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TMI Blog1925 (1) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the learned Judge I do not think that the question he framed was the real question raised in the case, and I think that the question as he has framed it is so beset with assumptions and begged questions that it would be impossible to decide fairly what the real point in this case is by any answer that could be given to the highly involved question he formulated. 3. The facts here are very simple. The assessees are a firm of piecegoods merchants in this City and they keep their books and render their accounts to the Income Tax Authorities in what is known generally as the mercantile system of accounts. It is obviously a very rough and ready method ; but it is the one that they have adopted and the one that the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result was a trading loss of just over a lakh and I ought to remark because it has a bearing on what I am going to say later, that if those goods had been put down at ₹ 13-8-0 a piece, their cost price, there still would have been a trading loss of some ₹ 45,000 ; so that the assessees really stood to gain nothing if the figure of ₹ 6 was an undervaluation. Now comes the next year. In that year they start off their debit side to stock on the 13th of April, 1922, 7,573 pieces at ₹ 13-8-0 a piece by which means they work out a loss of ₹ 15,000 and odd. The contention of the Income Tax Authorities is that the stock on the opening of the account must be put at the same value as it was put as stock left on hand on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Supposing in the year 1921-1922 the assessee had underwritten his loss with a firm of underwriters--I believe there are underwriters who will guarantee trading losses and at the end of the year he goes to his underwriters and says : I bought at ₹ 13-8-0 a piece; this stock was worth ₹ 13-8-0 a piece at the beginning of the year ; it is now worth ₹ 6 ; ₹ 7-8-0 is my loss; please pay me ₹ 7-8-0. I do not know what defence the underwriters would have to that claim. Suppose that he goes again next year to the underwriters with the same purpose of having his trading loss underwritten, what are the underwriters going to say if he says that the value of the same stock is ₹ 13-8-0 a piece ? The underwriters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same loss on the same goods in toto for perhaps a course of years. That cannot be permitted. If these goods had been valued at ₹ 6 and the market had gone down to say ₹ 4 he would of course be entitled in this trading year to treat the difference between ₹ 6 and ₹ 4, i.e., ₹ 2 as another loss justly debited to this year. But in the event of the price going up above the market rate at the beginning of the year which we must take as an accurate valuation, the difference is his profit. 6. In our opinion, the answer that we should return to the question is that the assessee, having elected in the previous year to value his stock at the market price of ₹ 6 a piece for the purpose of showing his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income Tax who makes the reference. 9. The particular case before us is a very simple one. The assessee had a large stock of piecegoods, 12,570 pieces, at the beginning of 1921 which he says he bought at ₹ 13-8-0 per piece. At the end of the year the value of these goods fell in the market to ₹ 6 per piece according to his own statement. In submitting his statement to the Income Tax Authorities for the year April, 1921, to March, 1922 (Ex. A), he has taken into account the falling price in the market for the whole stock in calculating his loss for the year though he had not sold at the stock. He has treated the remaining stock in his hand at the end of the year 7,573 pieces as being worth only S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22, he cannot be allowed to treat it again as a loss in the next year also. It will not do to allow him to reopen the previous return and newly distribute the loss between the two years. It may be an advantage to do so in this case, but it would more often be a disadvantage to the assessee to do so. Having been allowed to treat his loss as one on the stock in hand the previous year, he cannot be allowed again to treat it as a loss on the sales in respect of the same stock the next year. That is the only point that really arises in this case. I entirely agree with the learned Chief Justice in the answer that he has proposed to give to the Income Tax Authorities that we consider that they were right in treating the second year's statement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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