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TMI Blog1993 (3) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 9,88,095 under the caption "Sales-tax set off". This amount was assessed on accrual basis. Now, the appellant claimed in the ground of appeal that the change in the method of accounting was bona fide and therefore, the said addition should not have been confirmed. The CIT (Appeals) mentioned in his order that no reason was adduced either before the Assessing Officer or the CIT (Appeals) why the addition should not be made under the caption "Sales-tax set off" on accrual basis. Therefore, the appellant mentioned in the grounds of appeal that "during the course of proceedings it was cumbersome to keep a track of the claim of set off made in return and the claim of set off should be allowed in the assessment by passing the necessary adjustment entries in respect thereof ". What is mentioned by the Assessing Officer in para 5 of his order is as under : "The assessee has changed the method of accounting of sales-tax set on from accrual basis to cash basis. As in the past, such receipt was taxed on the accrual basis. The same is taxed on this year also on accrual basis. The reasons for change are not known. Addition on this account comes to Rs. 9,88,095. " 4. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting is not a matter of right without adducing any proper reasons and without approving it to be bona fide. 7. The Assessing Officer has mentioned in para 5 of his assessment order the receipt of sales-tax set off was taxed on accrual basis in the past. Therefore, he taxed the said receipt of sales-tax set off on accrual basis in this year also rejecting the claim to tax the same on cash basis. The decision relied upon by the learned counsel in the cases of Matchwell Electricals Ltd. and Maharashtra Scooters Ltd. [IT Appeal Nos. 920 to 922 (PN) of 1983, 258, 832 to 836 (PN) of 1985, 670 693 (PN) of 1986] are distinguishable on facts. We also do not find any good reason either to allow the change of method of accounting regarding the sales-tax set off from accrual basis to cash basis without showing proper reasons and the same being bona fide. Therefore, the Assessing Officer as well as the CIT(Appeals) were right to reject the change of method of accounting so far the sales-tax set off was concerned from accrual basis to cash basis. The Tribunal in the case of Matchwell Electricals Ltd for the assessment years 1977-78 and 1978-79 (pages 163 to 169 of the paper compilation) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal relate for not allowing the depreciation on an amount of Rs. 16,06,628 regarding taking over the machinery on dissolution of the firm in which the assessee-company was a partner. 9. The Assessing Officer restricted the claim of the depreciation as per the income-tax record of the partnership firm. The assessee contended to allow depreciation on the cost of the machinery of Rs. 16,06,628. The Assessing Officer held that the revaluation of the machinery was done with a view to claim additional depreciation based merely on guess work and the said valuation was not supported by any cogent evidence. It was also submitted that the CIT(Appeals) failed to appreciate the ratio of the Supreme Court in the case of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148. According to the appellant the ratio of the said decision is not application and the depreciation on the valuation of machineries should be allowed. The relevant facts are as follows : 10. There was a firm of M/s. ICI Plastics. The assessee-company was a partner in that firm. The assessee filed its return of income on 29-7-1982. The assessment was made on 18-2-1985. The firm of M/s. ICI Plastics was dissolved on 31-3-1981. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. He has placed much reliance on the report of the approved valuer (pages 113 to 118 of the paper compilation). He has also urged that the written down value is not material for determining the value of the machinery on commencement by the assessee-company. He has not disputed that the machineries were purchased by the erstwhile firm in 1960 as per page 117 of the paper compilation. It would be better to narrate a few undisputed facts from page 117 which are as under : (1) PVC compound fluidizing mixer, 150 litre capacity was purchased from Henschel Werke W. Germany on 22-6-1966 for a price of Rs. 32,752. The value of the said item was determined as on 1-9-1979 at Rs. 2,50,000 by claiming depreciation at 75 per cent and showing the depreciated value as on 1-9-1979 at Rs. 62,500. (2) PVC Compound Fluidizing Mixer, 250 litre capacity with cooling mixer was purchased from Rhenstahi Henschel AC, Federal Republic of Germany on 5-9-1968 for a price of Rs. 45,819. The value of the said item was determined as on 1-9-1979 at Rs. 5,00,000 by claiming depreciation at 60 per cent and showing the depreciated value as on 1-9-1979 at Rs. 2,00,000. (3) 90mm PVC Extruder was purchased from Chem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Delhi High Court in the case of Raj Narain Agarwala. CIT [1970] 75 ITR 1. In that case, the assessee firm owned three factories, viz., (1) Prag Distilled Water Ice Factory ; (2) Prag Cold Storage ; and (3) Prem Raj Enamel Metal Factory. The three factories were valued by experts, the assets were divided into two lots by the assessee and the only other partner had the option to elect either of the two lots. The valuation was made and it was accepted as genuine. In the instant appeal, the valuation of the factory is not involved but only the machinery. The valuation of the factory including the immovable property was appreciable but the value of the machinery is always depreciable. The ratio of the said decision is not applicable. He has also relied on the decision of the Bombay High Court (Nagpur Bench) in the case of R.B. Bansilal Abirchand Spg. Wvg. Mills v. CIT [1970] 75 ITR 260. In that case also the mill and building was valued by an Architect and the plant and machinery was valued by a former manager of the mill. The family was disrupted and the mill and agency business was taken over by the assessee under the agreement. Again the mill and the building wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners. On the basis of revaluation the value of the machinery in partnership firm was revised as it is already mentioned that the partnership firm was dissolved on 31-3-1981 and at the time of dissolution the machinery, the market value of which was determined at Rs. 16,06,626 was allotted to the share of the limited company i.e., the appellant and money equivalent thereto was paid to, other partners towards the adjustment of rights inter se between the erstwhile partners of the partnership firm of ICI Plastics. 14. Shri Bhide has stressed upon the approved valuer's valuation report. According to him, the valuation report should be accepted. Firstly, the approved valuer's valuation report cannot be a conclusive evidence. It is a subject matter of scrutiny under the relevant facts and circumstances of the case. Those facts and circumstances of the case are, the date of purchasing the machineries as mentioned above, the price paid for them, the written down value as per the books of accounts of the erstwhile partnership and lastly the life of the machineries in question. These facts do not allow us to accept the valuation made by the approved valuer for another reason also. That r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 215 is a consequential. The finding on this ground depends upon the grounds already dealt with above. Since the assessee has failed on all the grounds, no interference is called for in charging interest under section 215. 18. ITA No. 1925/(PN)/ 1985 : This is revenue's appeal against the order of the CIT(A) Pune dated 2-8-1985 for the assessment year 1982-83 raising two grounds of appeal. The first ground taken by the revenue is that the CIT(A) was not justified in involving the provisions of section 40(c) when the provisions of section 40A(5) should have been applied to the remuneration paid to the Export Director. The Assessing Officer applying the provisions of section 40A(5) to remuneration paid to the Export Director disallowed a sum of Rs. 7,922. It is the case of the assessee that in case of an employee-director provisions of section 40(c) should have been applied. Observing that the provisions of section 40(c) are specific provisions and therefore, should have precedence on the general provisions of section 40A(5), the CIT(A) directed the Assessing Officer to compute the disallowable amount, if any, with reference to section 40(c) and not section 40A(5). After hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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