2008 (8) TMI 6

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..... he impugned judgment of the Tribunal only with regard to the provision for diminution in value of stock available with the assessee made on account of the stock having become obsolete and old. 3.   The said issue arises in the background of the following brief facts:- 3.1 The assessee had filed a return on 20.10.2002 declaring a loss of Rs 51,031/-. The case of the assessee was picked up for scrutiny and a notice under Section 143(2) of the Act was issued. During the course of the assessment, it came to light that the assessee is in the business of manufacture of picture tubes of black and white television sets, as well as, glass shells for black and white picture tubes, electron gun and glass stems. 3.2 During the course of th .....

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..... finding of the Assessing Officer. The CIT (Appeals) held that the provision for diminution in value of stock could not be allowed as the loss in respect of the same was not a crystallized expense. 3.6 Being aggrieved, the assessee preferred an appeal with the Tribunal. The Tribunal by the impugned judgment allowed the appeal of the assessee. The Tribunal specifically noted the fact that the inventory in issue had not moved for a period of three years. It also observed that the assessee's stock had become scrap and incapable of further use. It also noted the fact that in the event the assessee was to sell the stock as scrap, the burden of excise would be higher than the value it would realize on the sale of the "obsolete" stock as scrap. .....

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..... ssioner of Income-tax v. British Paints India Ltd. (1991) 188 ITR 44 (SC). In the said judgment it has been 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 on market price, whichever is the lower. Where the market value has fallen before the date of valuation and where the market value of the article on that date is less than its actual cost, the assessee is entitled to value the articles at market value and thus anticipate the loss which he may incur at the time of the sale of the goods. It was further held that the correct principle of accounting is to enter the stock in the books of a .....

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