Income Tax Appellate Tribunal - Ahmedabad
Gujarat Processing Works vs Income Tax Officer (Gujarat Aluminium ... on 12 June, 1995
Equivalent citations: (1997)58TTJ(AHD)168
ORDER
B. M. KOTHARI, A.M. :
These two appeals by the assessee involve consideration of some common points. Hence they are being disposed of by this common order.
2. The first common ground in these two appeals relate to confirmation of additions of Rs. 2,19,599 in asst. yr. 1984-85 and Rs. 3,74,190 in asst. yr. 1986-87 on account of difference in valuation of closing stock.
2.1 The AO observed in the assessment order for asst. yr. 1984-85 that there was a difference in value of closing stock shown in the books of account and as shown in the stock statement submitted to the Bank as per details mentioned below :
As per return As per statement filed with Bank
(i) GCC Billets GAE Billets, Aluminium, Aluminium ingots.
4,63,354 5,38,897
(ii) Semi-finished goods 36,180 46,719
(iii) Finished goods at Kalol 3,30,357 4,24,839
(iv) Finished goods at Delhi Rs. 1,41,688 at Jaipur 1,848 1,43,536 1,82,571 9,73,427 11,93,026 Difference Rs. 2,19,599 2.2 The details of difference in the figures of closing stock shown in asst. yr. 1986-87 as given at pp. 2 and 3 of the assessment order for asst. yr. 1986-87 are as below :
The assessee-company has hypothecation account with Dena Bank Sayaji Gunj, Baroda and it has submitted the statement of stock as on 31st Dec., 1985 as follows :
Kgs Book value or cost price or landed cost whichever is lower Rs.
1. Raw material 5,035.360 1,97,370
2. Finished goods 44,540.000 14,91,199
3. Semi Finished goods 24,633.900 8,09,469 Total (excluding stored, spares, dies, etc.) 24,98,538 While the details of stock as recorded in the books of account on the last day of the previous year are as follows :
Rs.
1. Raw material 2,13,712
2. Finished goods 12,46,698
3. Goods in projects 6,63,938 Total including stores spares dies, etc. 21,24,348 It becomes very clear that there is a difference of Rs. 3,34,190 (i.e. Rs. 24,98,558 Rs. 21,24,348 in the stock shown to the bank and as recorded in the books of account. This has resulted in the lowering of gross profit and net profit by Rs. 3,74,190.
2.3 The AO after considering the submission made on behalf of the assessee made the addition of Rs. 21,599 in asst. yr. 1984-85 and Rs. 3,74,190 asst. yr. 1986-87.
2.4 The CIT(A) in view of reasons recorded in the order passed by him for asst. yr. 1984-85 and asst. yr. 1986-87 confirmed the aforesaid addition.
2.5 Before us the learned counsel for the assessee submitted that excise duty was paid on all the purchases of raw material and it was debited to a separate account styled as "Central Excise Credit A/c. Further the assessee had to pay the excise duty directly by cash against goods sold to customers which was also debited to a separate account namely, "Central Excise Deposit A/c". The appellant also recovers the excise duty from customers and such recovery were taken to yet another account known as "Central Excise Recovery A/c". At the end of the year the difference was carried forward to the balance-sheet.
2.5(i). It was submitted that since neither the payments on account of excise duty nor the recoveries/refund thereof entered into the computation of the trading results, the question of there being a element of profit and loss due to receipt and payment of excise duty never arose. The assessee furnished before the AO respective ledger accounts as also the purchase bills of raw materials to show that the value of purchases was debited to the trading account whereas the excise duty paid was taken to a separate account.
2.5(ii). It was further submitted that since the purchase account was debited net of excise, the valuation of stock in the books was made at cost net of excise. Such method of valuation of stock was consistently followed in similar manner ever since its inception i.e. from asst. yr. 1978-79 and such method has always been accepted by the Department in the past.
2.5(iii). The learned counsel further submitted that similar query with regard to valuation of closing stock was made in asst. yr. 1981-82 but after considering similar explanations given by the assessee, the AO accepted the same in that year. Such method of valuation of closing stock in one of the recognised methods of valuation. Similar method of valuation of closing stock and treatment given to excise duty was followed in the cases of other sister concerns such an in the case of Banco Aluminium Ltd. Gujarat Aluminium Extrusions (P) Ltd. and the same has been accepted and their respective assessments.
2.5(iv). The learned counsel further invited our attention towards an order under s. 144B of IT Act in the case of M/s. Gujarat Aluminium Extrusion Pvt. Ltd. for asst. yr. 1977-78 dt. 1st Sept., 1980 (pp. 15 to 21 of P. B. for asst. yr. 1984-85) to show that the IAC accepted similar contention and directed that AO to delete the addition of Rs. 2,98,913 proposed in the draft order on the basis of identical facts and circumstances.
2.5(v). The learned counsel further invited attention towards the Guidance Note on Accounting treatment for Modvat issued by the Institute of Chartered Accountants of India along with illustrations given in Annexure C of the said Guidance Notes to corroborate his contention that the method of accounting for Modvat credit/proforma credit of excise duty and the method of valuation of closing stock followed by the assessee is one of the recognised methods.
2.5(vi). He further pointed out that the quantity shown in the stock statement submitted to the bank and the quantities of closing stock shown in the financial books of accounts are same. There is a difference only in value and that too is solely on account of the inclusion of excise duty in the value of closing stock shown in the bank stock statement. Since the bank gives loan with reference to market value of closing stock, the amount of excise duty was included in that statement. But that was not included in value of closing stock recorded in financial books, as purchases was debited at purchase price net of excise i.e. without including the amount of excise duty paid to the suppliers of the goods alongwith purchase price. The learned counsel invited our attention towards the various details submitted in the compilation for asst. yr. 1984-85 and asst. yr. 1986-87 to corroborate the aforesaid contentions. He strongly urged that the aforesaid additions should be deleted.
3. The learned Departmental Representative gave written submissions. It will be appropriate to reproduce their arguments :
(1) All the outset primary requirements of excise laws have to be set out :
(a) The scheme of Modvat has been introduced from 1st March, 1986 by incorporating rr. 57A to 57J in the Central Excise Rules, 1944.
(b) Covers only those included final products classifiable under the specified chapters of the Central Excise Tariff Act, 1985, as contained in the table of the said notification.
(c) As originally introduced, the scheme also did not cover capital goods used by the manufacturer of finished excisable goods.
(d) The scheme will operate only when excise duty is payable on the final product and not when the final product is exempted from duty.
(e) The scheme provides for instant credit of the input duty on goods used in or in relation to the manufacture of final products.
(f) It also requires maintenance of Registers in No. 23A part I & II of the filing of monthly returns.
(g) Prior to introduction of Modvat w.e.f. 1st March, 1986 a system of proforma credit was available under r. 56A of the Central Excise Rules 1944. This had limited application, particularly since it applied only to cases where the inputs and the final products fall within the same tariff item.
(h) With effect from 1st March, 1986, both the Proforma Credit Scheme or the Modvat scheme would be available. The two schemes would be mutually exclusive however, and the manufacturer is given the option of availing of one or the other scheme.
(i) Given under the Modvat scheme, the ICAI has acknowledged certain circumstances which can lead to a distorted picture of profits and therefore recommends appropriate adjustments as per facts. This can be seen from paras 4.5, 4.6, 5.3, 5.4 & 5.5 of the relevant "Guidance Note".
3.1 In view of the above background, considering that the accounting period under consideration is 1st April, 1983 to 31st March, 1984 relevant to asst. yr. 1984-85, and since the Modvat scheme was introduced only w.e.f. 1st March, 1986, well after the end of the accounting period of the assessee, reliance on the method of accounting set out in the said "Guidance Note" is misplaced. The said "Guidance Note", has no application to the period under consideration.
3.2 "The Guidance Note" under reference has proceeded on the basis that Modvat credit available is similar to "rebate" or "duty drawback" which will reduce the cost of purchase since rr. 57A to 57J of the Central Excise Rules have been issued by Notification dt. 1st March, 1986 under the heading "Credit of Duty paid on Excisable Goods used as Inputs".
4. The Institute of Chartered Accountants of India has considered various Supreme Court decisions and its own publication on "Valuation of Inventories" in A. S.-2, and has issued "Guidance Note on Accounting Treatment for Excise Duties".
5. Extracts of the said "Guidance Note" is enclosed herewith and considering the accounting period involved, it is these accounting principles which will apply.
6. Specific attention is drawn to paras-22, 24,25,26 and 38 of the said enclosure which discusses "excise duty as an element of cost" and recommendations of ICAI.
7. From the said extract it will be seen that cost of purchase specifically includes duties and taxes, excise duty contributes to the value of the produce and, therefore, cannot be treated differently from other expenses for the purpose of determination of cost for inventory valuation. For this purpose, it is includible as part of cost not only in respect of finished goods, but also in respect to work in progress.
8. When accounts are prepared by an auditor a method of accounting for excise duty is not in accordance with the principles laid down in the "Guidance Note on Accounting Treatment for Excise Duty", the ICAI states that the auditor should clarify his report accordingly. He should also express his opinion whether the financial statements on which he reports gives a true and fair view of the operating results of the year.
9. Vide letter dt. 20th March, 1987 & 27th Aug., 1990 (pp. 5 & 23 of assessees paper book) addressed to the ITO, Wd - B, Godhra & CIT(A) Baroda respectively. The assessee has stated that while valuing closing stock the company ignores the element of excise duty.
It is, however, contended that since neither the payment nor recovery on account of excise duty enters into computation of trading results, book results are not affected. It is contended that this method of accounting has been consistently followed.
10. As seen from the "Guidance Note on Accounting Treatment for Excise Duties" issued by the ICAI, excise duty should be considered as a manufacturing expense and be considered as an element of cost for inventory valuation.
11. In the face of the above Guidelines ICAI, the assessees method of valuation of inventories are clearly improper. In its decision in Mcdowall & Co. Ltd. vs. CTO (1985) 154 ITR 148 (SC), the Supreme Court had also held that "the incidence of excise duty is directly relatable to manufacture."
12. Reliance is placed on the decision of the Madras Bench of the ITAT in the decision in Southern Asbestos Cement Ltd. vs. Dy. CIT (1991) 38 ITD 449 (Mad), where it is held that value of closing stock should include excise duty paid thereon.
13. Reliance is also placed on the decision of the Honble Supreme Court in CIT vs. British Paints India Ltd. (1991) 188 ITR 44 (SC) which held :
"(i) even if the assessee had adopted a regular system of accounting it was the duty of the AO under s. 145 of the IT Act, 1961 to consider whether the correct profits and gains could be deduced from the accounts so maintained.
(ii) that any system of accounting which excluded for the valuation of stock-in-trade all costs other than that of raw material for the goods-in-process and finished goods, was likely to result in a distorted picture of the true state of the business for the purpose of computing the chargeable income... The profit of one year was likely to be shifted to another year which would be an incorrect method of computing profits."
14. The addition made by the AO, therefore, needs to be sustained.
15.1 The learned Sr. Departmental Representative also relied upon the reasons mentioned in the orders of the Departmental authorities.
15.2 We have carefully considered the submissions made by the learned representatives and have also gone through the orders of the Departmental authorities and various other documents submitted in the compilation to which our attention was drawn during the courses of hearing.
15.3 The main contention of the learned Departmental Representative is that the scheme of Modvat was introduced from 1st March, 1986 and, therefore, the guidance-note issued by the Institute of Chartered Accountants in relation to accounting of Modvat cannot apply to the facts of the present case. The learned Departmental Representative has, on the other hand, placed reliance on another publication of the Institute of Chartered Accountants relating to Guidance Note on Accounting Treatment for Excise Duties A. S. 2 which according to him supports the view taken by the AO. The learned Departmental Representative also relied upon the judgments of the Honble Supreme Court in the case of Mc Dowell & Co. Ltd. (supra) and British Paints India Ltd. (supra). He has also furnished photo copies of Guidance Note on Accounting Treatment for Excise Duties along with the written submissions. It will be worthwhile to reproduce para-22 of the said Guidance Note :
"Cost of purchase specifically includes duties and taxes. Therefore if duties and taxes on items of purchase are part of the cost of purchase, there can be no justification for not considering them as cost of conversion when such duties and taxes are paid on manufacture."
The aforesaid Guidance Note clearly reveals that duties and taxes on items of purchase are part of the cost of purchase, there can be no justification for not considering them as cost of conversion and consequently, there is no justification in not including the value of excise duty paid at the time of valuing the closing stock. Likewise, in para-38 of the Guidance Note in which the various recommendations of the Institute have been summarised provides that excise duty should be considered as a manufacturing expense and like other manufacturing expense be considered as an element of cost for inventory valuation. There can be no doubt that if the amount of excise duty paid by the assessee has been debited as an expenditure in the trading and manufacturing account along with the purchase price of the material purchased and used for consumption, it should be also taken into consideration for valuation of closing stock, but in the present case the assessee has contended before the Departmental authorities as well as before us that the excise duty paid on purchase of raw material is not debited as expenditure, but it is debited in a separate account which after taking into consideration the set off availed against excise duty payable on sale of finished goods as shown in the balance sheet and has never formed part of expenses in the trading and manufacturing account. This undisputed fact clearly distinguishes the facts of the assessees case from the facts of the judgments and Guidance Note relied upon by the learned Departmental Representative.
15.4 The assessee in its letter dt. 24th March, 1987 submitted to the AO has, inter alia, stated the following facts :
"(4) Why Excise Duty not included in stock of P&L a/c Excise duty not included in stock of P&L a/c. because of we have not claimed excise duty as expenditure but we are getting set off against clearance of rate of stock shown in P&L a/c. and in bank statement.
The assessee in its letter dt. 20th March, 1987 submitted to the AO also explained that the difference in valuation of stock shown in the statement given to the bank and as per the P&L a/c. is only on account of valuation and there is no difference in the quantity of stock statements. The valuation in the statement submitted to the bank was made at cost inclusive of excise duty paid. However, in the financial books the valuation of stock was made at cost exclusive of excise duty, as excise duty was not debited in the expenditure account. It was also stated that such a practice has been consistently followed by the assessee as well as by various other concerns.
15.5 In the case of M/s Gujarat Aluminium Extrusion (P) Ltd., an addition of Rs. 2,98,913 was proposed by the AO in the draft assessment order. The assessee submitted objections before the IAC, Baroda. The IAC, Baroda gave directions under s. 144B vide order dt. 1st Sept., 1980. It will be worthwhile to reproduce paras 7 & 8 of the said directions given by the IAC in that case :
"This brings me to the addition of Rs. 2,98,913 proposed to be made by the ITO on account of under valuation of closing stock. The ITO has set out all the relevant facts in paras 6 and 7 of the draft assessment order. The statement of stocks lying with the Dena Bank (vide Annexures A which forms a part of the draft assessment order) reveals that the assessee had included the excise duty aggregating to Rs. 2,98,913 paid by it on the purchases of raw materials required for the manufacture of goods. In this connection, Shri Bhagwat contended that the ITO had not appreciated the true applications of the facts incorporated in the statement. He clarified that excise duty was paid by the assessee on all the purchases of raw materials and it was duly credited to a separate account styled as "Central Excise Credit A/c". Likewise, the assessee had to pay excise duty directly by cash against goods sold to the customers which was also credited to a separate account, namely, "Central Excise Deposit A/c". Shri Bhagwat further stated that the assessee was entitled to recover the excise duty from customers and such recoveries were taken to yet another account known as "Central Excise Recovery A/c". Shri Bhagwat clarified that at the end of the year the difference was carried forward to the balance-sheet. Shri Bhagwat argued that since neither the payments on account of excise duty, nor the refunds therefor entered into the computation of the trading results, the question of there being an element of profit/loss due to receipt/payment of excise duty never arose. In support, Shri Bhagwat produced relevant ledger, as also vouchers in respect of purchase of raw material to show that the value of purchase was debited to the trading account, whereas the excise duty paid was taken to a separate account. On these facts, Shri Bhagwat contended that the ITO had erred in taking into consideration the element of excise duty for the purpose of valuation of closing stock. Shri Bhagwat admitted that the assessee had taken this element in to account for the purpose of obtaining loan from the banks, but he prayed that there was nothing wrong with the method by the assessee, for the simple reason that insofar as the loan facility is concerned, the real worth of the goods lying with the Bank would be not only the purchase consideration paid by the assessee but also the excise duty paid thereon by it.
In view of the facts clarified by Shri Bhagwat with reference to entries in the relevant books and vouchers, I am satisfied that there was no justification for enhancing the value of the closing stock disclosed by the assessee. The ITO is, therefore, directed to exclude the aggregate sum of Rs. 2,98,913 from the computation of total income. As a consequence of these directions, the ITO need not issue only notice, under s. 274 for the assessees default for imposition of a penalty under s. 271(1)(c) of the IT Act, 1961."
15.6 It is time that scheme of Modvat came into force w.e.f. 1st Aug., 1986, but prior to that there was a system of proforma credit available under the Central Excise Rules. The amount of excise duty paid by a manufacturer on raw materials could be set off against the amount of excise duty payable on the sale of its finished goods in accordance with the relevant excise rules. Since the assessee did not debit the amount of excise duty paid on the purchases of raw material as an expenditure and such amount of excise duty on purchases did not form part of purchase of raw material nor it formed part of the cost of manufacturing of goods but the amount in question was debited in the separate account and was finally taken to balance-sheet, the inclusion of the amount of such excise duty in the valuation of closing stock cannot arise.
15.7 The assessee has categorically stated before the authorities below that such method of valuation of closing stock was followed by them right from its inception i.e. asst. yr. 1978-79 and such method has been accepted by the Department in all earlier years. This factual aspect has also not been disputed by the Departmental authorities nor by the learned Sr. Departmental Representative before us.
15.8 The assessee also submitted a letter dt. 6th Dec., 1988 to Dy. CIT(A) in response to a query raised by the AO relating to difference of Rs. 3,74,190 in stock as per financial record and bank statement. The extracts from the said reply are reproduced below :
"In this context we have to state that the difference in stock is only because of the different methods of valuation as adopted in financial record and that followed for obtaining finance from the bank.
As the bank gives finance on the correct value of security placed with them, the excise duty has to be included while valuing stock of raw material and finished goods and accordingly while submitting the statement with the bank, the average cost was derived after taking into consideration the excise duty paid/payable by the company. However, in financial records, as per the past practice followed by our client average cost was arrived at without considering the element of excise duty and because of the lower cost, the financial record showed lesser stock.
A detailed chart enclosed with the letter reveals that quantity of stock in both financial record as well as, as per the statement submitted to the Dena Bank, are the same, while valuing the stock in financial record, the company ignores the element of excise duty as the company gets "set off" while making payment of excise duty on its sales. The portion of the bill for purchase, relating to excise is being debited in finance record to "Central Excise Deposit Account". Further, the company recovers central excise from its customers on sales and this recovery is being credited to "Central Excise Recovery Account" and at the year end two accounts was carried forward to the balance-sheet.
Thus, neither the payment on account of excise duty nor the recovery on account of excise duty enters into the computation of trading results and hence while valuing stocks in finance records the company has never considered excise duty element. The method is being followed by our client consistently since last several years and hence the question of addition of difference of Rs. 3,74,190 in stock, does not and should not arise".
A detailed chart was also submitted along with this letter in which exact difference and the reasons in support of such difference between value of closing stock as per financial record and as per bank statement was explained. From the aforesaid facts, it is clear that the assessee produced all the relevant records to prove that the amount of excise duty paid on the input of raw material has not been debited as an expenditure in the financial books of accounts, but was treated as an advance payment of excise duty which was to be set off or adjusted against the amount of excise duty payable on sale of finished goods manufactured by the assessee. It is also an undisputed fact that the difference between the value of closing stock as per financial records and as shown in the stock statement submitted to the bank is only on account of non-inclusion of excise duty in the value of closing stock in financial records which was included in the stock statement submitted to the bank. It is also an accepted fact that there is no difference in the quantity of stocks as per financial records and as given in the statement furnished to the bank. If the cost of raw material purchased by the assessee has been debited in the manufacturing and P&L a/c at a value net of excise duty paid on inputs, the question of including the amount of such excise duty paid on inputs in the value of closing stock would not arise at all. This can be further aptly illustrated by looking at the illustrations given in Annexure C of accounting for Modvat credit. The said illustration is reproduced hereunder :
"The illustrations are based on the following assumptions :
(i) There are no opening stocks.
(ii) 100 units of raw materials are purchased at Rs. 10 per unit, plus Rs. 2 for excise duty, aggregating to Rs. 12.
(iii). 60 units of raw material are consumed in a process involving manufacture of a component. All the 60 units are sold in the year. The balance 40 units are manufactured and sold in the subsequent year.
(iv) The manufactured components are sold at a price of Rs. 15 per unit (including excise duty Rs. 3 per unit).
(v) Modvat credit is available on the raw material purchased and excise duty payable on the final product.
(vi) Conversion costs are ignored. Alternative [Refer para 4.1 (a)] P&L a/c.
Units Rate Amount Units Rate Amount To purchase of raw materials 100 10 1000 By sales 60 15 900 Less : Stock of raw materials 40 10 400
-
-
600-
-
To excise duty 60 3 180
-
-
To gross profit
-
-
120-
-
900 900The valuation of closing stock of raw material has been made in the aforesaid illustration at Rs. 10 per unit because the purchase price was also debited at Rs. 10 per unit (net of excise) and the amount of excise duty of Rs. 2 paid was separately debited as Modvat credit was available on the raw material purchased which could be set off against the excise duty payable on the finished product. The said illustration clearly explains that the method of accounting consistently followed by the assessee in relation to valuation of closing stock was one of the recognised methods and correct profits can be properly deduced from such a method.
15.9 We are, therefore, of the considered opinion that the addition of Rs. 2,19,599 in asst. yr. 1984-85 and Rs. 3,73,190 in asst. yr. 1986-87 cannot be sustained. The AO is directed to cancel the same.
16. The second common ground relates to disallowance of sum of Rs. 1,31,538 in asst. yr. 1984-85 and Rs. 3,33,000 in asst. yr. 1986-87 being the value of dies consumed during previous years.
16.1 The learned counsel for the assessee submitted that consuming on of die so written off on the basis of method uniformly and regularly followed from year to year. He invited our attention towards reply dt. 8th Feb., 1989 submitted in the course of assessment proceedings for asst. yr. 1986-87 along with voluminous details submitted to the AO. He further pointed out that in case the deduction is not allowed on the basis of consumption of dies, the assessee is entitled to depreciation on the cost of dies. Such depreciation at the rate of 30 per cent comes to Rs. 30,38,523 from asst. yrs. 1977-78 to 1986-87 against which the assessee has written off the value of dies only to the (sic extent) of Rs. 27,17,392 from 1977-78 to 1986-87. A chart giving such details was submitted in the compilation for asst. yr. 1986-87 which is marked as Annexure E. The learned counsel, therefore, submitted that the amount of dies written off ought to have been allowed by the learned CIT(A).
16.2 The learned Sr. Departmental Representative submitted that the assessee has written off the amount of dies on account of so-called consumption on the basis of mere estimate which has rightly been disallowed. As regards alternative claim made by the learned counsel for the assessee, he submitted that the assessee is not entitled to grant of depreciation because the requisite particulars were not furnished by the assessee for the purposes of claiming depreciation. He submitted that the ITO could not suo motu proceed to allow depreciation on plant and assets in respect of which the assessee did not furnish the requisite particulars as per the relevant provisions of law. He placed reliance on judgment of Honble Punjab & Haryana High Court reported in CIT vs. Friends Corpn. (1989) 180 ITR 334 (P&H) and CIT vs. Shri Someshwar Sahakari Sakhar Karkhana Ltd. (1989) 177 ITR 443 (Bom). He thus strongly supported the order of the CIT(A).
16.3 We have carefully considered the submissions made by the learned representatives and have also gone through the relevant documents and orders of the Departmental authorities.
16.4 We agree with the finding given by the CIT(A) holding that the method of valuation of the dies remaining in stock at the end of the respective year followed by the assessee is not a scientific and proper method. The assessee also could not properly explain as to how did they arrive at the number and value of dies written off during each year. In asst. yr. 1986-87, the CIT(A) has made similar observations with further finding that the value of a die, which is in use, its value cannot be reduced arbitrarily. In case the die becomes obsolete the assessee is entitled to write it off as scrap value. He has further arrived at the conclusion that since the assessee has not followed any recognised and consistent method but has reduced the value of dies in closing stock on an arbitrary basis, the addition made by the AO was considered to be justified by him. To the extent, the CIT(A) has observed that the assessee has not followed any scientific, recognised or proper method in respect of consumption of dies debited in the P&L a/c is concerned, we agree with him, but we find considerable force in the alternative argument advanced on behalf of the assessee that it is impossible to carry on the production activities without user of dies in the process of manufacturing activities carried on by the assessee. Some deduction is definitely allowable to the assessee in respect of tear of the dies which are used in the manufacturing process. The dies are covered by the wide definition of "plant" given in s. 43(3) of IT Act, 1961. Such dies which constitute plant are clearly eligible for grant of depreciation. The judgments relied upon by the learned Sr. Departmental Representative are not at all applicable in the present case, as those are cases where the AO wanted to thrust upon the assessee the grant of deduction by way of depreciation. However, here the assessee made an alternative claim before us as well as before the lower authorities. It will be worthwhile to go through the written submission dt. 19th Sept., 1990 submitted before the CIT(A) in asst. yr. 1986-87 wherein the assessee submitted a statement showing that if depreciation would have been claimed from calendar year 1976 to 1985, the cumulative amount of depreciation allowable at the rate of 30 per cent would have been substantially more than the amount written off by the assessee. The complete details of dies lying in opening stock, dies purchased during the year and the closing stock were also submitted during the course of assessment proceedings. Such an alternative claim can be made by the assessee at any stage of the proceedings as it does not require any fresh investigation as to facts. The total number of dies purchased and the purchase price of the same are already available on record. In the interest of fairness and justice, we are, therefore, of the considered opinion that this matter be restored back to the AO with a direction that he should consider the assessees claim for grant of depreciation on the cost/WDV of dies in accordance with the provisions of law. We, therefore, confirm the finding given by the CIT(A) that an adhoc and arbitrary claim made by way of consumption of dies cannot be allowed, but it would be proper to grant depreciation to the assessee on the cost/WDV of dies in accordance with the law. The matter is, therefore, restored back to the AO in relation to this point. The assessee will be entitled to submit a precise claim for grant of depreciation on dies for the years under consideration and the AO will be at liberty to consider the assessees claim for grant of depreciation in accordance with the provisions of law.
17. The ground No. 3 for asst. yr. 1984-85 relates to confirmation of disallowance of Rs. 13,181 under s. 43B.
17.1 At the time of hearing, the learned counsel was fair enough to admit that disallowance under s. 43B has been restricted by the CIT(A) only to the extent of Rs. 13,181 out of the total disallowance of Rs. 1,18,075 made in respect of outstanding sales-tax liability under s. 43B. This balance amount was not paid by the assessee within the time prescribed under s. 139(1). The aforesaid ground raised by the assessee, therefore, has no merit and is accordingly rejected.
18. The next ground in asst. yr. 1984-85 is that the CIT(A) has erred in not admitting the claim of deduction under s. 80J and/or 80HHA.
18.1 The CIT(A) rejected the said claim on the ground that no such claim was made before the ITO. Hence the question of allowing deduction under these sections by the AO did not arise.
18.2 After considering the submissions made by the learned representatives, we are of the considered opinion that the CIT(A) has rightly refused to consider such a ground. The assessee has not furnished any specific claim under s. 80J. or 80HHA before the AO nor before the CIT(A) nor before us. The grant of deductions under these sections requires fulfilment of various conditions including the condition of submitting an audit report in the prescribed form. Since the learned counsel for the assessee has failed to point out that such material already exist on records the belated claim without availability of relevant information and document existing on records cannot be entertained. We confirm the view taken by the CIT(A) in relation to this ground.
19. The last ground relates to confirming the levy of interest under s. 217.
19.1 The CIT(A) has directed the AO to grant consequential relief.
19.2 In our view, the assessee is not entitled to any further relief as no case has been made out by the assessee to support his claim that no interest under s. 217 is chargeable. The directions given by the CIT(A) to the AO for recalculating the interest will meet the ends of justice. This ground is also, therefore, rejected.
20. In asst. yr. 1976-87, only two common grounds which have already been discussed and decided were raised. No other grounds have been raised.
21. In the result, both the appeals are treated as partly allowed for statistical purposes.