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TMI Blog2019 (3) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, with respect to the items in which 50% devaluation was claimed, the Tribunal found that the committee had not spoken of the utility value or about the physical condition and the 50% devaluation was recommended by the committee without doing any realistic appraisal of each of the items included in the list of 313 items. - HELD THAT:- Tribunal’s findings that the committee’s recommendations were without any basis cannot hence be accepted. The Committee of officers based on the technical evaluation had recommended devaluation at 50% finding the 313 items of stocks and spares to be of some use in the business of the Company or possible of earning 50% of the cost price in the market being second hand stores and spares. When the deval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is the appellant herein and raises the following questions of law:- (i) In the facts and circumstances of the case, ought not the Tribunal have held that the revaluation of certain old inventories which were obsolete and non moving items of spares was in accordance with law? (ii)Whether in the facts and circumstances of the case the assessee was entitled for deduction of the written off value of the obsolete spares and stores? 2. The undisputed facts are that the assessee, a public sector undertaking, had been valuing its assets in the balance sheet. On a verification of the accounts by the Comptroller and Auditor General (C AG), it was found that the assessee had been valuing assets which had become obsolete. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devalued were not trading items and that it cannot be termed as a stock in trade. The decision relied on by the assessee in (1964) 51 ITR 329 [Forest Industries Travancore Ltd. v. Commissioner of Income Tax, Kerala] was distinguished insofar as the decision having proceeded on the premise of a concession by the Department as to the spares being stock in trade. The decision of the Apex Court in (1991) 188 ITR 44 (SC) [Commissioner of Income Tax v. British Paints India Ltd.] was found to be of no help to the assessee insofar as the decision having found the income tax officer to be justified in rejecting the books of accounts if the ordinary principles of commercial accounting are not followed. 4. In the present case, the AO found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst appellate authority found that the claim can be allowed for the present year also. 6. The Tribunal reversed the order of the first appellate authority. The Tribunal agreed with the observations of the CIT (Appeal) in the earlier years, insofar as 20% alone having been declined as scrap value for obsolete spares revalued in those years. Adopting the very same reasoning, the assessee was permitted 80% of the claim with respect to 100% devaluation claimed items, again, apportioning 20% as the scrap value of such items. However, with respect to the items in which 50% devaluation was claimed, the Tribunal found that the committee had not spoken of the utility value or about the physical condition and the 50% devaluation was recommended b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tores and spares were never used and hence a valuation was attempted as per accounting principles itself to revalue the obsolete stores and spares. This works out to the prejudice of the revenue, but that sole reason cannot result in it being disallowed. The valuation was an accepted practise and it was necessitated as the situation warranted a revaluation of obsolete stores and spares. The method of revaluation cannot be faulted for reason of it having been accepted by accounting principle AS-2. The assessee had also carried out a similar exercise of devaluation in the earlier years, which were allowed to the extent of 80%, the 20% being disallowed as scrap value. 9. The decisions of two other High Courts were also relied on by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim finding it to be the scrap value of the devalued items. With respect to the other items, the committee had recommended only 50% devaluation. We have to notice that the committee was appointed by the Board of Directors and consisted of Senior Executives of the Company itself. It is also seen from the annual report that a technical evaluation was conducted and it was thus that 313 items were found to be devalued to 50% of their value. The Tribunal s findings that the committee s recommendations were without any basis cannot hence be accepted. The Committee of officers based on the technical evaluation had recommended devaluation at 50% finding the 313 items of stocks and spares to be of some use in the business of the Company or possible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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