Tribunal upholds most issues in favor of assessee, with some for further verification.

The Tribunal upheld the decisions of the Ld CIT(A) in favor of the assessee for most issues, including the addition on account of low Gross Profit, treatment of Sales Tax Subsidy Receipts as capital subsidy, disallowance of Cooperative Development Expenses, and disallowance of Payment Made to Sabarmati Gaushala. However, the Tribunal set aside the disallowance of Legal Expenses for further verification by the AO and directed a fresh consideration of Consultancy Expenses disallowance. The issue of Interest Payable to NDDB was also remanded to the AO for necessary verification. The assessee did not press the ground related to the subsidy amount received, leading to its dismissal.

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Issues Involved:
1. Addition on account of low Gross Profit (GP).
2. Addition of Sales tax subsidy receipts.
3. Disallowance of cooperative development expenses paid on behalf of Vasundhara Trust.
4. Disallowance of payment made to Sabarmati Gaushala.
5. Disallowance of legal expenses.
6. Disallowance of interest payable to NDDB.
7. Disallowance of consultancy expenses.
8. Treatment of subsidy amount received by the assessee.

Detailed Analysis:

1. Addition on Account of Low Gross Profit (GP):
The Assessing Officer (AO) added the amount relating to the GP rate difference due to a drop in the rate of GP in the years under consideration compared to earlier years. The Ld CIT(A) deleted this addition after considering the detailed explanations and evidence provided by the assessee, including comparative trading results, price lists, and quantitative records. The AO did not find any defect in the books of accounts nor did he dispute the explanation provided by the assessee. The Tribunal upheld the decision of Ld CIT(A), noting that the AO failed to show that the books maintained by the assessee were unreliable for deducing correct income.

2. Addition of Sales Tax Subsidy Receipts:
The AO treated the sales tax subsidy received by the assessee as "Revenue subsidy" while the assessee treated it as "Capital subsidy." The Ld CIT(A) accepted the assessee's claim, and the Tribunal upheld this decision, referring to a previous Tribunal order in the assessee's own case which had accepted the assessee's contention that the subsidy was for additional fixed capital investment.

3. Disallowance of Cooperative Development Expenses Paid on Behalf of Vasundhara Trust:
The AO disallowed the amount paid to Vasundhara Trust for research and development activities. The Ld CIT(A) deleted the addition, noting that the assessee is empowered to carry out such activities in collaboration with other organizations. The Tribunal upheld this decision, referring to a previous Tribunal order that found the collaboration was not ultra vires and was an extension of the assessee's activities.

4. Disallowance of Payment Made to Sabarmati Gaushala:
The AO disallowed the payment for semen doses, questioning the business connection. The Ld CIT(A) deleted this addition, observing that the expenditure had a direct nexus with the objectives of the assessee society, as it was for breeding improved milk-bearing animals. The Tribunal upheld this decision, noting that the department did not provide any material to controvert the findings of Ld CIT(A).

5. Disallowance of Legal Expenses:
The AO disallowed legal expenses amounting to Rs.24,50,000/- and consultancy charges of Rs.19,50,000/- paid to M/s. Chiryu Consultancy, citing lack of confirmation letters and basis for the charges. The Ld CIT(A) deleted the addition of Rs.19,50,000/- to avoid double addition, as it was already included in the Rs.24,50,000/-. The Tribunal set aside this issue for verification by the AO.

6. Disallowance of Interest Payable to NDDB:
The Tribunal set aside this issue to the AO for necessary verification, consistent with a previous Tribunal order in the assessee's own case.

7. Disallowance of Consultancy Expenses:
The AO disallowed consultancy expenses paid to M/s Chirayu Consultancy and Shri Milind G Gujarati due to lack of confirmation letters. The Ld CIT(A) confirmed the disallowance on the grounds of excessiveness. The Tribunal set aside this issue for fresh consideration by the AO, directing to examine the payments vis-`a-vis the services rendered.

8. Treatment of Subsidy Amount Received by the Assessee:
The assessee did not press the ground related to the subsidy amount received, which was to be deducted from the cost of machineries. Consequently, this ground was dismissed as not pressed.

Conclusion:
- The appeals of both the revenue and the assessee relating to the assessment year 2003-04 were partly allowed.
- The appeals of both parties relating to the assessment year 2004-05 were dismissed.

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