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TMI Blog2006 (4) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... g stock by its element of tax, duty, cess or fee, etc., and not by altering the opening stock. Whenever the assessees changed their method of accounting from one recognized method to another recognized method, there is bound to be tax effect in the year of change. But, over the year it is tax neutral. On the same analogy, when the Legislature has imposed a new system of valuing the closing stock it is bound to have an impact in that year, but becomes neutral in nature in the subsequent year. We are, therefore, of the view that the CIT(A) was not justified in accepting the claim of the assessee. Accordingly, the order of the CIT(A) on this issue is reversed and that of the Assessing Officer is restored. In the result, the appeal is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the time being in force, shall include all such payment notwithstanding any right arising as a consequence of such payment." The newly inserted provisions require all the assessees to value their inventory by including the element of tax, duty, cess or fee etc. There were two alternative methods that were prevalent up to 31-3-1999. One was known as inclusive method and the other was exclusive method. In the inclusive method, the element of tax, duty, cess or fee was always included as a element of cost. The other method known as the exclusive method prevalent up to 31-3-1999 excluded the element of tax, duty, cess or fees etc. Now, the Legislature wants all the assessees to switch over to inclusive method from 1-4-1999 wherein the elemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Thus from the Assessment year 1999-2000 the appellant has to follow the system as provided in section 145A and it cannot deviate from that as such the addition made by the Assessing Officer is not sustainable and has to be allowed subject to verification of the valuation of closing stock taken by the appellant." Aggrieved, the revenue is in appeal before the Tribunal. 4. The learned Departmental Representative strongly relied upon the order and the discussion in the assessment order. The main contention of the revenue is that it is not open to the assessee to change the value of the closing stock of the previous year. According to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Forex International Drill Inc. v. CIT [2005] 279 ITR 310 . 5. We have carefully considered the rival submissions and have gone through the record. In our view, the contentions of the revenue have some force. As already explained, the provisions of section 145A were introduced by the Finance (No. 2) Act, 1998 with a view to end the litigation which existed prior to that. In order to ensure that the values of the opening stock and closing stock the correct value an amendment was made to provide that such values shall be determined only after considering the element of tax, duty, cess or fee paid in relation thereto. In fact, the Legislature proposed to introduce section 145A right from the assessment year 1986-87. The aforesaid provision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration the element of the tax, duty, cess or fee paid in the sales, purchases and inventory. It will not have an impact on the closing stock carried forward because what can be debited to this year s profit and loss account is the closing stock of the earlier year. There can be no exception to the rule that the closing stock of the earlier year will have to be necessarily the opening stock of this year. The change in the method of valuation of the closing stock as a result of section 145A has an overriding effect on section 145 relating to method of accounting itself. In other words, notwithstanding what is contained in section 145, the provisions of section 145. A shall prevail. The sum and substance of that intent can only be achieve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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