1989 (2) TMI 159 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee-company is an industrial company.
2. Levy of interest u/ss 217 and 139(8).
3. Valuation of closing stock.
4. Sales promotion expenses.
5. Disallowance u/s 43-B.

Summary:

1. Whether the assessee-company is an industrial company:
The primary dispute in ITA nos. 2703/Del/87 and 5928/Del/87 was whether the assessee, a private limited company, qualifies as an industrial company. The assessee argued that it assembles diesel engines from various components, thus should be considered an industrial undertaking. The Tribunal, after examining the facts and relying on precedents such as Tata Locomotive & Engg. Co. Ltd., concluded that the assessee's activities amounted to manufacturing or production of an article. Consequently, the Tribunal reversed the CIT (Appeals)'s finding and directed the ITO to treat the assessee as an industrial undertaking, granting it the benefits of concessional tax rate, relief u/s 80-I, and investment allowance.

2. Levy of interest u/ss 217 and 139(8):
The issue of interest levy u/ss 217 and 139(8) was acknowledged by the assessee's counsel as consequential, dependent on the outcome of the primary issue.

3. Valuation of closing stock:
For the assessment year 1986-87, the assessee changed its method of valuing closing stock to cost price or market price, whichever was lower. The ITO added Rs. 60,000 due to this change, which was upheld by the CIT (Appeals). The Tribunal, however, held that the assessee is entitled to adopt any consistent method of valuation, referencing cases like Ramswarup Bengalimal and Forest Industries Travancore Ltd. The Tribunal reversed the CIT (Appeals)'s decision, accepting the assessee's method of valuation.

4. Sales promotion expenses and disallowance u/s 43-B:
The judgment does not provide detailed discussion on these issues, indicating they were either resolved or not significant enough to affect the overall decision.

Conclusion:
The Tribunal partly allowed the assessee's appeals for statistical purposes, recognizing the assessee as an industrial company and accepting its method of stock valuation. The levy of interest was deemed consequential.