National Heavy Engg. Co-operative Ltd. v. Deputy Commissioner of Income-tax, SR-2, Pune

Per K.G. Bansal, Accountant Member. - ITA NO. 1419/PN/94 FOR ASSESSMENT YEAR 1991-92 – APPEAL OF THE ASSESSEE AND ITA NO. 1249/ PN/94 FOR ASSESSMENT YEAR 1991-92 – APPEAL OF THE REVENUE

These two cross appeals arise out of the order of CIT(A) - I, Pune, passed on 29-8-1994. The order of assessment was passed by the DCIT, SR-2, Pune, under the provisions of section 143(3) of the IT Act, 1961 on 25-3-1994. The assessee has taken up six grounds of appeal, out of which ground No. 6 is residuary in nature, which does not require any decision from us. Ground Nos. 1, 2 & 3 are against non-deduction of a sum of Rs. 23,30,508, being the Statutory Reserve Fund (hereinafter called the SRF), in computing the income of the assessee. It is inter alia mentioned that the debit to the profit & loss account in respect of the SRF amounted to diversion of income by overriding title and, therefore, because of the aforesaid reason and otherwise also, the amount represented an allowable deduction in computing the income. The 4th ground of appeal is against the non-deduction of a sum of Rs. 3,76,430, representing the reserve for doubtful debts, in computing the income. It is inter alia mentioned that reserve represented, in fact, bad debts. 5th ground of appeal is against adding a sum of Rs. 4,00,925, representing excise duty, to the total turnover, for the purpose of computing deduction u/s 80HHC of the Act. As against the aforesaid, the revenue has taken up four grounds of appeal, out of which ground Nos. 3 & 4 are in the nature of prayer or residuary ground. Ground No. 1 is against the finding of the learned CIT(A) that retention money received by the assessee against furnishing bank guarantee did not result in accrual of income to the assessee. It is inter alia mentioned that the learned CIT (A) erred that the change in method of accounting made by the assessee in this respect is bona fide. Ground No. 2 is against the finding of the learned CIT(A) that the guest house assets qualify for deduction of depreciation in computing the income of the assessee.

2.1 In regard to non-deduction of SRF, the matter is discussed in paragraph 5 of the AO and the relevant portions thereof are reproduced as under:—

"In the case of the assessee, it is governed by the Law of Multistate Co-operative Societies (51 of 1984). Section 60(2) of the said Act prescribes the manner in which the net profit of the Society is to be worked out. The section 61(1)(a) lays down that not less than 25% of its net profit is to be transferred to the Reserve Fund. Section 61(2) lays down the manner as to how the balance of the net profit is to be distributed. Thus, the purpose of section 61(1) is to conserve the funds of the society. It does not lay down that the reserve fund is to be handed over to any other entity. The assessee continues to hold the fund. Under the Societies’ Rules, there is ample freedom to deposit the reserve as laid down in rule 7(2) and to utilize it for unforeseen losses etc. as provided under rule 7(1) of these Rules. The MP High Court decision is not, therefore applicable. There is no divesting of the income by overriding title when a portion of the net profit is transferred to the Statutory Reserve Fund. The claim for deduction is accordingly rejected."

2.2 Not being satisfied with the decision of the AO, the matter was carried in appeal before the learned CIT(A). Her findings are mentioned in paragraph 6 of the order, which for the sake of convenience, are reproduced below :

"The submissions have been considered. On identical facts relating the bye-laws of Co-operative Societies, in the case before the Madras High Court, South Arcot District Co-operative Supply & Marketing Society Ltd. v. CIT, Madras, 97 ITR page 501, it was held that the bye-laws may have a statutory basis, but, it cannot be said to have statutory force and hence the reserve created under the bye-laws for business losses amounts to only to an application of the income and does not constitute a diversion in law or by superior title, and, therefore, the disallowance is justified. Similarly, in the same case, before the Madras High Court, CIT, Tamil Nadu-V v. South Arcot District Co-operative Supply and Marketing Society Ltd., (1981) reported in 127 ITR page 467, in connection with the education fund, it was held that the transfer to the fund is only an application of income and does not result in any diversion of income at source by overriding title. Since the reserve fund in the case of the assessee is identical as in the case of Madras High Court, there is no diversion of income by any overriding titles. The disallowance claimed for deduction of special reserve is, therefore, upheld. The assessee fails on this issue."

Thus, the findings of the AO and the learned CIT(A) were that the debit in respect of the SRF amounted to application of income and not diversion of income in law or by superior title.

2.3 Before us, the learned counsel of the assessee referred to the provisions governing Multi-State Co-operative Societies. Section 61 provides that a Multi-State Co-operative Society shall, out of its net profits in any year (emphasis supplied) transfer an amount not less than 25% to the Reserve Fund. The SRF money has to be invested in prescribed securities etc., as mentioned in section 62. The notification, in sub-rule (1) of Rule 7, provides that the object of the fund is to meet any one or more of the objects, namely, -(i) unforeseen losses, (ii) claim of creditors of the society which cannot be otherwise met, and (iii) such other financial needs in times of special scarcity. Sub-rule (5) of the Rule 7 provides that utilization of the Reserve Fund made for aforesaid objectives shall be subject to the condition that any amount drawn shall be reimbursed from the profits accruing in subsequent year or years as directed by the Central Registrar. The Registrar has also been empowered to waive wholly or partially the condition of reimbursement as above, having regard to special circumstances of the society. The learned counsel also relied on certain cases, which we find it appropriate to deal here along with other cases discussed in the course of hearing.

2.4 The Hon’ble Karnataka High Court discussed the issue of diversion of income by overriding title in the case of CIT v. Pandavapura Sahakara Sakkare Karkhane Ltd. [1988] 174 ITR 475. Section 57 of the Karnataka Co-operative Societies Act, 1957 and rule 20 of the Societies Rules provided for payment to Co-operative Education Fund, if profits of a society exceeded Rs. 500 and dividend to the members exceeded 2% of the paid-up share capital. The rate of contribution depended upon the rate of dividend. The language of section 57(4) made clear that though the contribution is to be made with reference to profits, the contribution was not out of the profits. The contribution was to be made to Cooperative Education Fund, which had a overriding charge on the income or profits of the assessee. The Hon’ble Court came to the conclusion that such payments constituted admissible deduction. Two things may be noted here, namely, that -(i) the payment was out of the trading transactions of the assessee and not from profits, and (ii) the Co-operative Education Fund had a overriding title in respect of the amount of contribution, though it was based upon the profits and dividend. None of the conditions is satisfied here. The contribution as clarified by section 61 is out of the net profits. The money remains with the assessee, albeit with the condition that it has to be invested in approved fund for the sake of security of the money; and it can be utilized as per rule 7 subject to the condition that the amount so utilized shall be made good from the profits of the subsequent year or years. The condition of making good the amount utilized from the SRF can also be waived by the Central Registrar. Thus, at least one thing is clear that there is no overriding title in favour of the third party. The learned counsel also relied on the decision of Hon’ble Karnataka High Court in the case of CIT v. Pandavapura SSK Ltd. [1992] 198 ITR 690, in which the decision was the same as in the aforesaid case.

2.5 The learned counsel also relied on the decision of Hon’ble Bombay High Court in the case of Somaiya Orgeno-Chemicals Ltd. v. CIT [1995] 216 ITR 291 ¹. That assessee was manufacturing rectified spirits out of molasses. The assessee was subjected to Ethyl Alcohol (Price Control) Amendment Order, which provided for creation of storage facilities for molasses and alcohol. The assessee transferred a sum of Rs. 43,633 from the sale proceeds (emphasis supplied) to the "Storage Fund". The Hon’ble Court pointed out that what was necessary to see was whether there was diversion at source of the income. In other words, what was necessary to see was whether the assessee lost domain and control over the amount. The title to the fund in favour of the third party was not conclusive of the matter. The assessee was under a statutory obligation to set up a fund and set aside certain sums, calculated @ Rs. 6 per kilo litre of the rectified spirit manufactured by it, and credit the same to the "Storage Fund". The Court was of the view that in such a situation, the assessee had no control over the amount credited to the fund as it had to be utilized in the manner laid down in the statute, i.e., the storage facilities had to be constructed as per directions of the authority, mentioned in the Amendment Order. Therefore, it was held that the amount set apart for this purpose could not be included in the income of the assessee. The ratio of the judgment is based upon the fact that the contribution to the statutory fund had to be made on the basis of quantity of goods produced by the assessee. Thus, the statutory charge was fastened to the amount of goods produced. The amount had to be credited to a separate bank account, specifically opened by the assessee for this purpose. The amount could be utilized only for the purpose of construction or erection of storage facilities for molasses and alcohol, and for no other purpose. In this connection, the Hon’ble court, inter alia, referred to the decisions of Kerala High Court and the Bombay High Court in the case of Cochin State Power and Light Corporation Ltd. v CIT [1974] 93 ITR 582 and Amalgamated Electricity Co, Ltd. v. CIT [1974] 97 ITR 334. In the case of the aforesaid Cochin State Power, the assessee was required to statutorily create contingency reserve out of the revenues and not out of the profits. The fund could be used only for the purposes indicated in the statute and the amount was not at the disposal of the assessee in relation to manner of its utilisation. The Hon’ble Kerala High Court came to the conclusion that as manner of disposal was not under the control of the assessee, the amount did not part form of the real income of the assessee. Again it may be reiterated here by us that the contribution was out of the revenues and not of the profits and that the main reason for the Hon’ble Kerala High Court to come to the conclusion that since disposal of the amount was not in the hands of the assessee, the amount did not accrue to it as income. In the case of Amalgamated Electricity Co. Ltd. (supra), the assessee was under statutory obligation to create a contingency reserve. The Hon’ble Court pointed out that the appropriation to the fund was not made voluntarily by the assessee and the reserves were not available to the assessee for any purpose of its own (emphasis supplied). The fund had to be utilized as per the statutory provisions, which were ultimately held the benefit of consumers, thus, it will be seen that the creation of the fund was obligatory on the part of the assessee and it could not be used for any of its purposes. Therefore, the Court came to the conclusion that there was diversion of income at source in favour of the consumers. Looking to the decision in the case of Somaiya Orgeno-Chemicals Ltd. (supra) it can be said that there need not always be a diversion of the income by overriding title in favour of third party before it can be concluded that the income did not accrue to the assessee at all. There could be an alternative situation where the money has to be statutorily set apart from the sale proceeds and to be utilized in accordance with the statutory provisions. In such a case also, the income does not accrue to the assessee for the reason that it has lost control and domain over the money. However, it has to be shown that the contribution was from sale proceeds or it was calculated on the basis of production of goods before it could be claimed that there was no domain or control over that part of sale proceeds which had to be contributed to the statutory reserve. The facts of the case at hand are different in the sense that the guidelines clearly provide for the creation of reserve out of profits and the contribution is also calculated on the basis of net profits. The fund is to be used for the purposes of the assessee. Thus, the nature of the fund is such that it strengthens the financial position of the assessee. The funds have to be used for the purpose of the assessee only, though there are provisions for making good the amount so utilized and there are also provisions to waive the condition of making good such payment. Thus, the facts of the case do not correspond with the facts of the case of Somaiya Orgeno-Chemicals Ltd. (supra).

2.6 We also find that the Hon’ble Supreme Court had an occasion to discuss similar matter in the case of Associated Power Co. Ltd. v. Commissioner Of Income Tax [1996] 218 ITR 195¹ . That assessee was also required to create statutory reserve if its clear profits exceeded a reasonable return. The fund was utilized to meet the expenses or recoup loss of profits arising out of accidents/strikes or other circumstances which were beyond the control of the assessee. The fund could also be used for replacement or renewal of plants or for making compensatory payments for which no other provision had been made. There was also a reservation that money was always available for meeting such expenses and the supply of the electricity was not interrupted because of aforesaid unforeseen circumstances. The payments could be made only on approval of the State Government. The decision of the Hon’ble Court was that the money was not diverted from the assessee. The investment would be made in the name of the assessee and the assessee continued to be owner of the fund. The investment could be made as per the provisions of Indian Trust Act, which is also applicable in case of the assessee in the present case. The Hon’ble Court pointed out that such restrictions on investments do not alter the position that the assessee was owner of the fund. On the aforesaid facts, the Hon’ble Court came to the conclusion that the amount was not diverted at all by any reason of a overriding obligation or title. Therefore, it came to the conclusion that the amount represented income of the assessee. It may be pointed out that in coming to the aforesaid conclusion, the Court considered the case of Hon’ble Kerala High Court in the case of Cochjn State Power & Light Corporation Ltd. (supra) and the Hon’ble Bombay High Court in the case of Amalgamated Electricity Co. Ltd. (Supra). The Court pointed out that in those cases, the amount was not at the disposal of the assessee in the matter of its obligation. The object of the fund to make available sufficient reserves for meeting commitments necessary for efficient running of the business. Having considered the facts of the case in hand, we find that the assessee continues to be owner of the fund, which are to be utilized by it for its own purposes. Thus, there is neither an overriding title in favour of the third party nor the assessee loses control and domain over the money. Similar issue was raised in the case of Vellore Electric Corporation Ltd. v. CIT [1997] 227 ITR 557¹ (SC) in which the Apex Court came to the conclusion that money was available for meeting the expenses of the assessee in such a manner that the supply of electricity was not interrupted. Hence, the company was not liable to deduct the amount from its income. Such was also the decision of Hon’ble Rajasthan High Court in the case of Commissioner Of Income-Tax v. Kotputli Rural Electric Co-Operative, Society Ltd. [2002] 255 ITR 563 ² and CIT v. Jodhpur Co-operative marketing Society [2005] 275 ITR 372³ . (Raj.)

2.7 The learned DR pointed out that no overriding title was created in favour of any third party. He also relied on the orders of the authorities below.

3. We have considered the facts of the case and rival submissions. As discussed earlier, it is a case where the assessee has to set apart a portion of its profits and credit the amount to SRF. The money has to be invested in approved securities. This condition is imposed to ensure that investment is in sound securities and the fund is not fritted away. The money can be used for the business of the assessee as provided in the notification. Thus, there is neither diversion of income at source in favour of a third party nor the assessee loses control and domain over the money as it remains invested in its own name and it is to be used in its own purposes. The condition regarding recoupment of the money utilized also does not detract us from the facts that there is no overriding title and the assessee continues to be owner of the money in its own right. The condition merely enforces the impression that the rules are to ensure financial health of the assessee society. It is also clear from section 61 that the transfer is from the profits to the SRF and, thus, it amounts to application of income after it has reached the assessee as such. In this connection the heading of section 61 - " Disposal of net profits" may not be conclusive but only indicative, but provision itself is clear that the transfer is from profits. Thus, we are unable to persuade ourselves to the view that the transfer of the amount to the SRF is deductible in computation of income of the assessee. Therefore, we are of the view that the learned CIT(A) was right in not allowing deduction of this amount in computing the income of the assessee. Thus, ground Nos. 1, 2 & 3 of the appeal are dismissed.

4. The 4th ground of appeal is against the finding of the learned CIT(A) that the assessee is not entitled to deduct an amount of Rs. 3,76,430, representing reserve for doubtful debts in computing its income. The case of the assessee was that the debts were irrecoverable, though they were not actually written off from the books of account. We have considered the arguments of the assessee and its learned counsel. We find that provisions of section 36(1)(vii) contain an Explanation to the effect that any debit or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts. The Explanation was inserted by Finance Act, 2001, with effect from 1-4-1989. Therefore, the statutory provision is applicable to the instant assessment year, i.e. assessment year 1991-92. The provisions contained in the Explanation are clearly against the case of the assessee as the assessee has not written off the amounts from its books of account. Therefore, we are of the view that the learned CIT(A) was right in not entertaining this claim of the assessee. Thus, ground No. 4 of the appeal is also dismissed.

5. Ground No. 5 is clearly covered in favour of the assessee by the decision of the jurisdictional High Court in the case of CIT v. Sudershan Chemicals Industries Ltd. [2000] 245 ITR 769 (Bom.). Therefore, it is directed that the amount of excise duty collected by the assessee shall not be included in its turnover, computed for the purpose of granting deduction u/s 80HHC of the Act. Thus, this ground of appeal of the assessee is allowed.

6. In result, the appeal of the assessee is partly allowed.

7.1 In regard to the appeal of the revenue, the first ground is that the learned CIT(A) erred in excluding retention money, amounting to Rs. 38,27,500 from its income. The learned DR relied on the order of the AO and pointed out that this was the first year when the assessee changed its method of accounting in respect of the retention money. By this change the assessee adopted, cash method of accounting rather than the mercantile method of accounting in respect of retention money. Since this method was not bona fide, it was argued that the learned CIT(A) erred in not bringing the retention money to tax in the proceedings in the instant assessment year.

7.2 As against the aforesaid, the learned counsel of the assessee pointed out that the assessee has been manufacturing "sugar manufacturing machinery". Simple agreement with Bhuna Co-operative Sugar Mills Ltd. was filed. From the agreement, it becomes clear that the assessee has to guarantee certain minimum standards in terms of quality and quantity of the products as per clause 9 (c) of the agreement. In order to enforce such right in favour of the buyer, the assessee has to furnish bank guarantee of an amount equal to 5% of the contracted price as per clause 16.2(a) of the agreement. The assessee becomes entitled to receive this amount, on satisfactory performance of the machinery supplied and installed by it. The case of the learned counsel was that the assessee becomes entitled to receive the aforesaid part of the contract price only after the expiry of satisfactory performance period as per the contract. Therefore, it does not become entitled to receive the aforesaid amount on installation and trial run of the plant. The assessee also filed details of amounts retained by 25 customers in the accounting year 1990-91, aggregating to Rs. 38,27,500. The details also show that Rs. 9,40,250 was transferred to sales account in accounting year 1991-92 and Rs. 28,87,250 in the accounting year 1992-93, leaving the balance of Nil amount. Therefore, it was argued that as and when the money became unconditionally available to the assessee, the amount was transferred to the sales account. In any case, on expiry of two years of satisfactory performance period, the whole of the amount was transferred to the sales account. The learned counsel also relied on the decision of the Hon’ble ITAT, Pune "A" Bench, Pune, in the case of Dy . CIT v. Saj Froude Test Plant (P.) Ltd. [IT Appeal Nos. 871 (Pune) of 1994 & 1239 (Pune) of 1995] in which the issue was decided in favour to the assessee.

7.3 We have considered the facts of the case and rival submissions. The case of the learned DR was that the assessee has changed its method of accounting in respect of the retention money, which was not bona fide. We are not in agreement with the learned DR on this issue. The reason is that the assessee is a corporate entity. Under the regulatory statute, it is bound to follow mercantile method of accounting, in which receipts and liabilities is accounted for on the basis of their accrual. The assessee has been doing so. However, in respect of retention money, its understanding was that the amount accrue as income and, therefore, the whole of the amount was accounted in the year of sale. Subsequently, decisions came in favour of the proposition that since retention money was not available to the assessee for its use unconditionally and it was tagged with the satisfactory performance in terms of quality and quantity, the money did not accrue to the assessee in the year of sale. In view thereof, it changed its practice of accounting for retention money. We are of the view that there is a distinction between the accounting method and accounting practice, the former having a force of law. The accounting practice was inappropriately used by the assessee earlier, which had the effect of preponing its tax liability. In view of the subsequent decisions on this issue, the assessee followed the correct method of accounting by changing its practice. Therefore, we have no hesitation in holding that the amount of retention money did not accrue to the assessee as income in this year. It has been otherwise demonstrated by the assessee that it has been accounted for in books as income in the appropriate years. Thus, relying on the decision of Hon’ble Tribunal, which represents the correct state of law according to us, we hold that the learned CIT(A) rightly deleted the addition made by the AO on this issue. Thus, this ground of appeal is dismissed.

8. Ground No.2 is regarding depreciation of guest house assets, stands fairly covered in favour the department in the decision of Hon’ble Supreme Court in the case of Britannia Industries Ltd. v. CIT [2005] 278 ITR 546¹. Respectfully following that decision, this ground of appeal is allowed.

9. In result, the appeal of the revenue is partly allowed.

ITA NO. 1025/PN/95 FOR AY 1992-93 - APPEAL OF THE ASSESSEE AND ITA NO. 1091/PN/95 FOR AY 1992-93 - APPEAL OF THE REVENUE

10. Ground Nos. 1, 2 & 3 of appeal of the assessee are against the finding of the learned CIT(A) that the amount credited to the SRF is not deductible in computing the income of the assessee. This issue has been decided against the assessee and in favour of the revenue in ITA No. 1419/PN/94 (supra). Relying on that order, these grounds of appeal are dismissed.

11. 4th ground of appeal and the additional ground of appeal are against the inclusion of excise duty and sales tax in the total turnover for computing deduction u/s 80HHC. Relying on the decision of Hon’ble Bombay High Court in the case of Sudarshan Chemicals Industries Ltd. (Supra), these grounds are decided in favour of the assessee and against the revenue.

12. 5th ground of appeal is against the disallowance of rent paid for the guest house building. This issue has been decided against the assessee by the Apex Court in the case of Britannia Industries Ltd. (supra). Respectfully following that decision, this ground of appeal is dismissed.

13. 6th ground of appeal is residuary in nature, which does not require any decision from us.

14. In result, the appeal of the assessee is partly allowed.

15. As regards to the appeal of the revenue, ground No. 1 is against the finding of the learned CIT(A) that the retention money does not accrue as income to the assessee in this year. Following our order in ITA No. 1249/PN/94 (supra), this ground is dismissed.

16. 2nd ground of appeal is against the addition made to the closing stock of the assessee on account of modvat credit. This issue is fairly covered by the decision of the Apex Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 261 ITR 275 ². The decision of the court was that the closing stock has to be valued on the same basis on which the purchases are debited in the books of account. Therefore, the Assessing Officer is directed to verify the method used by the assessee for debiting purchases and value the closing stock accordingly. In view thereof, this ground is treated as allowed for statistical purposes.

17. Ground Nos. 3 & 4 are in the nature of prayer and residuary, which do not require any decision from us.

18. In result, the appeal of the revenue is treated as partly allowed, as indicated above.

ITA NO. 1260/PN/96 FOR AY 1993-94 - APPEAL OF THE ASSESSEE AND ITA NO. 1369/PN/96 FOR AY 1993-94 - APPEAL OF THE REVENUE

19. Ground Nos. 1, 2 & 3 of the appeal of the assessee, in respect of credit to the SRF by way of debiting an equivalent amount to the profit & loss account, are dismissed in view of our finding in ITA No. 1419/PN/94(supra).

20. The 4th ground of appeal is against the finding of the learned CIT(A) that excise duty and sales tax may be added to the total turnover for the purpose of computing deduction u/s 80HHC. This issue is decided in favour of the assessee and against the revenue by following the decision of Bombay High Court in the case of Sudarshan Chemicals Industries Ltd. (supra). The assessee had also taken the plea that sales of scrap and income from management consultancy should also be excluded from the total turnover. However, these points were not pressed by the learned counsel of the assessee at the time of hearing of the case. Therefore, these issues are decided against the assessee as not pressed. Thus, this ground of appeal of the assessee is partly allowed.

21. Ground No. 5, regarding salary paid to guest house attendant is decided against the assessee following the decision of the Apex Court in the case of Britannia Industries Ltd. (supra). Thus, this ground is dismissed.

22. The 6th ground of appeal is that the learned CIT(A) erred in not allowing deduction for payment of bonus by resorting to provisions of section 43B of the Act. It was pointed out that the assessee had made a provision of Rs. 38,39,039 on this count. However, the deduction was claimed of an amount of Rs. 40,90,668. The balance amount of Rs. 2,51,629 was paid in the previous year relevant to the assessment year 1994-95. In the course of hearing before us, it transpired that the assessee was relying on the case law, pronounced before the insertion of section 43B in the IT Act. The admissibility of bonus payable to the employees is governed by clause (c) of section 43B, which has to be allowed on cash basis only, subject to the condition that the allowance shall also be made if the payment has been made before the due date of filing the return u/s 139(1), as mentioned in proviso of the section. There is some confusion in the year in which the aforesaid amount was paid. Therefore, the Assessing Officer shall verify the date of payment of the bonus to the employees once again with a view to verify its admissibility in the instant year. Thus, the matter is restored to the file of the Assessing Officer for fresh adjudication after hearing the assessee. Thus, this ground is treated as allowed for statistical purposes.

23. Ground No. 7 being residuary in nature, does not require any decision from us.

24. In result, the appeal of the assessee is partly allowed.

25. Coming to the appeal of the revenue, the first ground is in relation to the retention money, amounting to Rs. 3,25,43,381. This issue is covered in our order in ITA No. 1249/PN/94. Relying on our decision in that appeal, this ground is dismissed.

26. 2nd ground of appeal is against the deletion of addition of Rs. 22,50,623 made by the Assessing Officer to the value of closing stock on account of unavailed part of modvat credit. Following our order in ITA No. 1091/PN/95, this matter is restored to the file of the Assessing Officer for fresh determination in terms of the decision of the Hon’ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. (supra). Thus, this ground of appeal is treated as allowed for statistical purposes.

27. In result, the appeal of the revenue is treated as partly allowed, as indicated above.

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