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Issues:
1. Valuation of closing stock of metal and types in the press room. 2. Change in the method of accounting for valuation of stock. Analysis: The case involved the valuation of closing stock of metal and types in the press room and a change in the method of accounting for the same. The assessee, a company engaged in printing and publishing newspapers, used a special alloy for making types for printing. The issue arose when the Income-tax Officer added the value of the alloy in molten form in the vat to the total income, which the assessee sought to exclude from the valuation of closing stock. The Appellate Tribunal accepted the assessee's case that the change in the method of accounting was bona fide and not intended to reduce tax liability. The Tribunal found the change justifiable as it was difficult to evaluate the metal after issue from the store room. The Revenue argued that the addition was necessary to reflect the real income for the year and relied on a precedent. The assessee contended that the alloy in molten form had negligible value after use and should not be included in the closing stock valuation. The High Court considered the principles governing changes in the method of accounting and valuation of closing stock. It emphasized that an assessee can change the method of accounting as long as it does not distort the true profit of the year. The Court analyzed the reasoning behind the change in valuation method by the assessee and compared it to the treatment of loose tools. It noted that the alloy in molten form lost its value after use, justifying its exclusion from the closing stock valuation. Referring to legal precedents, the Court highlighted the importance of a bona fide change in accounting method and the need for it to reflect the true profits of the business. Ultimately, the Court upheld the Tribunal's decision to delete the disallowance made by the Income-tax Officer, considering the change in accounting method as genuine and bona fide. In conclusion, the High Court affirmed the Tribunal's decision, ruling in favor of the assessee and against the Department. It found no mala fides in the change of accounting method regarding the valuation of closing stock in the press room and the molten stage in the vat. The Court held that the method adopted by the assessee was genuine and bona fide, leading to the deletion of the disallowance. The judgment emphasized the importance of a reasonable and justifiable change in the method of accounting to ensure an accurate reflection of profits, as well as the acceptance of methods recognized in the commercial world for stock valuation.
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