2002 (4) TMI 238 - AT - Income Tax

Summary

Issues:
1. Deletion of addition of Rs. 4,76,84,000 on account of provision for losses in stores, stock, raw material, and finished goods.
2. Deletion of addition of Rs. 4,58,000 being excess amortization of expenses.
3. Deletion of addition of Rs. 8,38,30,000 being understatement of profits on account of change of method of valuation of moore cake, neutral sand, lime sludge, and copper cadmium.
4. Deletion of disallowance of Rs. 78,43,000 made by exclusion of interest on Government loan and head office expenses.
5. Deletion of addition of Rs. 5,40,68,000 on account of slow and non-moving stores and spares less by 25 per cent.
6. Deletion of addition of Rs. 1,20,23,000 on account of excess depreciation.
7. Deletion of disallowance of guest house expenses of Rs. 17,28,686.
8. Deletion of levy of interest under ss. 234B and 234C.

Analysis:

1. The appeal addressed the deletion of an addition of Rs. 4,76,84,000 related to losses in stores, stock, raw material, and finished goods. The Tribunal declined to interfere with the order of the CIT(A) based on a previous decision regarding a similar matter.

2. The issue of excess amortization of expenses amounting to Rs. 4,58,000 was discussed. The Tribunal held that the excess amortization under the Companies Act did not impact income computation under the IT Act, hence declining to interfere with the CIT(A)'s decision.

3. The deletion of Rs. 8,38,30,000 due to understatement of profits from a change in the valuation method of certain items was considered. The Tribunal agreed with the CIT(A) that the change was justifiable based on difficulties faced in recovery, declining to interfere with the decision.

4. The deletion of Rs. 78,43,000 disallowed for excluding interest on Government loans and head office expenses from closing stock was analyzed. The Tribunal upheld the CIT(A)'s decision, stating the change in accounting method was in accordance with Accounting Standard No. II of the Bureau of Public Enterprises.

5. An addition of Rs. 5,40,68,000 on slow-moving stores and spares was discussed. The Tribunal supported the decision based on the recommendations of the general manager, inventory control, and declined to interfere with the CIT(A)'s ruling.

6. The issue of Rs. 1,20,23,000 excess depreciation was addressed. The Tribunal found the auditors' comments were based on the Companies Act, while the correct depreciation was allowed as per IT Rules, leading to the decision not to interfere with the CIT(A)'s order.

7. The disallowance of guest house expenses amounting to Rs. 17,28,686 was considered. The Tribunal referred to a previous decision and declined to interfere with the CIT(A)'s ruling.

8. The last issue involved the deletion of interest under ss. 234B and 234C. The Tribunal supported the CIT(A)'s decision based on the impracticality of extending the fiction of assessable income to advance tax payments and relevant legal provisions.

In conclusion, the Tribunal dismissed the appeal after thorough analysis and consideration of each issue raised by the Revenue against the CIT(A)'s order for the assessment year in question.