Income Tax Appellate Tribunal - Bangalore
Motor Industries Co. Ltd. vs Inspecting Assistant Commissioner. on 29 June, 1995
Equivalent citations: [1995]55ITD465(BANG), (1996)54TTJ(BANG)287
ORDER
Per Balasubramanyam, JM - These appeals, one by the assessee and the other by the revenue, concern the assessment completed for the year 1979-80 for which accounting year is the same as calender year 1978.
2. The assessees business has been of manufacturing some articles required in automobile field such as fuel injection equipment, spark plugs, filters, head light bulbs, etc. In the assessment completed under section 143(3) read with section 144B several additions were made. In appeal, the Commissioner of Income-tax (Appeals) deleted few of them, but sustained few others. Both the revenue and the assessee have preferred appeals raising grounds relating to points on which they have lost.
3. We will first of all deal with revenues appeal wherein there are five distinct issues. The first is of addition of Rs. 70,00,000 which the CIT (Appeals) deleted. To narrate facts, the assessee, right from its inception, was charging in the books only the actual consumption of consumable stores and machinery spares to the profit and loss account. In this accounting year, that is 1977, a change was made. The change was that the entire purchase was charged in the books and this also included the opening stock of that year. A reason offered for the method newly adopted was that inconvenience was being experienced in accounting innumerable items involved in consumable stores and machinery spares. To obviate the difficulty, the assessee, it was stated, switched over to the new method stated above which was also a recognised method in accountancy. It was claimed that the switch-over was bona fide.
4. Parallel with issue No. 1 we may also consider the second question which relates to valuation of finished goods. For valuing the finished items, overhead expenses were being reckoned. What they did in this year (1977) was to value goods on "prime cost" instead of "on cost" basis. To say this in a simple way, earlier, the closing stock of finished goods were being valued on cost which included many items other than raw material cost and direct labour. Under the changed system only material cost and labour directly related to the quantum of production were taken into consideration. This method of valuing was also claimed to be one recognised in accountancy field.
5. The Income-tax Officer did not accept the change-over of charging in the books only actual consumption of consumable stores and machinery spares and also the new pattern of valuing finished goods. In the case of first one, there was "distortion of profits" and on calculation there was a loss of revenue to the extent of Rs. 70,00,000. In the other, but for the change adopted in the manner of valuation of the closing stock, the profits of the company would have risen by Rs. 85.48 lakhs. The changes made in the year were unacceptable to the ITO mainly on the reason that they had caused loss of substantial revenue. He, therefore, made additions.
6. In appeal, the CIT (Appeals) deleted both the additions. He accepted that the new method adopted in 1977 was also an accepted system of accounting and that the change was bona fide. The revenue has taken exception to the order of the CIT (Appeals) by raising grounds 2 to 5.
7. Shri Puniha who argued with great perspicacity contended that the method of charging 100% purchases irrespective of consumption would distort the true profits of the year and that there could be no conceivable method which would not show the actual profits earned. With regard to plea of inconvenience, his submission was that the assessee was all along following the method of charging the actual consumption and that an inventory management cannot plead inconvenience. It was his further submission that whatever method an assessee would follow it would be unacceptable to the revenue so long as it would misrepresent the true profits and for the purpose of making a proper assessment the taxing authority is within powers to reject the change-over. In regard to valuation of finished goods on "prime cost", Shri Puniha stated even the earlier practice of valuing "on cost" basis is a recognised method which the assessee was all along following and the change which has concealed profits to the extent of Rs. 85.48 lakhs should not be accepted on the premise that the new method is a more prudent method. He distinguished the decision of the Madras High Court in the case of CIT v. Carborandum Universal Ltd. [1984] 149 ITR 759 relied upon by the CIT(A).
8. Quite a few authorities were cited by Shri Puniha in support of his submissions. And they are: the decision of the judicial committee of the Privy Council in the case of CIT v. Sarangpur Cotton Mfg. Co. Ltd. [1930] 6 ITR 36; the decisions of the Supreme Court in the case of Chainrup Sampatram v. CIT [1953] 24 ITR 481; the case of S.N. Namasivayam Chettiar v. CIT [1960] 38 ITR 579; the case of CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122; and the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44.
9. Shri Soli E. Dastur, the learned senior advocate for the assessee, replied that so long as the newly adopted system has sanction from accountancy and the change is bona fide, the revenue cannot refuse to accept the changed system merely because it results in loss of revenue in the year of change. His further submission was that in a case of this type, the loss of revenue is one-time affair and the question has to be seen only from the point of bona fides. To establish that, he stated that the changed method is continuously being adopted by the assessee till this year and that the revenue has not taken objection in any subsequent assessments. He made a special mention to the assessment of the next year (1980-81) and we will say more about it later. The case law cited were, the Karnataka High Courts decision in the case of CIT v. Corporation Bank Ltd. [1988] 174 ITR 616; a judgment of the Kerala High Court in the case of Forest Industries Travancore Ltd. v. CIT [1964] 51 ITR 329; and the decision of the Madras High Court in Indo-Commercial Bank Ltd. v. CIT [1962] 44 ITR 22. He also referred to the decision of the Madras High Court in the case of Carborandum Universal Ltd. (supra).
10. Shri Dastur invited our attention to the decision of the Ahmedabad Bench of the Tribunal in the case of Gujarat Machinery Mfrs. Ltd. v. ITO [1992] 42 ITD 35 and an unreported decision of the Bombay Bench of the Tribunal in the case of Spaco Carburettors (India) Ltd. [IT Appeal Nos. 1767 and 538 (Bom.) of 1983 dated 22-9-1984], which according to him, have close approximation to facts.
11. The question before us has received our fullest thought. At the outset, we must refer that the method to which the assessee changed in 1977 is also a well recognised book keeping. To quote from Manual of Auditing by Cooper:
"469. For stores of a very low value it may be uneconomic to main detailed stores records. It may, for example, be reasonable to charge all purchases, or periodic issues under an imprest system, to production overheads and to control the expenditure by comparison with a budget or with past expenditure."
Howard F. Stettlers Systems Based Independent Audit, (2nd Edn. p. 389) contains the following passage:
"Other companies omit maintaining the general ledger records on a perpetual basis but keep detailed records of quantities to aid in purchasing and to establish control over supplies in the storeroom. A physical inventory is then taken at the end of the year to determine the allocation of the balance of the supplies account into asset and expense portions. Perhaps the most common treatment, however, is to maintain no control over the supplies after they are purchased, and to charge all purchases directly to expense. In such cases the cost of supplies used should not be a material item, and if this is true the failure to account for fluctuations in year-end supply inventories will not have a significant effect on either the results of operations or financial position."
Montgomerys Auditing (Ninth Edn.) says (in page 445):
"Small Tools Many hand tools and other portable tools may last for years, or they may break or be worn out, lost or stolen almost as soon as they are put to use. Therefore, accounting form them as property, plant and equipment to be capitalized and depreciated is often considered too difficult or impracticable. Some companies take physical inventories of tools periodically and adjust the accounts accordingly. Others treat small tools as supplies inventory and record their costs as expenses when they are put into use, considering as assets only new tools that have not been placed in service. Others charge all tool costs to expense as incurred. Still others capitalize all tool costs and depreciate them over a short period, such as two or three years. All methods are sanctioned by long-standing practice; the first method of periodic physical inventories is most likely to reflect actual cost of tools consumed."
Following is the extract from the Handbook of Modern Accounting by Sidney Davidson (pp. 17-32):
"Minimum capitalization amount In practice, strict observance of capitalization principles would require intolerable attention to detail in regard to minor items, such as the substitution of a 75 watt light bulb in place of a 50 watt bulb.
To avoid this problem, most organizations establish a minimum capitalization amount. Individual expenditures below this minimum are expensed rather than capitalized. The accounting manual of one major midwestern manufacturing corporation states that no item with a total cost below $ 250 shall be capitalized.
[The above is referred to in the case of Spaco Carburettors (India) Ltd. (supra)].
12. The CIT (Appeals), in para 19 of his order, quotes the report of the Institute of Cost and Works Accountants, London, on Marginal Costing 1961 (p. 21) which is as hereunder:
"The inclusion of overhead cost in the valuation of work-in-progress and finished stock is a subject on which considerably divergent views are held. The extremes vary from the inclusion of total overhead to the inclusion of variable overheads only, or even the exclusion of all overhead cost. Whatever may be the merits of these various cases, they should be consistently applied from year to year or period to period."
An article in the publication (No. 207) of the Institute of Chartered Accountants of India (The Chartered Accountant) - Para. XVIII Part XI - May, 1970) reads:
"In determining cost for the above purpose, it is permissible according to generally accepted accounting principles; to include manufacturing and administrative expenses to the extent that it is appropriate in the particular facts and circumstances of each case.
12. Financial expenses and selling and distribution overheads are not generally included in arriving at cost for this purpose, as they do not relate to the cost of production of the stock or to the bringing of it to its existing condition and location."
The ITO concedes in the assessment order that the two new principles adopted by the assessee are also methods recognised in accountancy. So, no more discussion is necessary to conclude that the changed method (in regard to consumable stores and machinery spares and also of valuing finished goods on prime cost) is not opposed to accounting principles, but accepted and well recognised.
13. Now comes the question of bona fides. The assessee states that inconvenience was being experienced in valuing innumerable small items of little value and that the change was for the better. The argument on behalf of the revenue was that when the assessee had inadvertently followed the earlier method though inconvenient, inconvenience felt in 1977 would not constitute a reasonable explanation. The company, it is true, had a different practice right from the inception in 1954 up to 1977. The organisation had grown from year to year and the items of manufacture had increased. The company had taken up manufacturing new items which were earlier not there. Naturally, the number of small items would have gradually increased and at some stage difficulty would be felt acutely. There could be no surprise about it.
14. The items of consumable stores which are charged off irrespective of consumption are:
(i) High Speed Diesel Oil,
(ii) Light Diesel Oil,
(iii) Generator Lubrication Oil,
(iv) Trichloroethylene,
(v) Tempering salt,
(vi) Emulsifiable (without EP characteristics),
(vii) Hydraulic oil,
(viii) Petrol,
(ix) Cutting oil,
(x) Kerosene,
(xi) Transformer oil.
The items of consumable stores were about twenty one thousand in number. None of these items had gone into manufacturing articles. There is a certificate issued by the Deputy General Manager (Finance) of the assessee to show this fact. The consumable spares were like tools, spare parts, etc. required for running of the plant. The CIT (Appeals), in para 15 of his order, has demonstrated this by taking the statistics and we are convinced about the genuineness of the plea. If a way was available to surmount the operational inconvenience there is no reason to take exception to the change.
15. As stated by Shri Dastur, the change is a one-time affair. There was no change earlier. There was no change subsequently. Upto this date the changed method has been uninterruptedly followed. We must mention about one thing here.
16. In the assessment for 1981-82 the ITO had put a query as hereunder:
"There was a change in the method of accounting in the valuation of stock in the assessment year 1979-80. How far this change has affected the financial position of Y.E. 31-12-1979 and 31-12-1980 and what is its impact on the income of this year."
To the above, the reply of the assessee was:
"What regard to your query about the impact on the income of the assessee-company consequent to the change in the basis of valuation of Finished Goods from on cost to prime cost effected in the assessment year 1979-80, we would like to clarify that, during the current year, both the opening and closing stocks of finished goods have been valued on an uniform basis and therefore the change in the basis of valuation does not have any impact on the income of the company for the year. The changed basis of valuation effected in 1978 has been consistently followed thereafter by the assessee company.
With regard to consumable stores and machinery spares, the method of accounting was changed by the company during the year 1978 relevant to the assessment year 1979-80 in that the stores and spares items were charged to production at the point of procurement. In as much as the same method of accounting has been followed in the current year also, there is no impact on the income of the company for this year."
The ITO had accepted the explanation in the assessment. No addition was made. This is one relevant circumstance. We may note here that the officer who made the assessment for both the years was the same person. The point is, the person was fully aware of the background as he had passed the assessment in the first year of change.
17. In valuing the finished goods on price cost only material cost and labour are reckoned. Under the earlier method of "on cost" several items which did not directly relate to the manufacture were also being included. They were:
(1) Consumable tools and stores, (2) Depreciation, (3) Repair/maintenance of buildings and machinery, (4) Salaries and wages of Foreman, Supervisors, Setters, etc. (5) Provident Fund, gratuity, leave wages etc., relating to direct and indirect labour, (6) Machine shifting and re-arrangement, (7) Power, water, compressed air, etc. The above overheads have no direct relation to production. In case of supervising staff, salary would have been paid even during the time the factory was under lock-out or closed on account of labour strike. Expenditure on machine shifting or re-arrangement has nothing to do with the manufacturing cost. It is only to make re-arrangement in the factory working. Consumable stores and tools are those required for operation of the plant.
18. We must make a special mention to power, water and compressed oil. They are directly used in the manufacture, and, hence, should have been added to the cost just like labour.
19. Power and water are also used outside the factory, such as maintenance, canteens, offices. An explanatory note was furnished and it says:
"2. As regards the expenditure on power referred to above, it consisted of cost of power taken from the external source i.e., Karnataka State Electricity Board as well as the cost of power generated internally by the company. The cost of power from KSEB consisted of two elements - one was the contracted demand charge (which was a fixed amount each month till the period of the contract) and the other one was the energy change (which varied with the number of units consumed). The cost of power generated internally was comprised of the cost of diesel as well as the other fixed charges such as depreciation and maintenance of generators and remuneration of generator room staff etc.
3. Compressed air was used for manufacturing operations in various factories as well as for maintenance departments, service departments, industrial canteen, motor vehicle/transport departments, etc. at its various locations.
4. Out of the total expenditure incurred by the company on these accounts, a portion was allocated (on the hypothetical basis of labour cost) to the finished goods inventory till the financial year 1977 and this practice was discontinued from the financial year 1978 onwards.
5. Total expenditure debited to Profit & Loss Account on account of these expense heads was 0.9% of the turnover in the financial year 1978. The amount allocable to finished goods inventory as on 31-12-1978 on account of these expense heads (based on the past practice) was about Rs. 3,50,000."
When the company, therefore, found more prudent to value the finished goods on prime cost basis the change cannot be dismissed in one year when the principle is recognised.
20. Our attention was drawn to Auditors Report annexed to the Annual Report of the Company for 1978 wherein it is mentioned that the change in the method of accounting of consumable stores and machinery spares had the effect of lowering the profit by approximately Rs. 7 million and valuing the finished goods on prime cost had resulted in lowering the profit by Rs. 85,47,741. The rejoinder of the other side was the Chartered Accountants were required to put the facts as they are so that the shareholders would have a full picture of the business of the company and they were duty bound under the Company Law to certify the facts as found particularly as it has a bearing to the declaration of dividend. This is no doubt true. Further, the note given in the Audit Report is not a criticism. It is only a statement of fact. In the Annual Report of 1979 it is mentioned that the changed system which is in accordance with the normally accepted accountancy principles has been followed in that year also. So, consistency is demonstrated.
21. Another submission of Shri Puniha was that the picture is made to appear attractive on the premise that the changed method is also a well recognised method; but a method which would substantially detract the real profit would be unacceptable to the revenue and the assessor has always the power to deduce the true income for tax purposes and, on this account, additions could justifiably made. To put his submission in another way, it was his point that the profits of the year would have been far in excess of what is declared had there been no change in the method of accounting and that bona fides cannot be considered in a vacuum when the true profits of the year is sought to be kept out of reach. The accounting practice is not determinative if only it is contrary to the provisions of the IT Act and Shri Dastur stated that there is no provision in the IT Act for valuing the closing stock and that valuation of closing stock is not the genesis of the profits but is done only to deduce the income of the year.
22. A reference to case laws cited at the Bar would throw certain light on the question. In the case of Corporation Bank Ltd. (supra) there was a change in the method of valuation of securities which formed part of the stock-in-trade and the change effected had resulted in bringing down the real income during the year of change. The change was approved by the Karnataka High Court.
23. In the case of Forest Industries Travancore Ltd. (supra) their Lordships of the Kerala High Court held that the assessee was entitled to change its method of valuation of stock, from cost to market, even when the latter is less than the cost price, provided the change is bona fide and the new system is continued in subsequent years. Similar is the holding of the Madras High Court in the case of Indo Commercial Bank Ltd. (supra).
24. Two Tribunal decisions are also in support of the assessee. In the case of Spaco Carburettors India Ltd. (supra), the assessee had been including tools and packing materials every year in the balance sheet. Having regard to the labour and expenses involved in determining the valuation of many items of tools and packing materials, the assessee suspended the previous practice and decided to adopt the new system of writing off the entire amount purchased as consumption of the year. This is exactly the situation in the assessment before us. The Bombay Bench held that the change was permissible as it was a recognised method in audit and accounting.
25. The case of Gujarat Machinery Mfrs. Ltd. (supra) is another good illustration. In that case, the assessee changed the method of valuation of finished goods from "sold at contract rate and unsold at lower of the cost or market value" to "at cost" method. As a result of this change there was a fall in taxable income and the book results of the year of change were, therefore, not accepted by the revenue. The Ahmedabad Bench of the Tribunal held that since the new method was scientific, and the change was bona fide, and continued in all subsequent years, the book results of the year of change should not be disturbed for the purpose of assessment. This authority is absolutely in point.
26. The revenue cited the decision of the Privy Council in the case of Sarangpur Cotton Mfg. Co. Ltd. (supra) in support of the submission that "the ITO was not entitled to take the profit shown in the balance sheet as the real income but was bound to consider whether the true income could be deduced from the account of the assessee and to proceed, according to his judgment, on this question". The facts of this case are different. The assessee who was regularly following the method of valuation of the stock by taking some price under both cost and market price with the object of creating a "secret reserve" which involved the retention of profits and was not included in the profits shown to the shareholders. As the method involved concealing true income on account of "secret reserve" made, their Lordships held that the ITO was entitled to deduce the true income according to his own judgment. This is not a case comparable on facts. It is one thing to say that true income is concealed and quite another to say that income is altered by the way as a consequence of change in the method of accounting.
27. In the case of S.N. Namasivayam Chettiar (supra), from the method of accounting adopted, the correct profits of business were not deductible. Therefore, the ITO applied section 13 of the IT Act, 1922, for making his own estimation. In that case, the book results were dismissed since there were absence of vouchers and there was no quantitative tally of stock. There were several creditors cheques which had been entered in the accounts of the assessee without any proof as to why those cheques had been given. There were other circumstances which totally rendered the accounts bad. So, on a consideration of factual aspects, their Lordships held that application of section 13 of 1922 Act was proper. No body can dispute that the ITO can resort to estimating the profits resorting to section 145 provided there is a case to reject the books of account.
28. It must be seen whether the ITO had, in this case, in fact, resorted to the application of section 145. This is a factual aspect to which we will advert later.
29. The case of Krishnaswami Mudaliar (supra) is also distinguishable on facts. The assessee, in that case, held an asset as stock-in-trade. The asset was exploitation of a motion picture. The value of the stock, namely, unexploited right of the assessee, had not been valued at the end of the accounting year. This naturally had upset the profit/loss of the assessee. In that context their Lordships held that the ITO is not compelled to accept the balance sheet and that he had to compute the income in accordance with the method of accounting regularly employed by the assessee. The mistake was of the assessee who had not valued the stock-in-trade which, undoubtedly, existed on the last day of the accounting year. This is not a comparable case.
30. Great emphasis was made upon the decision of the Supreme Court in the case of British Paints India Ltd. (supra). In that case, the assessee was consistently following the practice of valuing the goods-in-progress and finished products exclusively at the cost of raw-materials, totally excluding all the overhead expenditures. The reason was that the goods being paints had limited storage life. The ITO held that there was no justification to recognise that practice even though the assessee was consistently following that method and he recalculated the value of opening and closing stock by adding overhead expenditure which resulted in an addition in that year. As the closing stock had to be the opening stock of the next year, suitable change was effected in the succeeding year. Their Lordships who had reviewed the entire case law found that there was no decision in support of the practice adopted by the assessee. The assessees method was, therefore, rejected and the exercise made by the ITO in deducing the true profits of the year was upheld.
31. The decision of the House of Lords in Duple Motor Bodies Ltd. [1961] 1 WLR 739 was examined by the Supreme Court and their Lordships recognised the direct cost (also called the prime cost) method which the assessee, in that case, was following proper on the facts of that case. The observation of Dr. T. Kochu Thommen, J. is that there is much uncertainly in the on cost method compared to direct cost (or prime cost) method which takes into consideration only labour and raw-materials which is far more accurate in respect of goods which have insignificant market value. It seems to us that in this case the ITO had made addition expressly in terms of the proviso to section 145.
32. Another point, put alternatively, was that the ITO had not resorted to proviso to section 145 and when the method of accountancy adopted by the assessee was not rejected as one unknown to accountancy principles, the additions cannot be justified. It is a fact that the ITO has not expressly resorted to proviso to section 145(1). Shri Puniha countered this stating that when the ITO made the additions virtually following the earlier system which the assessee was following, it follows that there was an implied application of the proviso to section 145 for deducing the income for assessment purposes. He supported his submission by the observations of the Bombay High Court in the case of Dhondiram Dalichand v. CIT [1971] 81 ITR 609 at page 617. He also brought to our notice the decision of the Supreme Court in the case of CIT v. McMillan & Co. [1958] 33 ITR 182 wherein it is observed that the ITO, even when he accepts the method of accounting, is not bound by the figures of profits shown in the accounts.
33. We were invited to the decision of the Karnataka High Court in the case of Karnataka State Forest Industries Corpn. Ltd. v. CIT [1993] 201 ITR 674 and we do not find anything particularly applicable to this case. The general principles stated are clear and what is important is the application of them to the facts of a given case.
34. At this stage we must note one thing as a matter of fact. We have seen the assessment for the very next year (1980-81) and no addition is made on similar lines. In that year the assessee had debited in the books the entire purchases of consumable stores and machinery spares at the time of purchase itself irrespective of consumption. The finished goods had been valued on prime cost basis. This was accepted by the revenue.
35. Whether the ITO had impliedly applied the proviso to section 145(1) or not, we will not further stretch our discussion. But on one essential, British Paints India Ltd.s case (supra) is distinguishable. The method adopted by the company of valuing the goods exclusively on the cost of raw-materials only totally excluding the overhead expenditure was found to be altogether without support in book keeping or from illustrated case law. No decision had been brought to the notice of the Supreme Court to have it hold as a recognised practice. On the other hand, the prime cost method of valuing on cost of materials plus labour is a recognised method both in England and India and this position is clear from British Paints India Ltd.s case (supra) itself. That apart, by the additions made in this year (1979-80), the ITO is virtually relegating the assessee to the original practice. If that is allowed to stand in this year it would upset the opening balance of the next year which is not disturbed as we have found.
36. It is apposite to quote the following observations of the Bombay High Court in Melmould Corpn. v. CIT [1993] 202 ITR 789:
"Whenever there is a change in the method of valuation, there is bound to be some distortion in the calculation of profits in the year in which the change takes place. But, if the change is brought about bona fide and is in accordance with the normally accepted accounting practice, there is no reason why such a change should not be permitted. The change has to be effected by adopting the new method for valuing the closing stock which will, in its turn, become the value of the opening stock of the next year............... If, instead, a procedure is adopted for changing the value of the opening stock, it will lead to a chain reaction of changes in the sense that the closing stock value of the stock of the year preceding will also have to change and correspondingly the value of the opening stock of that year and so on. This was pointed out by the Madras High Court in the case of CIT v. Carborandum Universal Ltd. [1984] 149 ITR 759. In the case before the Madras High Court also the valuation of opening stock had been done by the company on the basis of total cost, i.e., cost including overheads while it changed its method of valuation for the closing stock to direct cost, i.e., cost without overheads. This change in method was made bona fide and the assessee said that it would be adopting this method consistently in the future just as in the present case."
As Pathanjali Sastry, CJ. observes "it is a misconception to think that any profit arises out of the valuation of the closing stock". The true purpose of crediting the value of the unsold stock, at the end of the year, is to balance the cost of those goods entered on the other side of the account at the time of purchase so that the entries cancel each other to leave only the transactions of the year which show the actual sales and the resultant profit/loss actually accrued/incurred in that year -Chainrup Sampatrams case (supra). It is now amply clear that the changed method is a recognised method. The supporting authorities are various. The reason that increased inconvenience was experienced in valuing consumable stores and machinery spares on inventory basis is acceptable. The valuation of the closing stock on prime cost basis was a more refined method in accountancy field and this is accepted by the Supreme Court in the case of British Paints India Ltd. (supra). We, therefore, hold that the change is bona fide. The assessee has continuously followed the changed method in subsequent years without break. What is more, the revenue has accepted the change in all the succeeding years. So long as the change is from one recognised method to another recognised method, and made for a reason, it cannot be rejected even though the revenue may be affected adversely by such change and that is illustrated by the Kerala High Court in the case of Forest Industries Travancore Ltd. (supra). The case of Carborandum Universal Ltd. (supra) is another authority. The revenue has allowed the opening balance of the next year to remain. So, it would be improper to disturb the book profits only in a solitary year solely on the reason that it has some tax benefit to the assessee. Such benefit is only incidental to the change as the change itself is not one intended to get the benefit. For the above reasons we uphold the order of the CIT (Appeals) deleting the additions. This disposes of grounds 1 to 5.
37. to 49. [These paras are not reproduced here as they involve minor issues.]
50. In the result, the appeal by the revenue fails. It is dismissed.
51. to 80. [These paras are not reproduced here as they involve minor issues.] Per Bandyopadhyay, AM - I am in full agreement with the discussions made and the reasonings given by my learned brother relating to all the issues covered in the present appellate order.