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Issues: Valuation of closing stock of tea, Constitutional validity of Income-tax Rules, Pension liability deduction
In the present case, the main issue revolves around the valuation of the closing stock of tea by the assessee-company, which led to a dispute with the Income Tax Officer (ITO). The assessee changed the method of valuing the closing stock to garden cost or estimated realizable value, but the ITO valued it at the average sale price, resulting in an addition to the total income. The Commissioner (Appeals) deleted this addition based on previous Tribunal orders accepting the change in valuation method. The department challenged this deletion, arguing that the change was not bona fide. However, the Tribunal upheld the Commissioner's order, citing consistency with previous Tribunal decisions in the assessee's case. Regarding the second issue raised in the cross-objection, the assessee contested the non-exclusion of total business income from tea estates in West Bengal, claiming that a specific rule in the Income-tax Rules was unconstitutional. The Tribunal declined to entertain this argument, stating that it does not have the authority to declare a statutory provision as unconstitutional, leading to the failure of this ground in the cross-objection. The third issue pertains to the disallowance of a claimed liability for pension by the assessee-company. The company sought a deduction based on actuarial valuation of its pension liability, which was disallowed by the ITO and upheld by the Commissioner (Appeals). The Tribunal analyzed the nature of pension liabilities, distinguishing between accrued and contingent liabilities. It referenced Supreme Court decisions to conclude that deduction for actuarially determined pension liability cannot be allowed, as it constitutes a contingent liability until actual payment is made. Therefore, the ground challenging the disallowance of the pension liability deduction also failed. Ultimately, the Tribunal dismissed both the appeal by the department and the cross-objection by the assessee-company, maintaining the decisions on the valuation of closing stock and the pension liability deduction.
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