JUDGMENT : The appeals are preferred by the assessee against the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee. The following substantial question of law was framed by this court while admitting the appeals : "Whether the expenses incurred by the appellant-organization for availing the services of various agencies, viz., accounting agency, marketing services for introduction of buyers to the appellant and several other services for enhancing and maintaining the business could be disallowed by the assessing authorities so as to treat them as taxable income ?" 2. The Department has preferred cross objections being Nos. 31 of 2003 and 32 of 2003. Other group of appeals is Appeals Nos. 43 of 2001 and 55 of 2000 and Cross Objection No. 87 of 2003 and the last group of appeals is Appeal Nos. 124 of 2003 and 165 of 2003 where only one question is framed where the Tribunal has held against the assessee and confirmed the order of the Assessing Officer and the Commissioner of Income-tax (Appeals). 3. Counsel for the appellant Mr. Jain, while appearing for the Department, contended that the three questions which are raised for consideration are as under : "1. Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the assessee is entitled for the benefit of deduction under section 80-1 of the Act on the machinery which was an old asset and was put to use by the assessee in its old unit has also claimed depreciation on same in the earlier assessment year ? 2. Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal has erred in law and acted perversely in holding that the forklift truck was on trial run in the old unit and which was ready for use in the new unit should be treated as a new asset without properly interpreting the provisions of section 80-1(2) and Explanation 2 thereof according to which the total value of old plant and machinery exceeded 20 per cent, and the assessee was not entitled to the benefit envisaged under section 80-1(2) ? 3. 3. Whether in the facts and circumstances, the Income-tax Appellate Tribunal has erred erroneously and illegally in upholding the order of the Commissioner of Income-tax (Appeals) as well as Income-tax Appellate Tribunal have upheld the rejection of accounts as well as invoking of provisions of section 145 of the Income-tax Act by the Assessing Officer ?" 4. The issue regarding forklift is covered by the decision of this court in Cross Objection No. 20 of 2003 in D. B. Income Tax Appeal No. 171 of 2002 and Cross Objection No. 44 of 2003 in D. B. Income Tax Appeal No. III of 2002 and Cross Objection No. 11 of 2002 in D.B. Income Tax Appeal No. 122 of 2002 where this court has held that forklift is not a plant and machine and, therefore, they are not entitled for the benefit under section 80-1 of the Income-tax Act, 1961. 5. With regard to other issue for invoking the provisions of section 145 of the Income-tax Act, he has contended that the Tribunal and Commissioner of Income-tax (Appeals) have abruptly deducted Rs. 8,78,985 to Rs. 2,00,000 without any reasoning where the Assessing Officer while assessing the books of account has rejected the given reasons on the basis of gross profit which has been earned by the assessee on an average of 35 per cent, on the basis of increase of turnover to the extent of Rs. 1.65 crores and correspondingly when the turnover is increased, the expenses after they have remained unchanged, therefore, he has estimated 35 per cent, on the basis of increased turnover. Therefore, he contended that the Commissioner of Income-tax (Appeals) and the Tribunal have seriously committed an error in confirming the order of the Commissioner of Income-tax, therefore, he contended that the rational approach which has been taken by the Assessing Officer is required to be adopted and same percentage of gross profit is required to be adopted. 6. Counsel for the respondent appearing for the assessee has contended that in view of the fact that the assessee has produced on record the total turnover sales as gross profit shown in terms of the percentage as estimated by the Department and contended that the view taken by the Commissioner of Income-tax (Appeals) and the Tribunal is just and proper and no interference is called for. 7. 7. Regarding forklift and others, he has contended that in view of Explanation 2 to section 80-1 of the Income-tax Act, forklift is not a plant and machinery as old machinery is entitled for the benefit under section 80-1 of the Act, which reads as under : "80-1. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent, thereof: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words "twenty per cent.", the words "twenty-five per cent." had been substituted. (1A) Notwithstanding anything contained in sub-section (1), in relation to any profits and gains derived by an assessee from - (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants; or (ii) a ship which is first brought into use ; or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990, but before the 1st day of April, 1991, there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty-five per cent, thereof : Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words "twenty-five per cent", the words "thirty per cent." had been substituted. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely : - (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose ; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of ten years next following the 31st day of March, 1981, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking ; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power : Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section : Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the words 'not being any article or thing specified in the list in the Eleventh Schedule' had been omitted. Explanation 1. Explanation 1. - For the purposes of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely : - (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India ; (b) such machinery or plant is imported into India from any country outside India ; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2. - Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty percent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. Explanation 3. - For the purposes of this sub-section, 'small-scale industrial undertaking shall have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA. (3) This section applies to any ship, where all the following conditions are fulfilled, namely : - (i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by it; (ii) it was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India ; and (iii) it is brought into use by the Indian company at any time within the period of ten years next following the 1st day of April, 1981. (4) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely : - (i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose ; (ii) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees ; (iii) the hotel is for the time being approved for the purposes of this sub-section by the Central Government; (iv) the business of the hotel starts functioning after the 31st day of March, 1981, but before the 1st day of April, 1991. (4A) This section applies to the business of repairs to ocean-going vessels or other powered craft which fulfils all the following conditions, namely : - (i) the business is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose ; (iii) it is carried on by an Indian company and the work by way of repairs to ocean-going vessels or other powered craft has been commenced by such company after the 31st day of March, 1983, but before the 1st day of April, 1988 ; and (iv) it is for the time being approved for the purposes of this subsection by the Central Government. (5) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft (such assessment year being hereafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year : Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words "seven assessment years", the words "nine assessment years" had been substituted : Provided further that in the case of an assessee carrying on the business of repairs to ocean-going vessels or other powered craft, the provisions of this sub-section shall have effect as if for the words "seven assessment years", the words Tour assessment years' had been substituted : Provided also that in the case of - (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants; or (ii) a ship which is first brought into use ; or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990 but before the 1st day of April, 1991, provisions of this sub-section snail have effect as if for the words 'seven assessment years', the words 'nine assessment years' had been substituted : Provided also that in the case of an assessee, being a co-operative society, deriving profits and gains from an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that proviso shall have effect as if for the words 'nine assessment years', the words 'eleven assessment years' had been substituted. (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to oceangoing vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. (7) Where the assessee is a person other than a company or a cooperative society, the deduction under sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to oceangoing vessels or other powered craft and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to oceangoing vessels or other powered craft does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation. - In this sub-section, 'market value', in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market. Explanation. - In this sub-section, 'market value', in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market. (9) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft, the Assessing Officer shall, in computing the profits and gains of the industrial undertaking or the hotel or the ship or the business of repairs to ocean-going vessels or other powered craft for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. (10) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertakings with effect from such date as it may specify in the notification." 8. On the appeal preferred by the assessee, only one question is framed and the counsel for the appellant has contended that all the authorities have seriously committed an error in confirming the orders passed by the Assessing Officer, the Commissioner of Income-tax (Appeals) and the Tribunal in as much as for the previous year, the expenses were allowed fully and in lump sum and the respondent has committed serious error and contended that in view of section 40 which reads as under and the circular of the Department at page 1 para. 74 of the Finance Act which reads as under : "74. 74 of the Finance Act which reads as under : "74. It may be noted that the new provision is applicable to all categories of expenditure incurred in business and professions, including expenditure on purchase of raw materials, stores or goods, salaries to employees and also other expenditure on professional services, or by way of brokerage, commission, interest, etc. Where payment for any expenditure is found to have been made to a relative or associate concern falling within the specified categories, it will be necessary for the Income-tax Officer to scrutinise the reasonableness of the expenditure with reference to the criteria mentioned in the section. The Income-tax Officer is expected to exercise his judgment in a reasonable and fair manner. It should be borne in mind that the provision is meant to check evasion of tax through excessive or unreasonable payments to relatives and associate concern and should not applied in a manner which will cause hardship in bona fide cases." 8.1 Reliance has also been made on the decision of the Supreme Court in the case of J. K. Woollen Manufacturers v. CIT [1969] 72 ITR 612 (SC), Laxmi Engineering Industries v. ITO [2008] 298 ITR 203 (Raj) and CIT v. Udaipur Distillery Co. Ltd. [2009] 316 ITR 426 (Raj). "Section 40A(2)(a). Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction." 9. Taking into consideration the expenses is required to be allowed. The counsel for the appellant Mr. Jain has taken us to the order and contended that it is a sister concern which has not done in genuine manner and in the transaction and concurrent findings no substantial question is raised. It would not be appropriate for this court to entertain this appeal and contended that the appeal deserves to be dismissed. 10. We have heard Mr. Jain has taken us to the order and contended that it is a sister concern which has not done in genuine manner and in the transaction and concurrent findings no substantial question is raised. It would not be appropriate for this court to entertain this appeal and contended that the appeal deserves to be dismissed. 10. We have heard Mr. Sameer Jain for the appellant-Department and Mr. N.M. Ranka, senior advocate for the respondent-assessee. 11. Coming to the issue of the appeal of the Department, the first issue which is posted for our consideration is whether in the facts and circumstances of the case, the Tribunal was justified in holding that the assessee is entitled for the benefit of deduction under section 80-1 of the Act on the machinery which was an old asset and was put to use by the assessee in its old unit has also claimed depreciation on same in the earlier assessment year ? Therefore, the issue No. 1 is required to be answered in favour of the assessee. The assessee is entitled to get benefit under section 80-1 of the Act. 12. In our view, regarding issue No. 2, which is concluded in view of the decision of the Division Bench of this court, therefore, the assessee will not be entitled for the benefit under section 80-1 of the Act and, therefore, the question is answered in favour of the Department and against the assessee. 13. Regarding issue No. 3 regarding lump sum amount taken by the Commissioner of Income-tax (Appeals), the contention of Mr. Jain is required to be accepted. The Assessing Officer by adopting 35 per cent., in our view which is at higher side, even if we accept the profit which has been shown by the assessee from the year 1991-92 to 1996-97, the average of which comes to 31.4, for that we put the estimate at 32 per cent, instead of 35 per cent, by the Assessing Officer. In that view of the matter, the issue No. 3 is answered in favour of the Department and against the assessee and we estimate profit at 32 per cent, and calculation may be done on that basis by the Assessing Officer. 14. In that view of the matter, the issue No. 3 is answered in favour of the Department and against the assessee and we estimate profit at 32 per cent, and calculation may be done on that basis by the Assessing Officer. 14. Regarding cross-objection which is for our consideration is whether the Tribunal was right in holding that the forklift is plant and machinery for purposes of section 80-1(2) of the Act in view of our answer in issue No. 2. This is required to be rejected, therefore, the cross-objections are required to be rejected. 15. Regarding other appeals of the assessee, particularly para. 7 of the order of the Tribunal in Tax Appeal No. 165 of 2003 which reads as under : "Keeping in view the past history of the case, the arrangement of making higher payment by way of switching over to a new system by linking the payment of charges to the sales cannot be held to be a bona fide arrangement for lack of evidence before us. Keeping in view the past practise and having regard to the provisions of section 40A(2) of the Income-tax Act, 1961 and also in view of the findings as recorded by the learned Commissioner of Income tax (Appeals) no interference is considered necessary in respect of disallowance of Rs. 12,97,336 for the assessment year 1995-96 and for the parity of reasons confirming the restriction of claim to Rs. 15 lakhs out of the total claim of Rs. 48,20,041 for the assessment year 1996-97 for the same services and also for the reasons contained in the order of the learned Commissioner of Income tax (Appeals) making disallowance of Rs. 2 lakhs out of a claim of Rs. 17 lakhs for system designing lay out. Accordingly, both the grounds raised by the assessee stand rejected." Thus, we are of the opinion that the Tribunal has not committed any error in rejecting the appeal and even otherwise the concurrent findings of the Tribunal are just and proper. Therefore, the issues are decided in favour of the Department and against the assessee. The appeals are accordingly disposed of.