9911796707
TMI Blog2014 (11) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... entories. 2. The assessee is carrying on the business in the manufacture and trading of computer hardware. In respect of the assessment year 2001-02, the assessee had filed a return of income. The assessee had debited Profit and Loss Account of a sum of Rs. 5,79,77,000/- under the head "Provision for obsolescence in inventory". The Assessing Officer rejected the said claim on the ground that the provision for obsolescence in inventory was a contingent claim and the same cannot be allowed as an expenditure during the current assessment year. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). The Appellate Commissioner held that the provision for obsolescence in inventory is an allowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion for obsolescence is made and benefit is claimed, which is not permissible in law. 5. Per contra, the learned Counsel for the assessee supported the impugned order. 6. The facts are not in dispute. The assessee carries a large number of computer parts, accessories, etc., in its inventory. Due to rapid technological changes that the computer industry has been facing in the last decade, the assessee periodically undertakes the exercise of reviewing its inventory items. The value of the inventory items found obsolete on such review is debited to the scrap account. The amount debited to scrap account during the year includes provision towards such obsolescence. The assessee was required to file computation of Rs. 5,79,77,000/- being provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is given which finds a place in the balance sheet and therefore, it was contended that though the net result is the same, the way accounts are reflected is not proper. 9. We do not see any substance in the said contention. Accounting Standards notified under Section 145(2) in particular Accounting Standard-I categorically states that the accounting treatment and presentation in financial statements of transactions should be covered by a substance and not merely by legal form. Further Section 145(A) provides notwithstanding anything to the contrary contained in section 145, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
