2008 (8) TMI 6

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..... ta Bansal For the Respondent : None CORAM :- HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER RAJIV SHAKDHER, J 1. This is an appeal filed on behalf of the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the said Act) against the judgment and order of the Income Tax Appellate Tribunal dated 7.9.2007. 2. The revenue has preferred this appeal against the 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. .....

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..... essing Officer concluded that such a claim can only be allowed when the material is actually sold. Consequently, the Assessing Officer disallowed the provision for diminution in value of stock in the sum of Rs12,02,973/-. 3.5 Being aggrieved, the matter was taken up in appeal by the assessee to the Commissioner of Income Tax (Appeals) [in short CIT (Appeals)]. The CIT (Appeals) vide order dated 16.8.2005 sustained the 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 ap .....

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..... ed value of the closing stock is not brought into the account as no prudent trade would care to show increased profits before actual realization. This theory that the closing stock is to be valued at cost or market price whichever is the lower, is now generally accepted as an established rule of commercial practice and accountancy." "To the same effect is the judgment of this Court in the case of Commissioner 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 .....

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