Appellate tribunal partially allows appeal, upholds decisions on depreciation, executive wages, remits stock valuation.

The appellate tribunal partially allowed the appeal filed by the assessee. The tribunal upheld the lower authorities' decision on issues such as non-allowance of depreciation on certain machinery and a building without transferred title. It disallowed the provision for executive wages but allowed depreciation at a higher rate once the requisite certificate is filed. The tribunal remitted the valuation of closing stock back to the Assessing Officer for further assessment. The issues regarding quantification of opening stock, interest charged under section 234B, and additional tax under section 143(1A) were deemed consequential.

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Issues Involved:
1. Non-allowance of depreciation on certain items of machinery at the claimed rate of 50%.
2. Non-allowance of depreciation on a building whose title had not been transferred to the assessee.
3. Disallowance of the provision for executive wages amounting to Rs. 7,59,03,000.
4. Valuation of closing stock of materials at the New York branch.
5. Quantification of the opening stock.
6. Sustenance of interest charged under section 234B.
7. Sustenance of additional tax levied under section 143(1A).

Issue-wise Detailed Analysis:

1. Non-allowance of depreciation on certain items of machinery at the claimed rate of 50%:
The assessee claimed depreciation at a higher rate of 50% on certain machinery, which required a certificate from the Department of Science and Technology as per section 32. The Assessing Officer allowed depreciation at the normal rate of 33.33% due to the absence of the requisite certificate. The first appellate authority confirmed this decision. The appellate tribunal upheld the lower authorities' action but directed that depreciation at the higher rate of 50% be allowed once the requisite certificate is filed by the assessee.

2. Non-allowance of depreciation on a building whose title had not been transferred to the assessee:
The assessee claimed depreciation on a building whose title had not been transferred by the end of the relevant previous year. The Assessing Officer disallowed the depreciation, which was upheld by the CIT(A). The appellate tribunal approved the actions of the lower authorities, citing two Karnataka High Court decisions: CIT v. Bharath Gold Mines Ltd. [1991] 192 ITR 639 and Ramkumar Mills (P.) Ltd. v. CIT [1989] 180 ITR 464.

3. Disallowance of the provision for executive wages amounting to Rs. 7,59,03,000:
The assessee made a provision for revision of executive wages based on a Cabinet note, but no Cabinet approval was received by the end of the relevant accounting year (31-3-1990). The Assessing Officer and CIT(A) considered it a contingent liability and disallowed the claim. The appellate tribunal found that the liability was based on expectations rather than definite material. The tribunal held that the enforceable liability arose only on the communication dated 22-2-1991 from the Ministry of Defence, and thus, the liability became an ascertained liability on that date. The tribunal upheld the disallowance of the claim for the relevant year, as the liability was contingent until the end of the accounting year.

4. Valuation of closing stock of materials at the New York branch:
The assessee evaluated the closing stock at the New York branch based on the exchange rate at the time of sanction of the Rupee Imprest Fund. The Assessing Officer revalued it based on the exchange rate at the end of the accounting period, leading to an addition of Rs. 56,54,612. The CIT(A) sustained this addition. The appellate tribunal noted that if the assessee converted the Dollar price to rupee immediately upon purchase, the assessee's method should be accepted. However, if the Dollar price was maintained till the end of the accounting year, the conversion should be based on the exchange rate at that time. The tribunal remitted the matter back to the Assessing Officer to ascertain the actual facts and take appropriate action.

5. Quantification of the opening stock:
The ground relating to the quantification of the opening stock was not pressed by the learned counsel for the assessee and was dismissed by the tribunal.

6. Sustenance of interest charged under section 234B:
The ground relating to the sustenance of interest charged under section 234B was conceded by the learned counsel for the assessee as merely consequential in nature. The tribunal directed that only consequential effects be given with regard to this ground.

7. Sustenance of additional tax levied under section 143(1A):
Similarly, the ground relating to the sustenance of additional tax levied under section 143(1A) was also conceded as merely consequential. The tribunal directed that only consequential effects be given with regard to this ground.

Conclusion:
The appeal filed by the assessee was partially allowed to the extent mentioned above.

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