Tribunal allows appeals, dismisses deductions under sections 80-I and 80HHC, orders deletion of enhancements.

The Tribunal partially allowed the appeals by dismissing the grounds related to deductions under sections 80-I and 80HHC. The Tribunal also ordered the deletion of enhancements concerning the valuation of closing stock and sales-tax deferment, as it found the valuation method consistent and the sales-tax deferment correctly accounted for in the balance sheets.

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Issues Involved:
1. Valuation of closing stock.
2. Deduction under sections 80-I and 80HHC.
3. Enhancement on account of sales-tax deferment.

Detailed Analysis:

1. Valuation of Closing Stock:
The first issue raised in both appeals concerns the valuation of closing stock. The CIT noted that the inventory was valued at cost or realizable value, whichever was lower, excluding freight and other expenses. The CIT deemed the AO's acceptance of this valuation method as erroneous and prejudicial to the interest of the Revenue, directing an enhancement of Rs. 43,685 to the closing stock value. The assessee argued that this method was consistently followed and similar action was dismissed in the case of Metallizing Equipment Co. The Tribunal found the facts and circumstances similar to the Metallizing Equipment Co. case and held that the AO's valuation was correct, ordering the deletion of the Rs. 43,685 enhancement.

2. Deduction under Sections 80-I and 80HHC:
The second grievance involved the deduction under sections 80-I and 80HHC. The assessee did not press these grounds, leading to their dismissal.

3. Enhancement on Account of Sales-Tax Deferment:
The last issue involved the enhancement by the CIT for Rs. 8,02,753 in AY 1996-97 and Rs. 16,01,006 in AY 1997-98 due to sales-tax deferment. The CIT observed that the deferred sales-tax was not converted into a loan by RICCO/RFC or the Industries Department and thus was not allowable as a deduction under section 43B. The assessee contended that the Rajasthan Government had amended section 7(2B) of the Rajasthan Sales-tax Act, 1954, and provided eligibility certificates under the New Deferment Scheme, 1989. The Tribunal reviewed the relevant material and found that the deferred sales-tax liability was correctly shown in the balance sheets and that the necessary amendments and notifications met the requirements of section 43B. The Tribunal held that the CIT's enhancement was based on a misinterpretation of the proviso to clause (d) of the notification and ordered the deletion of the enhancements.

Conclusion:
In summary, the Tribunal allowed the appeals partly, deleting the enhancements related to the valuation of closing stock and sales-tax deferment while dismissing the grounds related to deductions under sections 80-I and 80HHC.

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