These appeals by Assessee are directed against common order of CIT(Appeals) dated 31-3-2006 for above assessment years. In all these appeaals, detailed grounds have been filed, but on direction of Bench, concise grounds have also been filed. For all these three years, Assessee has raised two common issues viz., (i) denial of deduction under section 80-IA of Income-tax Act and (ii) confirmation of disallowance on account of certain payments towards inflation on purchase price. In addition to these two issues in assessment years 1996-97 and 1997-98, issue regarding re-opening of assessment has also been raised. 2. At time of hearing learned Counsel for assessee submitted that he does not wish to press issue regarding denial of deduction under section 80-IA of Act for assessment year 1998-99 because Assessing Officer has already rectified mistake and profits are subjected to computed under section 80-IA of Act. Therefore, this deduction is not material and same is not pressed. Accordingly, we dismiss this ground for assessment year 1998-99 as not pressed. 3. In respect of re-opening of assessment for assessment year 1996-97 and 1997-98, learned Counsel for Assessee relied on ground appeal. ld. Departmental Representative, on other hand, supported that orders of authorities below. 4. After hearing both parties we find that certain material hid come into possession of Assessing Officer and assessment have been reopened for above assessment years within four years. Therefore, there is nothing wrong with re-opening of assessment and this ground for assessment years 1996-97 and 1997-98 is dismissed. 5. brief facts regarding claim of deduction under section 80-IA of Act for assessment years 1996-97 and 1997-98 are that Assessee was in business of manufacture of Bandruff which was further used by Assessee for manufacture of Herbal Shikakai Powder which is used as Hair and Body wash power which is essentially Ayurvedic/Siddah product. process involved in manufacture of Bandruff is as under:- "1.Drying of Herbs 2.Fumigation 3.Grinding & Sieving 4.Blending 5.Quality Control 6.Packaging Drying of Herbs - crude country drug materials collected were dried in shed to remove moisture Sun drying of herbs was carried out by employees of appellant within factory, which does not consume power. Drying was progressed to stage when moisture including volatiles estimated at 106C was not more than 7 per cent. dried herbs then were freed from extraneous materials, if any, viz., visual inspection and physical separation. Fumigation- herbs then undergo fumigation in fumigation chamber, which was located in room within factory. fumigation of herbs goes for period of about 24 hours. fumigated herbs were used within week. appellant carried out fumigation process by use of chemicals and were done with manually operated machines; power consumption for process was not significant. Grinding and Sieving - herbs were then subjected to grinding separately to fine powder in mill, which was carried out by job workers. powdered materials were than sieved by appellant to 120-mesh size within factory and operation was carried out manually. Blending- powdered and sieved herbs were all uniform mesh in nature (120 mesh) so that they are inseparable after mixing. desired quantity as per formulations was mixed well for 2 hours and sieved using 40-mesh sieve. sieved final product is packed. appellant carried out blending process by mixture blender and power consumption for this process was not significant. Quality Control - Quality check and analysis relating to 1.Appearance, 2.Colour, 3.As content, 4.Particle size, 5.Loss of heating 105C 6.Microbial (total count to be less than 100 CFU/G and pathogens to be nil) Of product was completed after blending stage. Then product was cleared for quality. Packaging - formulated blend after sieving is packed appropriately in containers as required. packaging material was purchased and was done manually." 6. Assessing Officer denied deduction under section 80-IA mainly because there was no factory at given address by Assessee. Assessee could not clearly establish whether fumigation chamber existed, grinding of leaves was not done in premises of Assessee, Assessee consumed very little electricity and whole of produce was sold to only one party, viz., M/s. Mediherbs. On appeal, CIT (Appeals) agreed with Assessee that entire process of converting raw material i.e., herbs into finished product i.e., herbal power which has different use and name constitutes manufacturing activity. However, he agreed with Assessing Officer on other reasons mentioned above and confirmed denial of deduction under section 80-IA of Act. Aggrieved, Assessee is in appeal before us. 7. Before us, learned Counsel for Assessee submitted that Assessee was basically selling Meera Herbal Shikakai Powder in market which involved mainly two processes. First of all, it required manufacturing of Bandruff which was being manufactured in Assessees unit and some of works like grinding, sieving etc., were being done on job work basis. Then such Bandruff was sold in market and perfumes were added to product under control and supervision of Assessee company and then this product was handed over to one more party who was carrying on C&F process. learned Counsel for Assessee invited our attention to process of manufacturing which has been detailed by Assessing Officer. After that he referred to Page 5 of Appellate Order where CIT (Appeals) has clearly noted that he had agreed with Assessee company that entire process of converting raw material i.e., Herbs into finished product, i.e., Herbal power which had different use and name, constituting manufacture. 8. learned Counsel for Assessee vehemently argued that benefit has been denied to Assessee because Assessee was consuming low electricity, there was no factory and Assessee could not show fumigation chamber etc. He submitted that Assessee had ceased operation;, manufacturing and that is why when Inspector visited, he could not find factory. As far.as issue regarding consumption of low power is concern; most of process involved no consumption of electricity. processes drying herbs, blending of herbs, grinding and sieving etc., were got from out side and, therefore, very little electricity was required. Then referred to page 4 to 8 which are copies of permanent registration certificate from Director of Industries regarding establishment of factory, copy of registration from Central Excise Department, copy of registration certificate from Dy. Commercial Tax Officer, copy of letter regarding clearance of Pollution from District Industries Centre, Govt. of Pondicherry and copy of letter received from Municipal Corporation granting permission to set up industry. learned Counsel for Assessee clarified that most of certificate are in name of Beauty Cosmetics but name of company was later on changed which have been noted by Appellate Authority also and not disputed by Department. 9. learned Counsel for Assessee also submitted that address mentioned in most of certificates is 91-91, Thiruvalluvar Salai, Pillaithottam, Pondicherry. This address was changed to New address at No. 1, Vilupuram Pondi Main Road, Villiannur, Pondicherry. letter dated 22-6-1998 from Industries Department for change of address was duly furnished before CIT(Appeals) which has been recorded at page 7 of Appellate Order. All these certificates clearly show that Assessee had industrial unit and deduction was mainly denied because processes were not completed in- house. For this, he relied on decision of Tribunal in case of Dy. CIT v.Elgi Ultra Industries Ltd. [IT Appeal No. 1631, 1789 & 1790 (Mds.) of 2003, dated 26-10-2005] (copy filed on record), wherein following judgment of Honble Bombay High Court in case of CIT v. Penwalt India Ltd. [1992] , it was held that even if Assessee was in manufacturing of goods, on job work basis, Assessee was entitled to deduction under section 80-IA of Act. Therefore, learned Counsel for Assessee pleaded that case of Assessee is squarely covered by that judgment. 10. On other hand, ld. Departmental Representative, kly supported t h e orders of lower authorities. He particularly relied on para 6 of Appellate Order. 11. We have considered rival submissions carefully in light of material on record. We find that CIT(Appeals) has admitted that Assessee was in business of manufacturing, because entire process of converting raw material i.e., Herbs into finished goods i.e., Herbal Power which has different use constitutes manufacturing activity (Page 5 of CIT(Appeals)s order refers). For manufacturing Bandruff following process are required to be done:- 1.Drying of Herbs 2.Fumigation 3.Grinding & Sieving 4.Blending 5.Quality Control 6.Packaging 12. First of all, crude country drug herbs are collected and dried shed to remove moisture. herbs are dried in sun and for which electricity is consumed. Later on such dried herbs are made free of extreneous materials. Then herbs undergo fumigation in Fumigation Chamber. fumigation process goes on for 24 hours, which is done by of chemicals through manually operated machines. After it is processed, herbs are subjected to grinding separately to find powder in mill and process is carried out on job work basis. Such grinded powder is then sieved 120 mesh size which is also carried on manually. Later on, tne sieved power blended and again sieved at 40 mesh sieve and such final product is known as Bandruff which is sold in market for further process of adding perfume by buyers of this product. It is seen from manufacturing process that most of processes do not require much electricity. Therefore, there is no force in contention of Assessing Officer that electricity consumption was lower, for denial of deduction under section 80- IA. It is also seen that some of processes are got done from outsiders. Even then deduction cannot be denied in view of decision of Tribunal in case of Elgi Ultra Industries Ltd. (supra) wherein vide para 6 of order, it was held as under:- "After considering rival submissions carefully and relevant material on record as well as orders of lower authorities, we find that conclusions arrived at by ld. CIT(Appeals) are correct. It is clear from his order that Assessee had established brand name "Elgi Ultra" and same had been developed by Assessee company and continuous research and development was being carried on in this respect. Assessee company had also done procurement of component and required raw material under its own strict supervision. dyes and moulds were supplied by Assessee company and quality control and supervision was also ensured at all levels. We further find that assembling was done through labour contractors, but still supervision and quality control was being monitored by Assessee company. Marketing and after sales services of (he product was also being provided by Assessee company. According to us, ld. CIT(Appeals) has correctly followed decision of Honble Bombay High Court in case of CIT v. M/s. Pentwalt India Ltd. () (Bom.), wherein it was observed as follows:- Assessee would be said to be engaged in . manufacturing activity if he Assessee would be said to be engaged in . manufacturing activity if he i s doing part of manufacturing activity by himself and, for rest of it, engages in services of somebody else on contract other than contract of purchase. Assessee canvassed orders for supplying, erecting and commissioning sugar and tea machinery. Assessees activity consisted of (i) canvassing of orders (ii) preparing of designs and drawings on basis of orders (iii) placing orders for manufacture of machinery with TH (iv) to see that manufacturing process is carried on by TH under direct supervision of Assessee company (v) to have check over quality control and to be responsible for proper functioning of machinery, and guarantee after sale service for stipulated period. Assessee claimed special deduction under section 80-I of Income-tax Act, 1991. Thus, we are of opinion that CIT(Appeals) has correctly allowed deduction under section 80-IA and therefore we confirm findings arrived at by ld. CIT(Appeals)." 13. In case before us, fumigated herbs were given for grinding sieving purposes through job work and on that account deduction cannot denied. As far s allegation that no such factory was in existence does hold ground because Assessee has obtained permanent register certificate issued by Department of Industries and also bought line under Drugs and Cosmetics Act, Registration under Central Excise Department, No objection from Pollution Control Department, clearance Municipal Authorities, permission under t h e Factories and Boilers Act, clearance from Town & Country Planning Department and approval Pondicherry Planning Authority. Inspectors report cannot be accepted contrast to approval from various authorities which was obtained by Assessee. In these circumstances, we set aside order of CIT(Appeals) and direct Assessing Officer to allow deduction under section 80-IA for assessment years 1996-97 and 1997-98. We again clarify that claim of deduction under section 80-IA has not been pressed for assessment year 1998-99 before us, therefore, no such claim should be allowed for assessment year 1998-99. 14. brief facts in respect of issue regarding confirmation disallowance on account of certain payments towards inflation on purchase price are that during assessment proceedings Assessing Officer noticed that which assessee has sold Bandruff to party known as M/s. RK Herbs (P.) Ltd., M/s. Herbs (P.) Ltd., in turn sold goods to M/s. Kranes India Industries M/s. Kranes India Industries Ltd. in turn sold goods to trading of Assessee company. In another case, manufacturing division goods to M/s. Mediherbs, who in turn sold goods to trading of Assessee company. According to Assessing Officer since were coming back to Assessee only, it was only mechanism to inflate purchase. Assessing Officer, therefore, added sum of Rs. 53,28,971, Rs. 6,22,438 on account of difference in purchase and sale price by M/s. India Industries Ltd. in assessment years 1996-97 and 1997-98 respectively, According to Assessing Officer, such inflation was done through Pondy Personal Care Ltd., and Fragra International and Madan Labs (P.) Ltd. and, therefore, sums of Rs. 42,67,940, Rs. 55,65,426 and Rs. ,4,67,825 were added on account of these three purchases in assessment year 1998-99. additions were confirmed on appeal by CIT(Appeals). Hence, Assessee is on appeal before us. 15. Before us, learned Counsel for Assessee submitted that none o f these parties are related to Assessee company and Bandruff was being sold to all these parties who in turn were, after adding perfume, converted Bandruff into Meera Shikakai Powder which is different product. In turn, RK Herbals (P.) Ltd., Madan Labs (P.) Ltd., Le-bain Herbs (P.) Ltd., for 1996-97 and R K Herbals (P.) Ltd., Madan Labs (P.) Ltd., Medi Herbs for 1998-99, after converting Bandruff into Meera Shikakai Power after adding perfume, had sold product to M/s. Kranes India Industries Ltd. in 1996-97 and Pondy Personal Care Ltd., and Fragra International in 1998-99. later three part i.e., M/s. Kranes India Industries Ltd., and Pondy Personal Care Ltd., and Frag International were involved in ensuring quality at premises of earlier part on on line basis and they were then doing packing in small sachets which way being despatched on C&F basis to various retailers. In fact, trade name Meera was owned by Assessee company and Bandruff was ultimately sold trade name of Meera only in small sachets which was sold between Re. 1 and Rs. 2 which involved dealing with hundreds of retailers and that is why Assessee company had engaged last three parties. Thus, functions of R. I. Herbals (P.) Ltd., Madan Labs (P.) Ltd., Medi Herbs etc., were to add perfume and then to pack same in small sachets under supervision of M/s, Kranes India Industries Ltd., Pondy Personal Care Ltd. and Fragra International who were undertaking supply management for onward transmission to C&F agents. Individual agreements have been entered with these parties and all these parties were regular Income-tax assessees and transactions were not found to be bogus by Assessing Officer. learned Counsel for Assessee contended that payments have been disallowed merely on basis that Assessee is trying to inflate cost of product and increase profit of manufacturing division and lower profit in trading division. 16. learned Counsel for Assessee kly argued that since assessee was in belief that it was entitled to deduction under section 80-IA and had accordingly claimed same, there was no reason to inflate price because profits, in any case, were exempt at 100 per cent. This clearly shows that help of these parties were required for addition of perfume and ensuring of proper quality as well as management of supply chain. Once parties are not related to Assessee company and transactions are not found to be bogus, then Assessing Officer should have disallowed these payments because it is settled law that commercial expediency of transaction has to be seen from angle of business man and not from angle of Department. In this regard, he relied on judgment of Honble Madras High Court in case of CIT v. Global Motor Service (P.) Ltd. [1975] . 17. On other hand, ld. Departmental Representative submitted that when Assessee was not owner of Meera Trade Name, there was no need to sell product to R.K. Herbals (P.) Ltd., etc., who in turn were selling product to M/s. Kranes India Industries Ltd. who ultimately sold goods to Assessee company. There was no reason to believe that M/s. Kranes India Industries Ltd. would purchase goods when it was known to that firm that ultimately buyer is going to be Assessee company only. He also kly relied on orders of authorities below. 18. We have considered rival submissions carefully in light of material on record. It is settled position of law that every transaction has to be viewed from angle of business men and not from angle of department. Every business man is free to conduct his business way he ants. In fact, Honble Madras High Court has observed in case of Global Motor Services (P.) Ltd. (supra) that "it is not for Revenue to question commercial expediency of expenditure or income. commercial expediency is matter entirely left to judgment of Assessee". We also find that Revenue has at no stage made allegation that these parties are related to Assessee company. Separate agreements have been entered into between these parties and all these parties are also Income-tax Assessees. When.the Assessee was selling goods to R.K. Herbals (P.) Ltd., Madan Labs (P.) Ltd., and M/s. Medi Herbs etc., such parties were adding perfume and final Bandruff was known after such addition as Meera Shikakai Power which was being packed in small sachets. It is also known fact now-a-days that every business organisation is out sourcing many of its activities. product was sold t o M/s. Kranes India Industries Ltd., Pondy Personal Care Ltd. and Fragra International who were looking after supply chain and ultimately supplying to C&F agents of company. Hence, no fault can be found in this arrangement. In view of these circumstances, we set aside order of CIT(Appeals) and delete addition made on account of inflation of purchase price in different assessment years. 19. In result, appeals filed by Assessee are partly allowed. *** Cavinkare (P.) Ltd. v. Joint Commissioner of Income-tax, Special Range V