2012 (2) TMI 739 - HC - Income Tax

Summary

Issues involved:
1. Valuation of closing stock using LIFO method
2. Eligibility of Chennai Industrial Undertaking for deduction u/s. 80IA
3. Eligibility of Sahibabad Unit for deduction u/s. 80IA
4. Nexus between investment in dividend earning shares and borrowed money

Detailed Analysis:
1. Valuation of closing stock using LIFO method:
The appeal raised questions regarding the valuation of closing stock using the Last in First Out (LIFO) method. The Tribunal directed the Assessing Officer to value the closing stock according to the LIFO method, citing the Assessee's consistent use of this method since Assessment Year 1987-88. The Court noted previous instances where the Tribunal accepted the LIFO method for valuing closing stock in various assessment years, and the Revenue did not challenge it. The Court found the LIFO method to be an accepted valuation method, regularly followed by the Assessee, and in compliance with accounting standards. As a result, the Court did not find it appropriate to entertain the appeal on this issue.

2. Eligibility of Chennai Industrial Undertaking for deduction u/s. 80IA:
The appeal questioned the eligibility of the Chennai Industrial Undertaking for deduction under Section 80IA of the Income Tax Act. The Tribunal had held that the Chennai Industrial Undertaking was indeed eligible for the deduction. The Court admitted the appeal on this issue for further consideration.

3. Eligibility of Sahibabad Unit for deduction u/s. 80IA:
Similar to the previous issue, the eligibility of the Sahibabad Unit for deduction under Section 80IA was also raised in the appeal. The Tribunal had found the Sahibabad Unit to be eligible for the deduction. The Court admitted the appeal on this issue as well for detailed examination.

4. Nexus between investment in dividend earning shares and borrowed money:
The appeal raised a question about the nexus between the investment in dividend-earning shares and the money borrowed. The Tribunal's view on this matter was found to be consistent with previous judgments by Division Benches of the Court. The Tribunal held that only actual expenses incurred should be considered for allowing a deduction under Section 80M. The Court found that the Tribunal's decision was in line with established legal principles and did not raise any substantial question of law, thus not warranting further consideration.

In conclusion, the Court admitted the appeal for detailed consideration on the eligibility of the Chennai Industrial Undertaking and the Sahibabad Unit for deduction under Section 80IA, while dismissing the appeal on the valuation of closing stock using the LIFO method and the nexus between investment in dividend-earning shares and borrowed money.