1983 (5) TMI 54 - AT - Income Tax

Summary

Issues:
1. Valuation of closing stock method adopted by the assessee.
2. Disallowance of certain expenses for the assessment year 1976-77.
3. Disallowance of extra shift depreciation claimed for plant and machinery.

Valuation of Closing Stock Method:
The assessee, a ball bearing manufacturer, changed the method of valuing closing stock for the assessment year under appeal. The Income Tax Officer (ITO) rejected this new method and made trading additions based on the previous method. The assessee argued before the Appellate Assistant Commissioner (AAC) that the change was due to the levy of excise duty and was consistent. The AAC accepted the assessee's explanation and deleted the additions. However, the department appealed to the Tribunal, which set aside the AAC's order for reconsideration. The assessee then argued that the method was based on sound commercial practice and cited the Kerala High Court case of Bank of Cochin Ltd. vs. CIT. The CIT(A) upheld the ITO's action, stating that a uniform valuation method must be followed consistently. The Tribunal agreed, citing the Calcutta High Court case of Champalal Baid vs. CIT, and upheld the rejection of the assessee's method.

Disallowance of Expenses for 1976-77:
The next issue involved the disallowance of sales promotion, travelling charges, general miscellaneous expenses, and presentation expenses for the assessment year 1976-77. These disallowances were consistent with earlier Tribunal orders, and the Tribunal upheld them.

Disallowance of Extra Shift Depreciation:
For the same assessment year, the assessee claimed 100% extra shift depreciation for plant and machinery installed for triple shift working. The ITO limited this claim based on the actual number of days the machinery operated on triple shift. The CIT(A) upheld the ITO's decision, citing the Income Tax Rules. The Tribunal found no reason to interfere with this decision, as it appeared to be in accordance with the law.

In conclusion, the appeals by the assessee were dismissed, with the Tribunal upholding the rejection of the new valuation method for closing stock, the disallowance of certain expenses, and the limitation on extra shift depreciation claimed.