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TMI Blog1989 (8) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CIT (1982) 37 CTR (Bom) 204 : (1984) 150 ITR 586 (Bom). The assessee is aggrieved. 4. Learned assessed counsel placing reliance on the decision of the Special Bench of Tribunal in the case of Gedore Tools (India) Ltd. vs. IAC (1988) 70 CTR (Trib) (Del) (SB) 69 : (1988) 25 ITD 193 (Del)(SB) and the decision of the Tribunal in the case of Karimjee (P) Ltd. vs. IAC, Range IV-D, Bombay in ITA NO. 3892/Bom/1987 for the asst. yr. 1985-86, in which one of us was party to the order of the Tribunal, and submitted that the cash compensatory support received by the assessee cannot be treated as trade receipt. 5. As against this, learned Departmental Representative, Shri Sridharan, submitted that cash compensatory support received by the assessee is in the nature of trading receipt on revenue account and, therefore, the same is taxable. He placed reliance on the decisions of Calcutta High Court in the case of Jeewanlal (1929) Ltd. vs. CIT (1982) 26 CTR (Cal) 60 : (1983) 142 ITR 448 (Cal); of Allahabad High Court in the case of CIT vs. Swadeshi Cotton Mills Co. Ltd. (1980) 15 CTR (All) 81 : (1980) 121 ITR 747 (All); and of the Supreme Court in the case of Combay Electric Supply Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is low and, therefore, there was no cash of reducing it further below the lower of the two by 35 per cent or 33.67 per cent. Assessee is aggrieved. 8. The learned assessee counsel, Shri Patil, pointed out that in previous years, the method of accounting followed by the assessee was never rejected by the Department and, therefore, the same cannot be rejected for the present year. In any case, it was pointed out that when the valuation of closing stock is changed, there has to be corresponding change in the valuation of opening stock as well, as the method of valuation adopted by the assessee has been some even in the preceding years. In this connection reliance was placed on the decision of Privy Council in the case of CIT, Bombay Presidency vs. Ahmedabad New Cotton Mills Co. Ltd. AIR 1930 PC 56. 9. As against this, learned Departmental Representative supported the action of the CIT(A). 10. We have considered the rival submissions. The assessee has been following the method of valuing the closing stock at cost or market price whichever is low. Therefore, there was no question of reducing it further below the lower of the two by reducing it by 33.63 per cent or 33 per cent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessee counsel that this evidence was not produced before the ITO or the CIT(A) and, for the first time, it was produced before the Tribunal. He, however, requested that this letter should be taken on record considering the facts and circumstances of the case. 14. As against this, learned Departmental Representative submitted that from the pages 13 and to 14 of the paper-book filed by the assessee, it is clear that the letters dt. 27th Feb., 1986 and 4th March, 1986 were in possession of the assessee and these could have been produced by the assessee before the ITO and the CIT(A). Since the assessee failed to produce these letters at that stage, the same should not be entertained at this stage and the claim of the assessee should not be allowed on the basis of these letters. 15. We have considered the rival submissions. We find that the assessee has not been able to produce any evidence before the ITO or the CIT(A) about the damage to the goods. From the letter now produced which is dt. 28th May, 1989, it appears that there were two other earlier letters dt. 27th Feb., 1986 and 4th March, 1986, which were also produced before us in the paper book. The order of the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution of order or at the time of receipt of payment, though the terms of agreement speak of mercantile system of account. On appeal, the CIT(A) confirmed the order of the ITO on the following reasoning: "The appellant's source of income in this case is profits out of exports to USSR. The accounts are maintained for this source on mercantile basis. The appellant cannot further have different systems of accounts for different heads of expenditure made for earning the export income from USSR. The appellant has claimed that the expenditure was not claimed in the asst. yr. 1985-86 because he followed cash system of accountancy for the expenditure relating to commission paid on export order to USSR on cash basis and he is claiming the same on mercantile basis this year. This separate treatment of the export commission in two years on two different basis cannot be allowed. The appellant's system of accountancy in respect of this source of income was mercantile and therefore he should have claimed the commission of Rs. 1,00,450 which arose in the asst. yrs. 1985-86 in that year only on mercantile basis." Aggrieved by the order of the CIT(A), assessee has come in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the year rubber was found in stock o the extent of 97.569 Kg. and taking that figure into account, the balancing figure was shown as consumption. It was also submitted that since the ITO did not find any discrepancy in the books of accounts he should not have rejected them just on the basis of figures supplied to the Rubber Board. However, the CIT(A) confirmed the order of the ITO on the following reasoning; "I have heard the learned counsel. I do not agree with the appellant's contention that there was no defect in its books of accounts on the basis of which they could be rejected. The appellant has himself stated at more than one places before me that he did not maintain a record of the consumption of the raw material. That itself makes its manufacturing results worthy of rejection and therefore there was sufficient ground for the rejection of accounts. Secondly, it is not a case where the ITO has rejected its books of accounts but he has worked out a specific figure warranting addition under s. 69C as unexplained expenditure and since it was not shown as a part of the closing stock, it was natural to presume that it has been sold out of the books of accounts and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition on that account. 23. Further, no evidence has been produced by the Department to show that the assessee has incurred any expenditure and failed to offer any explanation as to the source of such expenditure, so as to attract the provisions of s. 69C. We, therefore, set aside the order of the CIT(A) on this point and delete the addition made by the ITO. This ground of assessee is hereby allowed. 24. The next ground in assessee's appeal is that the CIT(A) erred in limiting the deduction under s. 80HHC to Rs. 8,50,000. The assessee claimed that deduction under s. 80HHC should be allowed on total income as determined under the Act. However, the ITO has confined the deduction to 50 per cent of revenue at Rs. 9,42,278 created for the purpose. Before the CIT(A), on appeal, it was pointed out that the ITO was wrong in calculating the profit for the purpose of deduction at Rs. 20,44,542 instead of Rs. 27,84,621 and restricting deduction only with reference to the export reserve created instead of allowing deduction on full amount. It was also submitted that once it was established that the assessee credited reserve as per deduction claimed and thus fulfilled the condition under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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