1999 (9) TMI 143 - AT - Income Tax

Issues Involved:
1. Taxation of Rs. 5,29,700 due to change in the method of valuation of closing stock.
2. Disallowance of Rs. 8,753 by applying Rule 6B.
3. Treatment of Rs. 7,04,849 as revenue receipt.
4. Disallowance of Rs. 12,69,750 as revenue expenditure.
5. Deduction u/s 80HHC on deemed exports.
6. Deduction u/s 80-I on various incomes.
7. Charging of interest u/s 234A and 234B.

Summary:

1. Taxation of Rs. 5,29,700 due to change in the method of valuation of closing stock:
The assessee changed the method of valuation of closing stock from total cost method to direct cost method, excluding selling and administrative costs. The AO added Rs. 5,29,700 to the income, citing the Supreme Court decision in CIT vs. British Paints Ltd. The CIT(A) upheld this decision. However, the Tribunal found that the new method was a recognized accounting practice and bona fide. Citing various High Court decisions, the Tribunal held that the change was justified and deleted the addition of Rs. 5,29,700.

2. Disallowance of Rs. 8,753 by applying Rule 6B:
The assessee claimed that gifts given did not contain any emblem and thus should not be disallowed u/r 6B. The CIT(A) partially allowed the claim but confirmed the disallowance of Rs. 8,753. The Tribunal, referencing the Bombay High Court decision in CIT vs. Allana Sons (P) Ltd., deleted the disallowance.

3. Treatment of Rs. 7,04,849 as revenue receipt:
The assessee's claim that the amendment was not applicable for the assessment year 1989-90 was not pressed during the hearing. Hence, this ground was dismissed.

4. Disallowance of Rs. 12,69,750 as revenue expenditure:
The claim for revenue expenditure related to the increase in authorized capital was not pressed during the hearing. Consequently, this ground was dismissed.

5. Deduction u/s 80HHC on deemed exports:
The claim for deduction u/s 80HHC on deemed exports was not pressed during the hearing. Therefore, this ground was dismissed.

6. Deduction u/s 80-I on various incomes:
The Tribunal examined various items of income to determine eligibility for deduction u/s 80-I:
- Interest on deposit with banks: Remanded to AO for verification.
- Interest on intercorporate deposits: Not eligible.
- Interest on bills: Eligible.
- Interest on deposits: Remanded to AO for verification.
- Interest on advance tax: Not eligible.
- Interest on investments: Not eligible.
- Sales-tax refunds: Eligible.
- Lease rent received: Not eligible.
- Compensation for services rendered: Not eligible.
- Dividend received: Not eligible.
- Profit on sale of assets, investments, and units: Not eligible.
- Provisions written back: Eligible.

7. Charging of interest u/s 234A and 234B:
The grounds challenging the charging of interest u/s 234A and 234B were not pressed during the hearing and were therefore dismissed.

General Grounds:
Grounds for adding, altering, amending, withdrawing, or clarifying the grounds of appeal and adducing further evidence were general in nature and required no comments.

Conclusion:
The appeal was partly allowed.

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