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Issues involved: Determination of whether the losses claimed by the assessee were rightly held to be capital losses.
Details of the judgment: The assessee, a private company engaged in the manufacture and sale of cool drinks, claimed revenue losses in the assessment years 1970-71 and 1971-72 amounting to Rs. 34,482 and Rs. 35,341 respectively. The losses were claimed on account of breakage and depreciation of bottles and crates used in the business. The Appellate Assistant Commissioner allowed the claim based on the method of accounting regularly followed by the appellant, which the Income-tax Officer had initially rejected. The revenue appealed against this decision, leading to the references being made to the High Court. The High Court considered the submissions of both parties and analyzed the method of accounting employed by the assessee. It was noted that the claim for deduction was based on the reduction of the notional value of bottles and crates in the assessee's stock, even though they were still in use for the business. The Court found no rationale in this process and concluded that the losses claimed were not revenue losses but rather capital in nature. The Court emphasized that the purpose of maintaining accounts is to provide a true picture of the business dealings, and in this case, the claimed deductions were not justifiable. The Court held that the assessee was not entitled to the deduction of the claimed losses. In conclusion, the High Court ruled that the losses of Rs. 34,482 in the assessment year 1970-71 and Rs. 35,341 in the assessment year 1971-72 were not revenue losses, and therefore, the assessee was not entitled to a deduction. The judgment was delivered by R. N. MISHRA, with agreement from K. B. PANDA.
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