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Issues Involved:
1. Change in the method of accounting for export incentives on deemed exports. 2. Claim for extra shift allowance. Detailed Analysis: 1. Change in the Method of Accounting for Export Incentives on Deemed Exports: The assessee, a limited company engaged in the manufacture of conductors and cables, changed its method of accounting for export incentives on deemed exports from a mercantile to a cash basis. The Government's policy on export incentives, including duty drawback, was subject to frequent changes, making it difficult to ascertain the exact amount receivable. The assessee argued that due to these uncertainties, the export incentives could not be considered as accrued income until the claims were processed and approved by the concerned authorities. The IAC, however, viewed this change as an attempt to postpone tax payments or offset income against expected future losses, and added Rs. 17,71,320 to the assessee's income. On appeal, the Commissioner (Appeals) held that there was no significant uncertainty in the Government's policy, as claims continued to be made and paid, albeit with some delay. The Commissioner noted that the payment of duty drawback was almost automatic once the claim was made. He concluded that the change in the accounting method was not bona fide and was intended to reduce future losses, amounting to a carry forward of losses. In the appeal before the Tribunal, the assessee reiterated that the Government had withdrawn export benefits to deemed exports and that the making of a claim did not equate to the accrual of income due to the uncertainties involved. The Tribunal considered the rival submissions and the relevant decisions, including the case of Bajaj Auto Ltd., where it was held that the change in the method of accounting from mercantile to cash basis for duty drawback and cash assistance was permissible due to the non-statutory nature of the scheme and the irregular and delayed payments from the Government. The Tribunal concluded that the change in the accounting method was bona fide and justified, as the amount was neither due nor payable at the time of making the claim. The Tribunal decided this ground of appeal in favor of the assessee. 2. Claim for Extra Shift Allowance: The assessee claimed Rs. 15,50,400 as extra shift allowance, but the IAC allowed only Rs. 10,84,942, arguing that some machinery was installed late in the year and could not have worked for the minimum required days. The Commissioner (Appeals) upheld this view, relying on several judicial decisions that extra shift allowance should be calculated based on the actual number of days each machinery worked. In the appeal before the Tribunal, the assessee relied on a CBDT circular dated 28-10-1970, which stated that extra shift allowance should be allowed for the entire plant and machinery used by the concern, irrespective of the actual number of days each machinery worked double or triple shifts. The Tribunal agreed with the assessee, noting that the circular was beneficial to the assessee and applicable for the assessment year in question. The Tribunal upheld the assessee's claim for extra shift allowance, finding that the claim was justified and should have been accepted. Conclusion: The Tribunal ruled in favor of the assessee on both major issues, allowing the change in the accounting method for export incentives on deemed exports and upholding the claim for extra shift allowance based on the CBDT circular. The Tribunal's decision emphasized the bona fide nature of the accounting change and the applicability of the beneficial circular for extra shift allowance.
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