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TMI Blog2013 (6) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... nstead of taking the net realizable value for valuation of closing stock took the cost price of obsolete item and created a provision for difference in cost price and market value and debited the same to P&L Account, the effect of which is same. Therefore keeping in view the judicial pronouncements relied upon by the assessee on CIT Versus BECTON DICKINSON INDIA PVT LTD. [2012 (12) TMI 210 - DELHI HIGH COURT] appeal of assessee allowed. - I.T.A. No.5823/Del/2010 - - - Dated:- 7-6-2013 - Shri A. D. Jain And Shri T. S. Kapoor,JJ. For the Appellant : Dr. Rakesh Gupta, Sr. Advocate. For the Respondent : Shri Tarum Seem, Sr. DR. ORDER Per TS Kapoor, AM:- This is an appeal filed by the assessee against the order of Ld CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are then sold as scrap and is included in the misc. income. It was also submitted that obsolete stock included stationery items which include catalogues printed once in every few months which are printed for a specific period and therefore after that specific period these catalogues//flyers becomes un-useable and therefore written off as obsolete. Similarly, it was submitted that due to insignificant quantity of a particular item when it appears to be company that the same cannot be resold and therefore it is written off. It was further submitted that some times there is a mismatch between the quantity of components and quantity of packing material supplied by different suppliers and therefore un- matched packing material or goods bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods, the same was offered for taxation. It was further submitted that accounts of the assessee are maintained on mercantile basis and there is no change in the accounting policy followed by the company as compared to earlier year and such method of accounting followed by it is in accordance with the provision of section 145 of the Act. It was also submitted that the above method of reducing down the value of stock to its net realizable value was inconformity with the accounting policy followed by the company and the above treatment is further supported by the provision of section 211 of the Companies Act read with AS-II issued by ICAI and section 145 of the act read with AS-I. Reliance was placed on a number of case laws. 4. The Ld CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .). Silver Oak Laboratories (P) Ltd. v. ACIT I.T.A. No.1979/Del/2004 dated 22.2.2008 (for assessment year 2000-01). In these cases there is no dispute with regard to valuation of obsolete stock and also there is no reversal of provisions. The facts to that extent are distinguishable. The very fact that the stock is sold subsequently indicates that the provision is contingent in nature. Accordingly, the action of the Assessing Officer is upheld." 6. Aggrieved the assessee is in appeal before us. 7. At the outset, the Ld AR submitted that assessee was dealing in plastic kitchen ware products which included dabba, boxes etc. and part of stock becomes obsolete stock due to new innovations. Therefore, certain products are phased out and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock was on the basis of ascertained valuation and these were not ad hoc provisions and the company continued to follow this policy. Reliance was placed on the judgment in the following case laws:- 1. In I.T.A. No904/Del/2010 confirmed by Hon'ble Delhi High Court in I.T.A. No.39/2012. 2. I.T.A. No. 1979/Del/2004 and further confirmed by Hon'ble Rajasthan High Court in the case of Silver Oak Lab. (P) Ltd. v. ACIT reported in 3115 ITR 21 (Raj.) 3. Rotork Controls (India) Pvt. Ltd 314 ITR 62 (SC). 8. The Ld DR, on the other hand submitted that how plates and spoons, boxes etc/.e dealt with by the company become obsolete and further submitted that the whole system of creating provision besides actual write off in the stock due to accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .39/2012 dealt with such a situation where the findings of Tribunal are at para 5 which reads as under:- "The assessee has been consistently following the method of accounting over a period of time. The assessee is in the business of pharmaceutical products whereas strict supervision of the quality has to be ensured and these products are mostly surgical needles and medical consumable and if such fast moving items are not sold for a considerably lengthy period, it can be safely said that they have lost consumable acceptability over a period of time, may be due to advent of new products. After all, as long as the assessee acted in a bona fide manner and has appreciated the business realities in which he is placed, the same should be accept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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