know how and lump sum for royalty is justified when all technical inputs are provided by parent company why lump sum payment and royalty payment which are same thing in other words should be treated as diversion of profit without paying taxes and instead of debating over capital or revenue expenditure it should be added 40,65,07,000 in income of appellant because taxes have not been paid over it. In other words payment in name of royalty and lump sum is paying to oneself for one s knowledge. Why contract so far as provisions of article 14 are concerned. Appellant is also required to distinguish fact of case in respect to observation made by Hon ble Supreme Court in case of Jones Wood Head & Son (India) Ltd. 224 ITR 342 where test of enduring v. CIT benefit brought is, therefore, not certain on conclusive test and it cannot be applied blindly and mechanically without reference to particulars, facts and circumstances of given case. Noted for 10 8 2005 Sd/ Honda Siel Cars India Limited 2001 02, 2002 03 10 8 2005 Shri Rupesh Jain (FCA) & Mr. Surender Agarwal, GM (Finance) Sh. K.L. Gupta, Sr. Manager, Taxation Shri Chitresh Gupta attended filed written submission on point asked for. Supported by case laws and paper book. Argued that reasonableness of remittance according to TCA stand justified on basis of approval given by Government of India. Agreed that TCA will be within ambit of Indian Contract Act. Lump sum payment magnitude and proceeding of royalty was decided on basis of commercial viability of product even cost price being higher to sale price. Further argued that due to restructure clause benefit was of non enduring nature. From provisions for various expenses were to be made because bill were not raised in time. Regarding dispute custom payment matter is in Hon ble ITAT. Further argued that Assessing Officer should have considered claim irrespective of payment made. Stated that receivable amount from excise was actually to be disbursed to customs who are entitled for 8 per cent less excise duty. Since Assessing Officer did not ask for actual disbursement, therefore, it was not submitted. Regarding 3 per cent payment to HMCL on Ports sale to Thailand it was stated that separate agreement was entered to sell indigenous made out of designed territorial boundary. Sd/ 10 3 2005" In response to above show cause notice, assessee filed detailed reply his vide letter dated 10 8 2005 (copy placed at pages 54 to 63 of paper book). This has also been extracted by CIT(A) on pages 6 to 19 of assessment order for assessment year 2001 02 and also in order for assessment year 2002 03. implication of proposed action of CIT(A) was clearly brought to notice of assessee. Therefore, it is not correct to say that ld. CIT(A) has not issued any show cause notice before making enhancement of income. Since there is no statutory notice prescribed under Act and assessee has been allowed full opportunity before making enhancement of income, we are of considered opinion that there is no illegality in action of CIT(A) before enhancing income. law only requires that assessee must be made aware of proposed action of CIT(A) for enhancement of income and explanation be obtained and considered. entry made in order sheet amounts to due compliance with procedure. Thus, we are of view that ld. CIT(A) has complied with procedure as laid down under Act and assessee was duly put to notice before making enhancement of income. ratio of judgments of Hon ble Supreme Court in cases of Gedore Tools (P.) Ltd. ( Bahadur Hardutroy Motilal Chamaria ( ) is not applicable to supra) and Rai supra facts of present case because assessee was put to notice by CIT(A) before making enhancement of income. Therefore, orders of CIT(A) are upheld on this point and additional ground of appeal filed by assessee is rejected for both assessment years. 8. Now, we take up first ground of appeal common to both assessment years which read as under : "1.That on facts and circumstances of case CIT(A) erred in upholding disallowance of technical know how fee and royalty paid to Honda Motor Company Ltd., Japan (HMCL), on different ground than that taken by Assessing Officer, thereby enhancing assessment. 1.1That on facts and circumstances of case CIT(A erred in alleging that payment of technical know how fee and royalty to HMCL is neither revenue expenditure, as claimed by appellant, nor capital expenditure as held by Assessing Officer, but diversion of profit in favour of HMCL. 1.2That on facts and circumstances of case CIT(A) erred in alleging that relevant Articles of Technical Collaboration Agreement (TCA) between appellant and HMCL, relating to payment of technical know how fee and royalty to HMCL are void, in terms of Contract Act and permission granted by Reserve Bank of India. 1.3That on facts and circumstances of case CIT(A) erred in not appreciating that since appellant by virtue of TCA merely acquired right to use technical information and know how payment, therefore, in nature of lump sum fee and royalty is revenue in nature and deductible business expenditure. 1.4Without prejudice, that on facts and circumstances of case CIT(A) erred in not directing allowance of depreciation on amount of lump sum fee and royalty, treating same as capital expenditure." facts of case are that in returns of income filed for both assessment years, assessee had claimed deductions of Rs. 28,27,00,000 and Rs. 29,20,07,000 being lump sum amount of "Technical Guidance Fee" paid to M/s. HMCL, Japan for assessment years 2001 02 and 2002 03 under Technical Collaboration Agreement (In short TCA ). In addition, assessee also claimed deductions of Rs. 12,38,27,000 and Rs. 15,60,93,000 being royalty paid to foreign company under agreement for assessment years 2001 02 and 2002 03 respectively. During course of assessment proceedings, Assessing Officer called upon assessee to justify its claim as revenue expenditure. assessee submitted that it had entered into TCA with M/s. HMCL, Japan, under which assessee was granted indivisible, non transferable and exclusive right and license to use know how and technical information provided by M/s. HMCL. In consideration of right and license granted, assessee company was required to pay lump sum fee of US 30.5 million Dollars payable in 5 equal instalments beginning from 3rd year after commencement of commercial production. assessee furnished copy of TCA. Relying on two judgments of Hon ble Supreme Court in cases of of India Ltd. CIT v. Ciba [1968] 69 ITR 692 and Alembic Chemical Works Co. Ltd. [1989] 177 ITR 377 , assessee v. CIT contended that impugned expenditure was allowable as revenue expenditure. Similarly, assessee had explained that assessee was also required to pay royalty at rate of 4 per cent of net sale price of manufactured products sold in India under TCA for period of 7 years. assessee claimed that such payments were also in nature of revenue expenditure and hence allowable. However, Assessing Officer referred to various clauses of TCA and observed that without such agreement, assessee could not even start its business, let alone run it. He observed that agreement was crucial for setting up and starting business of assessee and technical know how provided for foreign collaborators included inputs for setting up its plant and manufacturing facilities. restrictions placed on use of license, technical know how, trademark etc. were simply by way of abundant precautions and legality as affairs of assessee company were being supervised and monitored by parent company HMCL, Japan. Thus, Assessing Officer observed that by i.e., incurring expenditure in nature of technical guidance fee, assessee had obtained advantage of enduring benefit and, therefore, such expenditure was capital in nature. He also relied on two judgments of Hon ble Supreme Court in cases of CIT v. Ciba of India Ltd. [1968] 69 ITR 692 and Warner Hindustan Ltd. [1998] 9 SCC 534 and CIT v. judgment of Allahabad High Court in case of Kumar Pharmaceutical Works Ram v. CIT [1979] 119 ITR 33. He further observed that expenditure incurred on payment of royalty was also for acquisition of technical know how, license etc. and, therefore, by incurring such expenditure, assessee has obtained benefit of enduring nature. In this view of matter, Assessing Officer disallowed both royalty payments and lump sum technical guidance fee being capital expenditure for both assessment years. 9. Aggrieved, assessee filed appeals against assessment orders before CIT(A) and submitted detailed submissions letter dated 10 8 2005. ld. CIT(A) called vide for further clarifications on points noted on page 19 of impugned order for assessment year 2002 03. assessee furnished this information. It was submitted before CIT(A) that both lump sum technical fee and royalty were being paid by assessee to HMCL under Technical Collaboration Agreement dated 21 5 1996 where assessee was granted indivisible, non transferable and exclusive right and license to use know how and technical information for manufacture of automobiles etc. In consideration, assessee was to pay sum of US $ 30.5 million payable in 5 equal instalments. Similarly, royalty at rate of 4 per cent on net sales (both internal and export sales) was payable by assessee for technical information and know how etc. supplied by HMCL, Japan for period of 7 years. It was submitted that business of assessee was joint venture between HMCL and Siel Limited, Indian company where HMCL was to have 60 per cent of shareholding in assessee company and 40 per cent was to be held by Indian partner Siel Limited. However, shareholding had changed in various years and in year 2003, shareholding by HMCL aggregated to 99.9 per cent and by Siel Limited to 0.1 per cent. It was also submitted that taking into account desired level of technological dynamism in Indian Industry, Government of India had encouraged acquisition of foreign technology, import of technology and development of imported know how as well as upgradation of indigenous technology, RBI accorded approval to all industries for foreign technology collaboration agreements subject to lump sum payment not exceeding US $ 2 million. Similar restrictions were placed on royalty payments. said policy was liberalized subsequently. fact that lump sum technical guidance fees and royalty were paid to holding companies did not make any difference so far as claim of assessee was concerned because considering commercial expediency of such payments, same had been recognized by Indian Government. It was submitted that Government approval has been given under governing statute e.g. Foreign Exchange Regulation Act or by Department of Industries by Ministry of Government of India under policy guideline because outflow of precious foreign exchange is matter of greater concern to Government. Reliance, was placed on judgment of Hon ble Supreme Court in case of of India LIC v. Escorts Ltd. [1986] 1 SCC 264, where it was observed that Reserve Bank of India was authority under section 29(1) of Foreign Exchange Regulation Act to grant permission for payments to foreign parties. It was also submitted that mere fact that holding company HMCL held 99.9 per i.e., cent shares of assessee company did not mean that payment was made to self because both HMCL and Siel India were two distinct and separate legal entities. It was also submitted that if that were so, then entire profit of assessee should have been treated as income of holding company and taxed in its hands in India. It was also argued that at most, disallowance, if any, out of payments made to related party b could be made under section 40A(2)( , provided payments are found as excessive ) or unreasonable, having regard to fair market value of goods/services. But in this case, such situation did not arise because agreement was approved by Government of India. Relying on judgment of Delhi High Court in case of CIT v. Shriram Pistons & Rings Ltd. [1990] 181 ITR 230, it was submitted that in case where approval of remuneration to son of Director of assessee was approved by Company Law Board, no disallowance under section 40A(2) of Act could be made. Reliance was also placed on decision of ITAT, Pune Bench in case of Kinetic Honda Motor Ltd. CIT [2001] 77 ITD 393 whereby referring to CBDT s Circular No. v. Jt. b 6 P, dated 8 7 1968 in context of section 40A(2)( , Tribunal had held that if ) payments were approved by one wing of Government, there was no question of being treated as excessive and unreasonable having regard to legitimate business needs. In this case also, there was change in pattern of shareholding of foreign company which had arisen from 28.56 per cent to 51 per cent. But agreement was approved by Government of India. It was held that there was no justification in making any disallowance once agreement was approved by Ministry of Industries. Reliance was also placed on decision of ITAT, Bombay Bench in case Bombay Burmah Trading Corpn. Ltd. CIT [IT Appeal No. 3518 (Mum.) of 2000]. of v. Dy. It was also submitted that judgment of Supreme Court in case of Wood Jonas Head & Sons India Ltd. [1997] 224 ITR 342 were distinguished on facts on v. CIT ground that in present case, lump sum fee/royalty paid by assessee under TCA was in lieu of use of know how, designs for manufacture, assembly, testing or inspection of cars provided by HMCL. Foreign collaborator was not obliged to provide technical assistance for setting up of manufacturing facilities of assessee. assessee had qualified engineers, technicians and other personnel, some of whom were trained by HMCL for purpose of setting of its plant. expenses of such personnel were capitalized by assessee. It was also submitted that there were restrictions imposed on assessee about use of technical know how provided by foreign collaborators within 90 days from date of expiration or termination of TCA. Thus, assessee did not enjoy exclusive right for unlimited period about use of technical know how provided by foreign collaborators. 10. ld. CIT(A) considered these submissions and referred to article 14 of TCA which provided payment of lump sum fee of US$ 30.5 million to HMCL payable in 5 equal instalments and also royalty payable at rate of 4 per cent on internal sales and exports subject to taxes. He also referred to letter dated 13 11 1995 of Government of India, Ministry of Industry, where proposal for foreign collaboration subject to terms and conditions mentioned therein was approved. ld. CIT(A) noted that while granting approval, Government of India had prescribed equity participation to HMCL to 60 per cent and by assessee to 40 per cent. However, in year 1996 shareholding of HMCL went up to 90 per cent and in year 2000, same stood at 99 per cent. shareholding of assessee was 1 per cent. Subsequently in year 2003, equity holding of HMCL went up to 99.9 per cent and of assessee stood at 0.01 per cent. ld. CIT(A) observed that change in equity ratio was not as per spirit of permission given by Government of India. Thus, he observed that assessee became almost complete subsidiary to HMCL. He also observed that permission for payment of royalty and lump sum technical guidance fee was with condition subject to taxes. While these words were incorporated for payment to royalty, but same were missing in clause relating to payment of lump sum amount of technical fee. This was contrary to conditions laid down by Government of India while granting approval. He also referred to section 16 of Indian Contract Act, 1872 which deals with contracts made under undue influence to obtain unfair advantage over other. He also observed that HMCL was holding real or apparent authority as per spirit of provisions of section 16(2)( of Indian Contract ) Act. Thus, he observed that both lump sum payment of technical guidance fees and royalty were indeed for diversion of profit without paying taxes. He also observed that TCA agreement with HMCL, Japan was voidable contract in terms of section 23 of Indian Contract Act, 1872 read with permission granted by Government. He also observed that diversion of profit was also established as money transferred by way of royalty payment and technical guidance fee flowed back to assessee in form of increased equity shareholding of HMCL by making aforesaid payment to HMCL. He further observed that stipulation in TCA that lump sum technical fee was to commence in 3rd year of commencement of production showed that these payments were to be made out of profits. But assessee has only increased its losses rather earning profit. Thus, he disallowed claims of assessee for payment of lump sum technical guidance fees and royalty for both assessment years. He did not decide ground taken before him that Assessing Officer was not justified in disallowing claims of assessee for deductions on ground that impugned expenditure was capital in nature. In other words, he has not recorded any finding as to whether expenditure incurred was capital or revenue in nature. assessee has now brought appeals before us. 11. ld. counsel for assessee reiterated submissions made before authorities below. He drew our attention to pages 1 to 24 of paper book which is copy of written submissions filed before CIT(A). He further referred to pages 96 to 123 of paper book which is copy of Technical Collaboration Agreement between assessee and HMCL. He referred to page 100 of paper book where assessee had entered into TCA on 21 5 1996 with M/s. HMCL as per which assessee had agreed to obtain license and technical assistance from M/s. HMCL for manufacture and sale of certain automobiles. He referred to page 102 of paper book, which defines term "know how" as to mean all secret and technical information, including but not limited to drawings, standards, specifications, material lists, process manuals and directions maps, which directly related to products or license parts themselves or was necessary for manufacture of products or licensed parts. Clause (7) of said agreement defines term "Technical Information" as to mean know how and technical information, such as service materials and Japanese Industrial Standard, which directly related to products or licensed parts or was necessary for manufacture of products or licensed parts. Article 2 of said agreement provided that assessee was granted to licensee indivisible, non transferable and exclusive right and license of manufacture, use and sell products and licensed parts within territory under Intellectual Property Rights and by using know how, and technical information, provided that licensee may grant sub licenses with prior written consent of licenser. As per article 7.1 of TCA, know how and other non public technical or business information of licensor of M/s. HMCL shall remain sole and exclusive property of licensor and same shall be held in trust and confidence for licensor by assessee. Thus, he submitted that assessee was merely licensee and not owner of technical know how and business information. He further referred to article 8 on page 107 of paper book where assessee was restricted to use said technical know how only for manufacture of its products and assessee was precluded from allowing use of such information by any third party. assessee was directly prohibited from sharing such information with anybody else. He then referred to article 14 of agreement on page 111 of paper book which provided consideration in form of lump sum fee and royalty payable to HMCL. He further referred to clause 14.3 on page 112 of paper book which clearly provided that all payments and remittance by licensee will be subject to tax deduction at source/levy of cess. Thus, he submitted that observations made by CIT(A) in impugned orders that there was no clause for payment of tax in respect of lump sum guidance fee was factually incorrect. He also submitted that statement too show that assessee had deducted tax while making payment of royalty and lump sum fee to HMCL. These have been placed at pages 438 to 440 of paper book. He submitted that various clauses of agreement referred to above show that assessee had limited right to use and access of knowledge and technical information for manufacture of its own products. assessee was not owner of such know how and had limited excess for manufacture of limited use for manufacture of its own car. He further referred to article 16 of TCA which provided use of trademarks of HMCL. As per agreement, assessee was prohibited from use or permitting any third party, trademarks licensed hereunder in servicing, sale or other disposition of any goods other than products and parts for repair or replacement. agreement further pointed out that on termination, he shall discontinue use of trademarks licensed by licenser. Article 19 on page 115 of paper book provided that agreement was effective for period of 10 years from date of agreement or 7 years from date of commencement of commercial production and shall thereafter be renewed subject to prevailing laws. He referred to page 117 of paper book where assessee was required to discontinue manufacture, sale and other disposition of products and parts, use of Intellectual Property Rights, Technical Information licensed or furnished by licenser under this agreement. assessee was required to return all relevant documents and information belonging to HMCL. Article 23 of agreement further prohibited assessee from assigning any rights, directly or indirectly to any other party without prior written consent of other parties. Thus, he submitted that expenditure incurred by assessee by way of payment of lump sum fee and technical guidance and royalty for right to use know how and technical information for manufacture of automobiles was revenue expenditure as assessee had not acquired ownership right in technology/information received and had only limited right to use same. In support of such contention, ld. counsel relied upon following judgments : ( CIT Ciba of India Ltd. i v. ) [1968] 69 ITR 692 (SC); ( Indian Oxygen Ltd. ii IT v. )C [1996] 218 ITR 337 (SC); ( IT IAEC (Pumps) Ltd. iii) v. C [1998] 232 ITR 316 (SC); ( Wavin (India) Ltd. iv IT v. )C [1999] 236 ITR 314 (SC); v hriram Refrigeration Industries Ltd. CIT ( )S v. [1981] 127 ITR 746 (Delhi); ( Tata Engg. Locomotive Co. (P.) Ltd. vi IT v. )C [1980] 123 ITR 538 (Bom.); ( riveni Engg. Works Ltd. CIT vii) T v. 138 ITR 216 ( sic); ( ddl. CIT Sharma Engines Values Ltd. viii) v. [1982] 138 ITR 216 (Delhi); ( Bhai Sunder Dass & Sons (P.) Ltd. ix IT v. )C [1986] 158 ITR 195 (Delhi); ( Jyoti Electrical Motors Ltd. x IT v. )C [2002] 255 ITR 345 (Guj.); ( Kanpur Cigarettes xi IT v. )C [2005] 147 Taxman 428 (All.); ( AC Bajaj Tempo Ltd. xii) v. I [1996] 218 ITR (AT) 147 (Pune) (SB); ( .R.P. Tools Ltd. CIT xiii) S v. [1999] 237 ITR 684 (Mad.). Thus, he submitted that Assessing Officer was not correct in disallowing such expenditure as capital in nature. 11.1 As regards action of CIT(A), ld. counsel submitted that he has not decided issue whether impugned expenditure was capital or revenue in nature which was basis for making such disallowance by Assessing Officer. However, he has held that impugned payments represented diversion of profits because assessee flouted conditions laid down, by Government while granting permission to enter TCA with HMCL. He has particularly referred that HMCL has increased its shareholding from 60 per cent to 99.9 per cent, lump sum technical know how fee and royalty was subject to tax and no tax was paid by HMCL in respect of same and lump sum technical know how fee and royalty were payable only out of profits of assessee and not immediately on entering TCA. ld. counsel submitted that these allegations of ld. CIT(A) were without any basis and contrary to facts on record. He submitted that increase in shareholding by HMCL was approved by Government of India, Ministry of Industries and Reserve Bank of India. He referred to pages 422 to 429 of paper book where such approval was granted by Reserve Bank of India. Page 422 is letter of Government of India, Ministry of Industries dated 25/29 6 1999 where HMCL was allowed to have 95 per cent equity of assessee company. Page 423 is letter dated 20 10 2000 of Government of India, where HMCL was allowed to have equity holding of 99 per cent. Page 424 is letter of Reserve Bank of India for transferring 32,40,000 equity shares of HSCI in favour of HMCL at rate of Rs. 31 per share. Similarly pages 426 and 427 is letter dated 25 3 2000 of Reserve Bank of India for granting permission of transferring 1,44,00,000 equity shares of Rs. 10 each to HSCI in favour of HMCL at price of Rs. 18.05 per share. Pages 428 and 429 is letter dated 23 4 2003 of Government of India, Department of Economic Affairs where approval was granted for transfer of Rs. 32.4 lakhs equity shares to M/s. HSCI representing 0.9 per cent of equity capital of assessee. Thus, he submitted that observations of CIT(A) that equity ratio has been changed by flouting conditions for granting approval to joint venture was factually wrong and incorrect. He further submitted that lump sum know how fee and royalty were remitted only to HMCL after deduction of tax at source in terms of provisions of Income tax Act and Double Taxation Avoidance Act (DTAA) between India and Japan. details regarding tax deducted at source and deposit of such tax etc. are placed at pages 430 to 440 of paper book. Thus, he submitted that allegation of CIT(A) that relevant clauses of TCA were flouted, was again without any basis. He further stated that TCA provided payment of lump sum know how fee in instalments over period of 5 years starting from 3rd year after commencement of commercial production so that assessee was able to find its feet and establish itself in market and payment of lump sum know how technical fee did not drain its financial resources during initial phase, which was capital intensive. stipulation in agreement had nothing to do with profit of assessee as payment had to be made from year specified in TCA, irrespective of whether assessee had profit or loss. He submitted that ld. CIT(A) has also erred in not appreciating that all these payments were made under agreement approved by Government of India and was again subject to permission given by Reserve Bank of India and same could not be brushed aside lightly and have to be given due consideration. assessee has relied on following judgments : ( LIC of India Escorts Ltd. i ) v. [1986] 1 SCC 264; ( Shriram Pistons & Rings Ltd. ii IT v. )C [1990] 181 ITR 230 (Delhi); ( inetic Honda Motor Ltd. Jt. CIT iii) K v. [2001] 77 ITD 393 (Pune); iv ombay Burmah Trading Corpn. Ltd. s ( )B case ( supra), Thus, ld. counsel submitted that TCA cannot be said to be void or having been obtained by HMCL by exercising undue influence on assessee and, therefore, conclusion drawn by ld. CIT(A) that agreement with TCA was void, deserves to be set aside. 11.2 As regards royalty payments, ld. counsel submitted that similar deductions had been claimed and allowed in earlier assessment years. Following principle of consistency, ld. counsel submitted that no disallowance of royalty payment was called for by Assessing Officer and ld. CIT(A) was not justified in upholding disallowance on ground that same represented diversion of income. He relied on following judgments : ( Radhasoami Satsang CIT i ) v. [1992] 193 ITR 321 (SC); ii Director of Income tax (Exemption) ( ) v. Apparel Export Promotion Council (No. 1) [2000] 244 ITR 734 (Delhi); ( IT Kishan Lal (HUF) iii) v. C [2002] 258 ITR 359 (Delhi); ( Neo Poly Pack (P.) Ltd. iv IT v. )C [2000] 245 ITR 492(Delhi); v ayaji Iron & Engg. Co. CIT ( )S v. [2002] 253 ITR 749 (Guj.); ( Girish Mohan Ganeriwala vi IT v. )C [2003] 260 ITR 417 (Punj. & Har.); ( esta Investment & Trading Co. (P.) Ltd. CIT vii) V v. [1999] 70 ITD 200 (Chd.); ( y. CIT Guru Nanak Vidya Bhandar Trust viii) D v. [2004] 139 Taxman 308 (Delhi); ix rihant Builders, Developers & Investors (P.) Ltd. [2005] Taxman ( )A v. ITAT 144 121 (MP); ( ARJ Security Printers x IT v. )C [2003] 264 ITR 276 (Delhi); xi y. CIT Jindal Photofilms Ltd. ( )D v. [IT Appeal No. 1920 (Delhi) of 1998] (TM). He also made alternative submission that once Assessing Officer had disallowed impugned expenditure on ground that same was capital in nature, he ought to have allowed depreciation thereon. 12. ld. CIT(DR) also filed written submissions his letter dated 25 5 2006 vide stating therein that various letters filed by assessee indicated that various agreements were approved by Government of India and further RBI had accorded approval for enhancing equity holding by HMCL of assessee company. He submitted that had these documents been available with CIT(A), he would have not observed in his orders that change in equity ratio was not as per spirit of approval granted by Government of India. He further stated that since equity holding with HMCL at point of time was of 99.9 per cent, it was rightly held by him that payment made by assessee in garb of lump sum payment of technical fee and royalty were nothing but diversion of profit. He further submitted that perusal of TCA entered into between assessee with HMCL shows that use of license, technical know how and trademark by assessee was for considerable long period of time 10 years and this resulted in enduring benefit of assessee. Thus, i.e., Assessing Officer had rightly treated impugned expenditure as capital in nature. He has also added that without TCA, assessee could not have started its business and, therefore, this agreement was crucial for inception and starting of business. He stated that this also supported case of revenue that impugned expenditure was capital in nature. In support of same, ld. CIT(DR) relied on judgments referred to and relied upon by Assessing Officer in order. As regards, ground for allowing claim of depreciation on capital expenditure, ld. CIT(DR) has submitted that assessee is entitled to claim of depreciation on capitalized amount of lump sum technical fee and royalty. 13. We have heard both parties at some length and given our thoughtful consideration to rival contentions, examined facts, evidence and material placed on record. We have also gone through orders of authorities below and also referred to relevant pages of paper book to which our attention has been drawn. We have also referred to various judgments cited by both parties at bar. From facts discussed above, it is obvious that Assessing Officer had disallowed lump sum payment of technical fee and royalty on ground that impugned payments related to setting up of plant and manufacture of automobile goods and, therefore, expenditure was capital in nature. ld. CIT(A) has not recorded any finding on issue raised before him as to whether impugned expenditure was capital in nature. However, he has held that impugned payments represented diversion of profits to HMCL. Briefly stated, conclusions drawn by CIT(A) are based on following facts : ( i HMCL has increased shareholding from 60 per cent to 99.9 per cent after )M/s. entering into TCA which was against approval granted by Government of India to proposal for setting up joint venture with HMCL where equity participation ratio of HMCL was supposed to be 60 per cent. This according to ld. CIT(A) tantamounted to flouting conditions laid down by Government for according approval. ii ( lump sum technical know how fee and royalty were subject to tax and no tax ) was paid by HMCL in respect of same. ( lump sum technical know how fee and royalty was payable only out of profits of iii)The assessee and not immediately on entering into TCA. iv ( Since equity holding of HMCL was 99.9 per cent, said company exercised ) undue influence while entering into TCA and, therefore, such agreement was void under section 16 read with section 23 of Indian Contract Act, 1972. 13.1 approval letters placed at pages 403 to 429 of paper book clearly show that increase in shareholding by HMCL in assessee company from time to time was approved by Government. It is clear from approval letters issued by Ministry of Industries and Reserve Bank of India. These letters have already been referred to while discussing facts of case and submissions of both parties. We also do not find any merit in submissions of ld. CIT(DR) that had these approval letters been placed before CIT(A), CIT(A) would have not recorded in impugned order that increase in equity share holding meant flouting conditions imposed by Government of India while granting approval to proposal of joint venture. We find that increase in shareholding has been duly brought to knowledge of CIT(A) and same is also noted on page 22 of impugned order for assessment year 2001 02, and page 24 of impugned order for assessment year 2002 03. 13.2 While granting approval, Ministry of Industries and Reserve Bank of India exercised due check on in flow of foreign funds for Industrial Development particularly in those segments which required higher level of technical know how and same is not available in India. While granting approval, Government also takes into account that valuable foreign exchange does not out flow from country in form of royalty and technical know how fee. All relevant aspects of matter are duly considered by Government of India. Thus, objection raised by CIT(A) that increase in equity holding by HMCL violated conditions for granting approval by Government of India is without any basis and merit. 13.3 next objection of CIT(A) is that technical know how fee and royalty were subject to tax and no tax was paid by HMCL, has again been found without any merit. assessee had remitted lump sum know how and royalty to HMCL after deduction of tax at source in terms of provisions of Act and double taxation avoidance agreement (DTAA) between India and Japan. details regarding tax deducted at source and deposit of such tax have been placed before us at pages 430 to 440 of paper book which have already been discussed in preceding paragraphs. Thus, here also, assessee has not violated any conditions laid down by Government of India while according approval. In case, tax was not deducted at source or same was not paid, revenue was free to take appropriate action under relevant sections of Act. However, there was due compliance on these conditions by assessee. Therefore, revenue did not feel any need to take such action against assessee. 13.4 other objection of CIT(A) that very fact that lump sum technical know how fee was to be paid from 3rd year after commencement of commercial production showed that intention was to make payments out of profits of assessee is again devoid of any merit. Obviously, proposed project not only involved high level of technical know how and technology, but was also capital intensive. Therefore, condition for payment for period of 3 years from commencement of production was stipulated in TCA only with view to enable joint venture to stablise its position and establish itself in market. If payment was to start from first year of its production, it would have resulted in undue strain on financial resources of assessee company. Afterall, intention of both parties to joint venture was to ensure its success more so when it involved huge investment. Moreover, it is for parties to decide as to when payment should start keeping in view commercial consideration and it is not for revenue to dictate its term as to when payment should be made. Therefore, we also do not find any merit in such objections raised by CIT(A) when there is nothing in TCA that payments of technical know how fee and royalty were to be made out of profit of assessee. 13.5 As regards observations of CIT(A) that since HMCL was holding 99.9 per cent of shares of assessee company, TCA agreement was made under undue influence and as such was void under section 16 read with section 23 of Indian Contract Act, 1872, we find no merit in same. As discussed earlier increase in shareholding was duly approved by Government of India and RBI. Therefore, it was not unilateral that HMCL had increased shareholding. Once approval is required to be obtained from Government of India/Reserve Bank of India, who is expected to scrutinize such proposals minutely keeping in view overall interest of country in field of economic development, requirement of foreign technology for such development and outflow of foreign exchange. It cannot be said that M/s. HMCL could exercise undue influence on assessee. This is so because agreement was not only between two parties, but also subject to approval of Government of India/Reserve Bank of India. In case of Kinetic Honda Motor Ltd. v. CIT [2001] Jt. 77 ITD 393 ITAT Pune Bench referred to Board s Circular No. 6 P, dated 6 7 1968 in , b context of section 40A(2)( that when payments were approved by one wing of ) Government, there was no question of such payment being treated as excessive and unreasonable, having regard to legitimate business needs. In that case also, assessee company, namely, Kinetic Honda Motor Ltd. ( established in 1984 as supra) was joint venture in collaboration with M/s. Honda Motors Company, Japan, each having 28.56 per cent of equity capital. Subsequently, in assessment year 1995 96, equity contribution of foreign company was increased to 51 per cent. Royalty agreement was renewed for period of 5 years. Taking into account increase in shareholding of foreign company, revenue disallowed claim for royalty payment. On appeal before Tribunal, disallowance of royalty payment was deleted on ground that revenue cannot sit in judgment over Ministry of Industries without any concrete evidence to contrary which was neither fair nor in accordance with Government Policy. Now once Government had accorded approval after due consideration, it is not for revenue to sit in judgment over such decisions. Such course of action by revenue authorities would only discourage foreign investments which are badly needed for overall economic develop ment of country. Therefore, approval granted by one wing of Government i.e., Ministry of Industry and RBI, cannot be treated lightly. Thus, taking into account these facts, we are of considered opinion that ld. CIT(A) was not justified in holding that TCA agreement was void because of increased shareholding of HMCL and foreign exchange had exercised any undue influence. 13.6 Thus, in light of detailed discussions in preceding paragraphs and legal position discussed above, we are of considered opinion that ld. CIT(A) was not justified in treating payment of lump sum technical fee and royalty as diversion of profit to HMCL, Japan. Accordingly, we set aside orders of CIT(A) and allow this ground of appeal of assessee for both assessment years. 13.7 next aspect of case is whether impugned expenditure was capital or revenue in nature. assessee has made detailed submissions in this regard. These have been summarised in earlier paragraphs. However, we find that ld. CIT(A) has not recorded any finding on same because he has taken view that impugned payments represented diversion of profits to foreign company. This view has not been approved by Bench. We, therefore, consider it fair and appropriate to restore this issue to file of CIT(A) for deciding same afresh as per law and after allowing proper opportunity to both parties. During course of hearing of appeals before CIT(A), assessee shall be free to raise alternative issue regarding claim of depreciation, if expenditure was treated to be capital in nature. We order accordingly. These grounds of appeal are disposed of in these terms. 14. next ground common to both assessment years is that ld. CIT(A) was not justified in sustaining disallowance of research and development expenses amounting to Rs. 57,44,102 and Rs. 1,54,14,278 for assessment years 2001 02 and 2002 03 respectively on ground that same were capital in nature. facts of case are that Assessing Officer observed that assessee had debited research and development expenses of Rs. 69,37,000 to profit & loss account and claimed as revenue expenditure for assessment year 2001 02. Assessing Officer observed that expenses incurred were towards research and development prior to launch of various new models of cars. These also included annual membership fee paid to Automotive Research Association of India amounting to Rs. 7,50,000 and Rs. 4,42,898. same was allowed as revenue expenditure. However, remaining expenditure of Rs. 57,44,102 was not allowed by Assessing Officer on ground that such expenditure related to research and development and was, therefore, capital in nature. 14.1 As regards assessment year 2002 03, Assessing Officer noticed that out of research and development expenses amounting to Rs. 2,05,36,000, assessee had claimed expenses of Rs. 1,80,13,000 as revenue expenditure. When asked to explain, assessee submitted that in view of Memorandum of Exchange of Technicians which was part of TCA, parent company had agreed to provide technical assistance through their technical experts from time to time to company as and when required, for which payment on basis of their stay and visit in India to factory as well as for service taken by company. assessee also furnished complete details of these expenses which included salary, repair and maintenance, travelling, staff welfare which though form part of respective heads of expenditure yet were shown by auditors in accordance with requirement of AS 8 (Accounting Standard 8). It was also explained that by virtue of nature of business, assessee was required to provide after sales service to its customers and company received lot of complaints. same being technical in nature could not be handled by normal automobile engineer. In order to cater to such requirement, Technical & Research Centre (In short "TRC") has been maintained and all expenses related to TRC have been disclosed under head "Research & Development" to comply with requirement of Accounting Standard. Assessing Officer observed that providing of technical know how was responsibility of parent company for which assessee was paying lump sum technical fee in view of agreement made for purpose. Thus, it was responsibility of parent company to provide technical assistance in removing defects, improving technology to be used by assessee in its products. He observed that expenses claimed for Research & Development were additional burden upon assessee. However, Assessing Officer allowed expenses related to technical guidance fee, salary of staff, other expenses including expenses in respect of depreciation of building and other research amounting to Rs. 15,76,707, vehicle maintenance expenses of 1,13,865, Courier Services Rs. 34,487, Telephone Rs. 181, Staff Welfare Rs. 33,616, Newspapers Rs. 1,385, Entertainment Rs. 5,633, Repair and Maintenance and Conveyance totalling to Rs. 82,365 and Membership fee to ARRAI Rs. 7,50,000, all totalling to Rs. 25,98,236. He disallowed remaining expenses of Rs. 1,54,14,278 on ground that same were capital in nature. 15. Aggrieved, assessee impugned disallowance in appeal before CIT(A). It was submitted before CIT(A) that expenses incurred pertained to day to day expenses of TRC Department of assessee. Referring to details of expenses, assessee had submitted that nature of same showed that these were revenue in nature. However, these expenses were segregated and were shown under head "Research & Development Expenses" by way of note to profit & loss account as per AS 8. It was submitted that TRC was responsible for analysing problems that are encountered during manufacturing as well as failures in field. It identifies root cause, suggested suitable counter measures and also controls counter measure implementation. TRC provided assistance and handled complaints of technical nature, which could not be solved by normal Automobile Engineers. This was also part of customer care or after sale service function of appellant. assessee also submitted that though HMCL had undertaken to provide technical assistance to assessee yet it was not possible and practicable to approach HMCL for each and every minor defect in vehicle. minor defects which might be dealt with by technical staff of assessee and expenditure incurred in respect of same was treated as research and development expenditure. It was also submitted that TRC acted as interface between assessee and HMCL on technical/engineering issues. It was also explained that TRC was engaged in Homologation of vehicles according to Indian environment and is continuously in touch with developments taking place around world in automobile market. It was also required to improve product quality, product appeal and localization of parts. TRC was also responsible to ensure compliance to various statutory regulations like ARRAI and also takes part in deliberations of enacting bodies of regulations and kept in constant touch with development taking place around automobile market. Thus, it was submitted that TRC was performing useful functions which were necessary for carrying on operation of business, and, therefore, it was not correct to say that assessee was not carrying on any research and development activity. ld. CIT(A) was not impressed with these submissions and accordingly upheld disallowance on ground that assessee was not carrying out any research and development activities. assessee is aggrieved with orders of CIT(A). Hence, these appeals before us. 16. ld. counsel for assessee, Sh. Ajay Vohra, drew our attention to page 124 of paper book which are details of Research and Development Expenditure for assessment year 2002 03, which include salaries, wages and other related cost for repairs and maintenance, travelling, printing, courier services, training and seminar, vehicle maintenance, miscellaneous expenses, payment made outside bodies for research and development which include rates and taxes, membership fee and technical guidance fee. Besides these expenses included of software, fabric for testing and other miscellaneous expenses etc. 16.1 As regards assessment year 2001 02, Assessing Officer has observed that said expenses related to testing and research of car on which part of expenditure has already been treated as capital in nature. He submitted that TRC provided customer care centre and feedback/information to HMCL of design improvement based on local environment position as localization/indigenisation of components etc. Thus, ld. counsel has submitted that expenditure is of revenue in nature and does not result in any enduring benefit in capital field to assessee. Therefore, same was wrongly treated as capital in nature. He also made alternative submission that if expenditure was capital in nature, ld. CIT(A) ought to have directed Assessing Officer to allow depreciation thereon. 17. ld. CIT(DR) has submitted that expenditure incurred on research and development was for purpose of creation of or invention of some new device/asset which could provide assessee benefit of enduring nature. He submitted that since assessee has now furnished details of these expenses, deduction in respect of expenses which are revenue in nature can be ascertained after verification and may be allowed to assessee. As regards claim of assessee that CIT(A) ought to have directed Assessing Officer to allow depreciation on same, ld. CIT(DR) has submitted that to extent expenditure is revenue in nature, no such depreciation is to be allowed. But in respect of remaining amount, assessee may be allowed amount of depreciation. 18. We have heard both parties at some length and given our thoughtful consideration to rival submissions, gone through evidence and material placed on record. From facts discussed above, it is clear that assessee has explained purpose of setting up of Technical and Research Center (TRC) and its functioning was also explained by assessee during course of proceedings before authorities below. From facts discussed above, it is obvious that one of reasons given by authorities below for making impugned disallowance was that it was responsibility of HMCL to provide technical assistance and guidance as per TCA. However, assessee has explained purpose of setting up of TRC for analyzing problems being encountered during manufacturing as well as failures in field. scope and ambit of its duties was to identify root cause, and suggest suitable counter measure and controls counter measure implementation. TRC also provided assistance and handled complaints of technical nature. This was also part of customer care or after sale services function of assessee. This center was also responsible for Homologation of vehicles according to Indian environment and to co ordinate for new model activities. It was no doubt true that HMCL had undertaken to provide technical assistance to assessee, but it was not practicable to approach HMCL for each and every minor defect in vehicle which was required to be tuned to Indian environment. It is common knowledge that automobile Industry in country is now extremely competitive and in order to survive in market one is required to continuously monitor and bring improvement in quality of products manufactured and to look more attractive and fuel efficient. Therefore, setting of TRC center was absolutely essential for manufacture and for carrying on business activities of assessee moreso when vehicles sold are covered by warranty period. Such center keeps close watch on repetitive defects for which complaints are received from buyers and to bring about improvement with view to cut down cost on warranty and also to improve quality. Therefore, objection raised by authorities below that providing of technical assistance was responsibility of HMCL is not valid and has to be seen in this context. details for research and development expenses incurred by assessee for assessment year 2001 02 are at page 60 of paper book which show rates, taxes and fees, payment made to automotive research association of India, technical fee, part development/testing expenses, salaries, wages and other related cost, repair and maintenance, travelling and conveyance, freight expenses, training and seminar etc. assessee had separately shown research and development expenditure on capital account amounting to Rs. 40,46,388 being cost of 4 cars capitalized for testing and research purposes. Thus, most of these expenses are revenue in nature. Similarly details for expenses for assessment year 2002 03 are given on page 124 of paper book which have already been dealt with while recording facts of case. These expenses are also revenue in nature. In fact, technical guidance fee amounting to Rs. 63,58,287 was also paid to technicians for TRC Department. These are not payments made to HMCL. Considering fact that nature of expenses incurred by assessee is revenue and TRC looks after customers care for improvement and change with view to cut repetitive cost it cannot be said that assessee has derived any benefit of enduring in nature. It also does not result in creation of new assets or advantage in capital field. We are, therefore, of opinion that ld. CIT(A) was not justified in treating impugned expenditure as capital in nature. factum that assessee has incurred such expenditure for purpose of assessee s business is not in doubt. Accordingly, we set aside orders of CIT(A) and allow deduction of impugned expenditure as revenue in nature. Since we have already allowed such expenditure as revenue in nature, ground relating to claim of depreciation has become redundant. Therefore, same is dismissed as such. 19. next ground of appeal for assessment year 2001 02 is that learned CIT(A) was not justified in sustaining disallowance of Rs. 63,07,099 being expenditure incurred by assessee in connection with launch of new model of car manufactured by assessee. facts of case are that this expenditure was not charged to profit & loss account for assessment year 2001 02. However, in computation of income, assessee had claimed deduction of same as revenue expenditure with note that impugned expenditure pertained to new model of car in existing line of business. It was stated that expenditure was charged to profit & loss account for assessment year 2002 03. But same was disallowed while computing income for subsequent year because expenditure related to this assessment year. assessee also stated that by incurring such expenditure no new asset in capital field had been created. Assessing Officer examined details and found that same was for travelling, training & seminar and sale promotion of new model of car. However, Assessing Officer disallowed same on ground that by incurring such expenditure, assessee had obtained benefit of enduring nature by way of establishing new car model in automobile market of India. Assessing Officer also observed that judgment of Supreme Court in case of Empire Jute Co. Ltd. CIT v. [1980] 124 ITR 1 relied upon by assessee was not applicable to facts of case. Accordingly, he disallowed same. 19.1 Aggrieved, assessee impugned disallowance in appeal before CIT(A). However, he upheld disallowance on ground that new model car was going to be asset and, therefore, expenditure related to capital asset formation. assessee has now brought matter in appeal before this Bench. 19.2 ld. counsel for assessee, Sh. Ajay Vohra, reiterated submissions which were made before authorities below. He submitted that expenses relate to travelling, training & seminar, printing & stationery, sales promotion etc. incurred in connection with launch of new model. same is revenue expenditure incurred in normal course of business and is allowable deduction. He relied on decision of ITAT, Delhi Bench in case of CIT Asstt. v. Medicamen Biotech Ltd. [2005] 1 SOT 347. 19.3 ld. CIT(DR) stated that new model of car was asset which provided enduring benefit to assessee for years to come and, therefore, expenditure incurred on same was certainly capital expenditure. 19.4 We have heard both parties and carefully considered rival contentions, examined facts, evidence and material placed on record. There is no doubt about fact that assessee is already engaged in business of manufacture of cars and production had commenced about three years before. new model of car relates to same line of business which assessee has been carrying on. assessee has not set up separate and independent unit to manufacture new model of car. From details of expenses given, it is clear that expenses related to travelling, training & seminar and advertisement, technical guidance fee etc. of on going business. It is common knowledge and there is cut through competition in automobile market and assessee is required to bring new models in market in order to retain/capture market. Therefore, expenditure incurred by assessee in respect of on going business is revenue expenditure. marketability of new model entirely depended on sale promotion and holding of training and seminar so that new model is well received in market. It is not correct to say that by incurring such expenditure, assessee had acquired advantage of enduring in nature. Similar issue came up for consideration before ITAT, Delhi Bench in case of Asstt. CIT v. Medicamen Biotech Ltd. [2005] 1 SOT 347, where it was held that expenditure incurred on launching of new pharmaceutical product does not result in benefit of enduring nature and, therefore, expenditure does not fall in capital field. It was also held that said expenditure is revenue in nature and mere fact that assessee had treated expenditure as deferred revenue expenditure over period of time does not make expenditure capital in nature. It was also held that term given by assessee in books of account or entries made in books are not decisive or conclusive in establishing nature of expenditure. While taking such view, Tribunal has relied on judgment of Hon ble Supreme Court in case of Kedarnath Jute Mfg. Co. Ltd. [1971] 82 ITR 363. very fact that expenditure v. CIT was not debited to profit & loss account of assessment year under reference would not make any difference so far as claim of assessee because undoubtedly expenditure relate to assessment year under reference and was claimed in statement of income filed along with return. assessee had itself disallowed same for computing income of subsequent assessment year where expenditure was charged to tax. Having regard to these facts and circumstances of case and legal position discussed above, we are of considered opinion that ld. CIT(A) was not justified in sustaining disallowance of impugned expenditure. Accordingly, we set aside order of CIT(A) and direct Assessing Officer to allow deduction of same. This ground of appeal is allowed. 20. next ground relates to sustaining disallowance of custom duty amounting to Rs. 32,63,032 on drawings imported under TCA with HMCL, admitted by assessee during accounting year relevant to assessment year under reference. Briefly stated, facts of case are that assessee deposited sum of Rs. 3,00,00,000 with Custom Department in earlier years is part payment towards Custom Duty on import of Drawing under TCA with HMCL, Japan in response to show cause notice issued by Custom Authorities claiming amount of Rs. 28,14,76,000 being duty and penalty. payment of Rs. 3,00,00,000 was advance. assessee also filed application with Custom and Excise Settlement Commission after making said payment. Out of payment of Rs. 3 crores, assessee admitted custom duty of Rs. 1,16,63,000 and debited expenses in year under consideration. But in revised computation, assessee added back Custom Duty of Rs. 84,00,257 and claimed deduction of Rs. 32,63,032, amount which was paid in assessment year 1999 2000 and adjusted in assessment year under consideration. Assessing Officer observed that impugned amount was paid on 31 3 1999 under protest and, therefore, did not relate to assessment year under consideration. He also observed that payment was not in revenue account. He also observed that provisional payment does not become ascertained liability until same has become final. He also observed that show cause notice issued by Custom Authorities was also for imposing penalty for not making payment. assessee had submitted that amount of Rs. 3,00,00,000 paid on 31 3 1999 as advance was shown as loan and advance in audited accounts in financial year 31 3 1999 and claim was made before CIT(A) under section 43B of Act for assessment year 1999 2000 which was not allowed by CIT(A). This issue was pending before ITAT. It was submitted that in case it was decided in favour of assessee, amount of Rs. 32,63,032 would be required to be added back to income of assessment year 2002 03. However, claim was not accepted by Assessing Officer on ground that same did not relate to assessment year under consideration. 20.1 assessee impugned disallowance in appeal before CIT(A). assessee reiterated submissions made before Assessing Officer. However, ld. CIT(A) observed that since issue was subject matter of appeal before ITAT for assessment year 1999 2000, disallowance is confirmed for statistical purposes. Assessing Officer would give appeal effect after receipt of order of ITAT. assessee has now brought this issue in appeal before this Bench. 20.2 ld. counsel for assessee, Sh. Ajay Vohra, reiterated submissions which were made before authorities below. He submitted that assessee had moved petition before Custom and Central Excise Settlement Commission, New Delhi, and said Commission order dated 23 8 2002 has now decided that assessee is vide liable to payment of aforesaid custom duty of Rs. 32,63,032. assessee has admitted liability in respect of this amount during accounting year relevant to assessment year under consideration. Therefore, ld. CIT(A) ought to have accepted claim of assessee for assessment year under consideration because liability became final in assessment year under consideration. 20.3 ld. CIT(DR), on other hand, relied on order of Assessing Officer and submitted since expenditure does not relate to assessment year under consideration, deduction was rightly disallowed by Assessing Officer and confirmed by CIT(A). He also relied on decision of ITAT, Delhi Bench in case of Maruti Udyog Ltd. CIT [2005] 92 ITD 119, where it was held that advance v. Dy. payment of taxes or duty without incurring liability to pay such taxes or duty cannot be allowed as deduction under section 43B. 20.4 We have heard both parties and carefully considered rival contentions. No doubt from facts discussed above, it is obvious that assessee had made payment of amount on 31 3 1999 as advance and had claimed deduction for assessment year 1999 2000. revenue did not allow same on ground that amount in question was advance only and had not become final. assessee s appeal for assessment year 1999 2000 is pending with Tribunal. In case, matter is decided by Tribunal in favour of assessee by taking notice of subsequent events that liability had become final, assessee would not be entitled to claim deduction for same in assessment year under consideration. However, if disallowance made is upheld by Tribunal for reason that amount paid was only advance and was not otherwise payable and hence not allowable under section 43B, assessee would be entitled to claim deduction in assessment year under reference because liability had become final in assessment year under reference and advance so paid would be adjusted in assessment year under reference. Thus, we set aside order of CIT(A) and direct Assessing Officer to allow claim of assessee only if said claim is not allowed for assessment year 1999 2000. This ground of appeal is treated as allowed for statistical purposes. 21. next ground of appeal for assessment year 2002 03 relates to upholding action of Assessing Officer for disallowing amount of Rs. 86,38,000 being provision for warranty made by assessee during accounting year under reference. facts of case are cars sold by assessee are covered under warranty. assessee made provisions of Rs. 86,38,000 for warranty and claimed deduction of same on ground that company was engaged in business of manufacture and sale of highly competitive premium segment cars and assessee was contractually bound to provide after sale services at various intervals and provide one year after sale warranty for manufacturing defects and thereafter sale service to customers. It was stated that liability to provide free after sale service accrues to assessee as soon as car is sold to customer. It was also submitted that it was liability praesenti as definitely arises in accounting year, though exact amount in may be quantified in future. However, Assessing Officer while relying on judgment of Hon ble Supreme Court in case of Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66 has held that same was not ascertained liability of assessment year under consideration. Accordingly, he disallowed claim. 21.1 Being aggrieved, assessee carried matter in appeal before CIT(A) and reiterated submissions which were made before Assessing Officer. However, these submissions did not find favour with CIT(A), who held that making of total provisions on estimate basis without actually incurring such expenditure especially when there was probability that total expenditure may not occur does not make liability as ascertained and accrued liability of assessment year under reference. Therefore, he upheld disallowance. assessee has now brought this issue in appeal before us. 21.2 ld. counsel for assessee submitted that assessee as per regular method of accounting followed by it provided for warranty in respect of car sold. amount of provision for warranty for car per month is worked out on basis of appellant s experience regarding warranty claimed and received for earlier and is spread over period of warranty commencing on sale of car. provision for warranty made on scientific basis and as per regular method of accounting followed by assessee was allowable revenue expenditure. He relied on recent decision of ITAT, Delhi Bench in case of Dy. Commissioner, Spl. Range 5, New Delhi v. Samtel Colours Ltd. [IT Appeal No. 3966 (Delhi) of 1996] for assessment year 1991 92. He further stated that similar expenditure incurred has been allowed in past. He referred to page 383 of paper book which shows similar provision for warranty made for assessment years 1998 99 to 2001 02, made on similar basis were allowed. In fact, in earlier assessment year, claim of assessee amounting to Rs. 58.30 lakhs as provision for warranty was allowed. He further drew our attention to page 125 of paper book which are details of provisions made for assessment year under reference which is linked with number of cars sold. Thus, he submitted that deduction in respect of impugned amount may be allowed. 21.3 ld. CIT(DR), on other hand, heavily relied on orders of authorities below and submitted that liability under consideration was only contingent in nature and, therefore, was not allowable. 21.4 We have heard both parties and carefully considered rival submissions, examined facts, evidence and material placed on record. There is no dispute about fact that cars sold to customers are covered by warranty and after sale services for repair and replacement for period of one year. assessee has been following same method of accounting and has been making provisions for same on basis of actual expenses incurred in past. It is fact that in past such expenses have been allowed by revenue. Even such claim of assessee was allowed for assessment year 2001 02. This is not case of revenue that provisions made far exceeded actual expenses incurred. In case of Bharat Earth Movers v. [2000] 245 ITR 428, Hon ble Supreme Court has considered CIT general principles regarding allowance of business expenditure and difference between accrued and contingent liabilities. It was held as under : "If business liability has definitely arisen in accounting year, deduction should be allowed although liability may have to be quantified and discharged at future date. What should be certain is incurring of liability. It should also be capable of being estimated with reasonable certainty though actual quantification may not be possible. If these requirements are satisfied liability is not contingent one. liability is praesenti in though it will be discharged at future date. It does not make any difference if future date on which liability shall have to be discharged is not certain." very fact that assessee had made provision only does not mean that liability was not ascertained and contingent in nature. In fact, similar issue was considered by ITAT, Amritsar Bench in case of Bee Industries v. CIT [1998] ITD 530 Jay Dy. 66 , where assessee was engaged in same business and assessee estimated cost of repairs at 2 per cent on sale value of transformers which were sold with warranty of 12 to 18 months and 6 per cent of sale cost of transformers which were sold with warranty of 60 months. On these facts, it was held that liability to carry out repairs/replacements accrues on date when sale agreement is executed with warranty clause and such in built liability cannot be ignored. Tribunal held that such liabilities are to be treated as trading expense and must be allowed. It must be mentioned that while deciding this case, Tribunal also took into account fact that Assessing Officer had made no efforts to find out whether amount of provision exceeded actual on repairs and replacement. But fact remains that expenses were allowed for reason it was not contingent liability and such liability arose as soon as assessee made sale. In case of v. CIT Indian Transformers Ltd. [2004] 270 ITR 259 Kerala High Court by relying on judgment of Supreme Court in case of Bharat Earth Movers ( supra) allowed deduction in respect of provision for meeting warranty liability on ground that same was not contingent liability. In case of Wipro GE Medical System Ltd. v. CIT [2003] 81 TTJ 455 ITAT, Bangalore Bench Dy. considered claim of assessee for deduction of warranty claims and observed that warranty expenses claimed as deduction was not abnormally high and gap between warranty provision and warranty expenditure incurred had narrowed down over years and, therefore, such expenditure was allowable as revenue expenditure and was not contingent liability. While deciding this case, ITAT, Bangalore Bench also followed decision of ITAT, Amritsar Bench in case of Bee Industries Jay ( supra). This issue also came to be considered by ITAT, Delhi Bench, in case of CIT v. Jt. Modi Olivetti Ltd. [2004] 3 SOT 22, where assessee has made provision for warranty claim at rate of 1.5 per cent on cost of sales. Tribunal by referring to judgment of Supreme Court in case of Bharat Earth Movers ( supra) held that liability had been incurred on date when sale was made and was not contingent in nature. Accordingly, claim of assessee was allowed. 21.5 Thus, various judgments cited above support view that liability was incurred on date when sales were made. Therefore, this was ascertained and accrued liability of assessee and accordingly, same was allowable. We, therefore, set aside order of CIT(A) and delete impugned disallowance. This ground of appeal is allowed. 22. next ground of appeal for assessment year 2002 03 is that ld. CIT(A) was not justified in sustaining disallowance of provision amounting to Rs. 2,96,50,000 made by assessee towards sales promotion expenses, instead directing Assessing Officer to allow only 10 per cent of said provision. facts of case are that Assessing Officer observed that assessee had claimed sales promotion expenses amounting to Rs. 6,49,36,642 which also included provision made in respect of various expenses amounting to Rs. 2,96,50,000. break up of these provisions were for trade in over allowance for 2001 02 at Rs. 60,00,000, fleet/Dempo Car at provision at Rs. 90,00,000, Hindustan Times Promotion provision for 2001 02 at Rs. 15,00,000, sales promotion at Rs. 71,00,000, Compensation for plant of Rs. 10,00,000, Rendezvous Magzine at Rs. 85,000, Finance Schedule provision viz., ICICI Bank at Rs. 70,000, Miscellaneous provisions at Rs. 9 lakhs and S/C & S/Manager incentive provisions Rs. 26 lakhs. Assessing Officer called upon assessee to explain why these expenses were debited only on provisional basis. assessee submitted that it was engaged in business of manufacture and sale of highly competitive premium segment car. company needed to do lot of advertisement and sales promotion activities on continuous basis. provision for sales promotion expenses were not future and contingent liability. same had already been incurred during relevant previous year. But invoices were not received till date of finalisation of accounts. Since this liability was recurring in nature and accounts were being maintained in accordance with method of accounting regularly employed by assessee, it was contended that deduction of expenses should be allowed. However, Assessing Officer observed that liability was made only on estimate basis and, therefore, same was contingent in nature. Assessing Officer disallowed same. 22.1 Aggrieved, assessee impugned disallowance in appeal before CIT(A). submissions made before Assessing Officer were reiterated. It was submitted that assessee had already incurred liability which was fully ascertained and accrued liability. However, same was provided on estimate basis because bills were not received from respective parties. These submissions were considered by CIT(A) but he was not impressed with same. He observed that there was no proper billing system between assessee and his clients on regular basis and such large portion of expenditure on provision basis was not justified. He, therefore, upheld disallowance of 90 per cent of provision and allowed relief to extent of 10 per cent of Rs. 2,96,50,000. assessee has now brought this issue in appeal before this Bench. 22.2 ld. counsel for assessee reiterated submissions made before authorities below and submitted that assessee had indeed incurred expenditure and same was accrued and ascertained liability of assessment year under consideration. However, he submitted that provisions were made on estimate basis because actual bills were not received from client Departments till end of accounting year. He submitted that as per regular method of accounting followed by assessee, it provided liability in respect of various expenses in its books of account at end of year on estimated basis. Since bills for all expenses were not received by assessee, accounts were finalized. Any excess provision was reversed in immediately succeeding year. ld. counsel drew our attention to pages 126 to 168 of paper book which contained details of actual expenditure of Rs. 2,70,23,000 incurred by assessee against provision of Rs. 2,96,50,000. Thus, he submitted that deduction of impugned expenditure may be allowed. 22.3 ld. CIT(DR), on other hand, relied on order of authorities below. He submitted that since liability was not ascertained, authorities below were justified in making impugned disallowance. 22.4 We have heard both parties and carefully considered rival contentions with reference to facts, evidence and material placed on record. We have also referred to relevant pages of paper books to which our attention has been drawn. There is no dispute about fact that assessee is engaged in business of manufacture and sale of highly competitive premium segment cars. assessee was required to incur huge amount of expenses on advertisement on continuous basis. fact that assessee had not received bills in accounting year under reference has not been disputed by revenue. In fact, out of provisions made, assessee has already incurred expenses of Rs. 2,70,23,000 for which details are placed at page 126 of paper book. Copies of bills for same have also been placed at pages 127 to 168 of paper book. perusal of those bills shows that expenses have been incurred for work done up to 31 3 2002 which shows that expenditure related to assessment year under reference. This also shows that assessee had indeed incurred such expenditure, but bills have been received subsequently. Looking into details of actual expenditure incurred out of provisions in subsequent assessment year, it cannot be said that provisions so made were wide off mark to reduce tax liability of assessee. However, considering fact that assessee claimed to have made provisions only in respect of expenses already incurred up to 31 3 2002 and in immediately succeeding assessment year, bills received indicated expenses incurred of Rs. 2,70,23,000, we are of opinion that assessee is entitled to deduction of ascertained liability to extent of Rs. 2,70,23,000 and not Rs. 2,96,50,000. Therefore, we set aside order of CIT(A) and direct Assessing Officer to allow deduction of expenses of Rs. 2,70,23,000. This ground of appeal is partly allowed. 23. next ground of appeal relates to upholding disallowance of Rs. 10,52,277 made by Assessing Officer being commission paid to HMCL. facts of case are that Assessing Officer found that in accounting year under reference, assessee had made export of wheels, assembly steering, and other items to M/s. Honda Automobile, Thailand, who is associated enterprises within definition of section 92A of Income tax Act. assessee paid commission at rate of 3 per cent of export FOB value claimed at Rs. 10,52,277 and credited to M/s. Honda Motor Company, Japan. assessee explained that commission was paid in pursuance of agreement made with HMCL for making export of parts abroad. However, Assessing Officer observed that assessee had made purchases of parts exported from its sister concern of M/s. HMCL and commission was paid to associate enterprises and same was held to be not allowable to assessee within meaning of section 92A. 23.1 Being aggrieved, assessee impugned disallowance in appeal before CIT(A). It was submitted before CIT(A) that under TCA, assessee was not authorized to sell its product in any other territory than India without written consent of M/s. HMCL. assessee had entered into separate agreement dated 1 4 1999 under which HMCL accorded consent to assessee to export specific parts to certain countries including Thailand for consideration of payment of commission at rate of 3 per cent of FOB value of such exports. It was submitted that payment was made by assessee to HMCL as consideration for according consent to appellant to export parts which were earlier being supplied by HMCL or its affiliates. It was also submitted that by virtue of said payment, assessee gained access to new market for its products which enable it to enhance its sale. Thus, it was contended that expenditure incurred was wholly and exclusively for purposes of its business. It was also stated that HMCL was separate and legal entity and transactions between parties were at arm s length and this fact was not disputed by Assessing Officer. fact that assessee had indeed made payment was also not doubted by Assessing Officer. Thus, it was contended that assessee was entitled to deduction of its claim. However, these submissions did not find favour with CIT(A), who observed that such payment of commission was because of undue influence of HMCL leading to diversion of profits. Thus, he upheld disallowance. assessee has now brought matter in appeal before us. 23.2 ld. counsel for assessee reiterated submissions which were made before authorities below. He also drew our attention to article 3 of TCA where assessee was prohibited from exporting cars, parts/components manufactured by it in India to any other country. assessee could do so only with prior approval of HMCL. assessee, therefore, entered into agreement with HMCL for export of cars, components to Honda Group of Companies in Thailand. payment of commission was made in lieu of HMCL allowing assessee to export cars/components to Honda in Thailand. It was not payment for HMCL for procuring any order from its group company for assessee. Thus, it was submitted that since expenses have been incurred wholly and exclusively for purpose of business, same were allowable. 23.3 ld. DR on other hand relied on orders of authorities below. He submitted that since 99.9 per cent equity holdings of assessee company are held by M/s. HMCL, impugned payment was nothing but diversion of its profit to HMCL. Thus, he submitted that order of CIT(A) in sustaining disallowance does not merit any interference. 23.4 We have heard both parties and carefully considered rival contentions, examined facts, evidence and material placed on record. It is clear from article 3 of TCA that assessee was authorized to manufacture and sell cars in territory of India. assessee was not allowed to sell cars/parts, components outside India except with approval of HMCL. Therefore, impugned payment was not part of TCA. However, for this purpose, assessee entered into separate agreement under which assessee was allowed to export parts/components abroad and consideration thereof, assessee was required to pay commission at rate of 3 per cent of FOB value of such exports. No finding has been recorded by authorities below that commission so paid by assessee was either excessive or unreasonable. Therefore, commission so paid is for promotion of assessee s business and for making exports of its parts and cars outside country. Therefore, such expenditure was incurred wholly and exclusively for purpose of business. While dealing with first two grounds of appeal lump sum technical fee and royalty payment, we have already i.e., rejected plea of revenue that payments made to HMCL represented diversion of profit. same finding would equally hold good to present issue. 23.5 In light of these facts and circumstances of case, we are of considered opinion that impugned expenditure was incurred wholly and exclusively for purpose of its business for acquiring rights outside country to export cars/components. Therefore, ld. CIT(A) was not justified in sustaining impugned disallowance. order of CIT(A) is set aside and Assessing Officer is directed to allow deduction of same. This ground of appeal is allowed. 24. last ground of appeal relates to upholding addition of Rs. 60,34,730 in respect of Excise Duty refund receivable by assessee on behalf of purchaser of goods. facts relating to this ground are that Assessing Officer observed that in balance sheet, amount of Rs. 79,63,384 was shown as receivable. When assessee was asked to explain, it submitted that such amount receivable included excise duty of car sold to India. Hotels at Rs. 5,96,726, excise duty of Rs. 3,61,303 on sale of car to Ambassador Hotel, Rs. 1,92,340 on sale of car to Leela Ventures and amount of Rs. 48,76,196 being excise duty refund of sale of 43 cars and export rebate of Rs. 8165. It was explained by assessee that amount in question was refunded to car buyers. However, Assessing Officer observed that assessee failed to furnish any supporting evidence that amount received was actually refunded to car owners. He, therefore, made addition of Rs. 60,34,370. 24.1 Aggrieved, assessee filed appeal before CIT(A). It was submitted before CIT(A) that amount of Rs. 60,34,370 represented claim made by assessee before Excise Authorities in respect of car sold by assessee to certain class of customers who were exempt from payment of Excise Duty under certain Schemes e.g., Hotels under EPCG Scheme, Taxi Operators etc. However, such claim was made by assessee on behalf of purchaser of cars and is paid to them when refund claim is accepted by Excise authorities. Thus, it was submitted that refund of excise duty does not represent income of assessee. It was also submitted that at time of sale of car by assessee, excise duty charged also included special excise duty of 24 per cent in respect of sale of cars to be used by taxi operators. At time when car is sold, assessee does not know whether or not car would be used for purpose of taxi. It was only when same was registered as taxi by purchaser of car, that purchaser approached assessee with relevant documents and requested assessee to refund special excise duty paid on such car. It was only based on such documents that assessee made claim for refund of such duty before Excise Authorities till refund is actually received and disbursed by Excise Authorities, assessee treated amount so receivable in balance sheet because it has already paid such amount to purchaser of car. Thus, it was submitted that such amount does not constitute income of assessee. These submissions did not find favour with CIT(A) who observed that assessee could not furnish details and evidence before Assessing Officer on account of excise duty receivable relating to sale of cars to hotels and for taxi purpose. He observed that working and methodology along with evidence should have been explained to Assessing Officer. Since assessee has failed to discharge burden of proving, ld. CIT(A) upheld disallowance. assessee has now brought this issue in appeal before us. 24.2 ld. counsel for assessee reiterated submissions which were made before authorities below. He submitted that at time when car was sold, assessee charged full amount of excise duty and paid same to Government because at that time it was not known whether car would be used by buyer as taxi or not. excise duty so charged and paid has been treated as income and expenses respectively in books of assessee. Once it came to know that car was being run as taxi, it applied for refund of excise duty on behalf of taxi operator. amount received from Excise Department towards custom duty was recorded as excise duty receivable in books of assessee. Once refund is received from Excise Department, same is passed on to customers. As regards car sold to Hotels, assessee charged excise duty at full rate and accounted for same as its income. Later on, assessee applied for refund from Excise Department. Hotels did not pay assessee for excise duty which was refundable and assessee recovered same from Excise Department. Since assessee was holding this amount in Trust for customers and same was passed on to them on receipt from Excise Authorities, amount did not constitute income of assessee. 24.3 ld. CIT(DR), on other hand, heavily on orders of authorities below. He submitted that since assessee failed to furnish relevant details and supporting evidence on account of excise duty receivable and fact that same was actually passed on customers, ld. DR contended that authorities were justified in making impugned disallowance. 24.4 We have heard both parties at some length and given our thoughtful consideration to rival contentions, examined facts, evidence and material placed on record. From facts discussed above, it is obvious that claim of assessee was that it charged full excise duty at time of sale of cars to taxi operators and accounted for same in its income and expenditure because at that time, assessee did not know whether car sold would be used as taxi or not. It is only when car is registered as taxi, that taxi operator approached assessee to claim refund of same. assessee has also stated that on receipt of refund of Excise Duty from Excise Authorities, same was passed on to car owner. main objection of Assessing Officer was that assessee failed to furnish complete details along with supporting evidence about excise duty charged, accounted for in books of account recovered from Excise Department and disbursed to car owners. Therefore, such claim was disallowed and upheld in appeal by CIT(A). Now in case, assessee has claimed refund of excise duty on behalf of others and on receipt same has been passed down to customers, no income accrues to assessee and claim of assessee deserves to be allowed. However, considering fact that these details were not furnished before authorities below and order of CIT(A) has been set aside in regard to first two grounds of appeal, we consider it fair and appropriate also to set aside order of CIT(A) on this point and restore same to his file with direction to redecide same as per law and after allowing reasonable opportunity to both parties. We order accordingly. This ground of appeal is treated as allowed for statistical purposes. 25. In result, both appeals of assessee are partly allowed. *** Honda Siel Cars India Ltd. v. Assistant Commissioner of Income-tax, Circle Noida