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4. I have heard the rival contentions perused the material on record and duly considered facts of the case in the light of the applicable legal position.

5. I find that the authorities below have clearly fallen in error by making disallowance on the basis of comparison of the expenses incurred in the immediately preceding year vis-à-vis the turnover in the said year and that expenses incurred in the present year vis-à-vis the turnover in the present year. It proceeds on the erroneous assumption that any increase of decrease expenditure will always move in the same direction and the same ratio in which the turnover increases or decreases. The underline assumption of these disallowances is thus clearly erroneous and wholly unsustainable in law. There is no dispute that the expenses are actually incurred there are no questions about the bonafides of expenses but everything hinges on Assessing Officers belief, which has met the approval on the learned CIT(A) as well, that the expenses and turnover will increase or decrease in the same ratio in which the turnover increases or decreases. I am unable to approve this approach. In view of these discussions and bearing in mind entirety of the case, I am of the considered view that the impugned disallowance of Rs.754,775/- and Rs. 137,300/- deserves to be deleted. I therefore, delete both of these disallowances.