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TMI Blog2004 (11) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... n the 17,408 hides of the closing stock is to be made after giving a set off of a similar revaluation of the 17,238 hides as appearing in the opening stock and, accordingly, in effect, revaluing only balance 170 hides (17,408-17,238) in process?" Briefly stated the facts giving rise to the present reference are as follows: The present reference relates to the assessment year 1982-83. The respondent is a private limited company and deals in tanning of raw hides. It used to purchase raw hides, process them and then sell them after converting them into leather. Its accounting year ends on 30th September of each year. The respondent had 17,408 hides lying in the tanning yard. They were in the process of tanning and certain materials had also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial used in the tanning of hides which were in the process stage at Rs. 15 per piece, i.e., at Rs. 2,61,120 as against Rs. 52,224 adopted by the respondent-assessee. The Revenue as well as the respondent assessee preferred separate appeals before the Tribunal. The Tribunal has held that the method adopted by the respondent is an arbitrary one and, therefore, requires revaluation of the closing stock but at the same time, the opening stock will also have to be adjusted in order to avoid the taxing of an income, which could not, otherwise, have been brought to tax. The Tribunal had found that there was opening stock of 17,238 hides which were in the process of tanning. The tanning charges were valued at Rs. 3 per hide at Rs. 51,714 and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whichever is the lower, and it is now generally accepted as an established rule of commercial practice and accountancy. In the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44 the apex court has held that for computation of the true profits of the year in the case of a trade or adventure, each year being a self-contained unit, the value of the stock-in-trade at the beginning and at the end of the accounting year and by ascertaining the difference between them has to be taken into account. It has further held that it is a well recognized principle of commercial accounting to enter in the profit and loss account the value of the stock-in-trade at the beginning and at the end of the accounting year at cost or market price, whichever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the booklet titled Valuation of Stock and Work-in-Progress-Normally Accepted Accounting Principles brought out by Indian Merchants' Chamber Economic Research and Training Foundation and written by Shri G.P. Kapadia wherein there is a discussion about change from one valid basis to another valid basis in the following terms: "2. Where a change from one valid basis to another valid basis is accepted, certain consequences normally follow. The opening stock of the base year of change is valued on the same basis as the closing stock. Whether the change is to a higher level or to a lower level, the Revenue normally does not seek to revise the valuation of earlier years. It neither seeks to raise additional assessments, nor does it admit rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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