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TMI Blog1963 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Indian Income-tax Act, 1922. The assessment year concerned is 1957-58 and the accounting period, the twelve months ended March 31, 1957. The assessee, the Forest Industries (Travancore) Limited, claimed a deduction of Rs. 4,14,413. The claim was disallowed by the Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The first question referred relates to this claim and reads as follows : "Whether, on the facts and in the circumstances of the case, a sum of Rs. 4,14,413 being the loss on obsolete machinery and equipment is deductible under section 10(2)(vii) of the Indian Income-tax Act, 1922?" It is settled law that in order to obtain a deduction under section 10(2)( vii) of the Act t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consequently, there has been no investigation on the subject. As a matter of fact the indications are to the effect that the machinery became useless long before the accounting year and was never in use, in any sense of the term, during that year or for many years prior to that year. Paragraph 1 of the assessment order says : "In or about 1947 the company acquired forest operation machinery from the war disposals. A lot of stores and spare parts were acquired for the various items of machinery for the forest operations. After about two years of working it was found that the mechanised working of the forest was not profitable and therefore the company discontinued such operations and adopted the extraction of timber from the forest th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock-in-trade of the assessee. The assessee was valuing the trading stock at cost. As stated by the Appellate Tribunal in paragraph 4 of the statement of the case : "The assessee wrote off 75 per cent. of the book value on the last day of the previous year. On the basis of a certificate from Paul Pothen, Engineer, that 25 per cent. of the original value can be taken as the reasonable value for accounting purposes the assessee company debited to the profit and loss account under the head ' loss on revaluation of stores and spares' a sum of Rs. 1,41,035 arrived at as under and claimed the aforesaid loss as a deduction : Rs. Total value of stores and spares as on 31-3-1957 ... 1,88, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement and close of each year, at cost, down to 1950. There was a fall in the market price of the securities and shares in 1950, 1951 and 1952. The assessee valued the securities and shares at cost at the commencement of 1951, at the market value at the end of 1951 and claimed the difference of Rs. 5,91,250 as a trading loss. For 1952 the securities and shares were valued at the market price both at the beginning and at the end of the year and the resultant difference of Rs. 18,491 was also claimed as a business loss. The court held : (1) that as the change in the basis of valuing the securities and shares at the close of 1951 was made by the assessee bona fide and that basis was continued thereafter, the requirements of section 13 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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