9911796707
TMI Blog1982 (6) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was entitled to claim the amounts pertaining to the processing charges not recovered which have been accounted for as receipts. The advances given by the assessee towards purchase of raw stock or for getting the liabilities of customers are not to be considered as advances in the normal course of business of the assessee. The ITO, therefore, disallowed a sum of Rs. 2, 78,727 allowing a sum of Rs. 1,28,987. On appeal, the CIT (Appeals) found that there was some discrepancy with regard to the figures which he directed the ITO to recheck. He relied on other orders where he has considered similar claim and allowed the assessee's claim. The department has come up in appeal on this allowance made by the assessee. 2. The facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 22,018 on raw-films in respect of Dhawani Prakash claimed as bad debt has also been recovered. If the ITO's order modified as to processing charges is treated as allowing the bad debts in respect of irrevocable processing charges, but not advances on raw-stock, the assessee's present claim comes to only Rs. 66,987. According to the ld. counsel for the assessee, this has been correctly allowed by the CIT (Appeals). 3. In the departmental appeal, it is claimed that the amounts advanced on raw-stock have been correctly disallowed by the ITO. Even in respect of processing charges not recovered, their irrecoverability has not been proved by the assessee by producing sufficient details. According to the ld. counsel for the department, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms themselves constitute a security for the loan in the hands of the assessee. The raw-films being processed acquired an enhanced value as processed film and not only for the advance made on the raw-films but also the outstanding processing charges, this security would be available. In deciding the extent of bad debts, if any, to be written off, the value of the processed raw-films with the assessee constituting such security for the loan as the processing charges should be considered. There is force in this contention of the ld. Departmental Counsel. The circumstances of the present case, however, indicate that the ITO has not satisfied himself about the solvency of the parties in all the cases. He has also treated advances on raw-stock as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wastage, but in actual practice out of such wastage, the assessee had been able to save certain amount of raw stock. The value of the raw-stock saved was shown at market rate reduced by 10 percent and this was shown as income of every year. In the revised return the assessee-company claimed that the value of raw-stock of films was not taxable on the ground that the cost of raw-films which constituted a capital asset to the assessee was nil and colour films being imported items the sale of the same was regulated by Government and the assessee was not able to effect sales of such films saved in the normal course. The revised return thus excluded the value of savings of raw-films returned as income in the original return. The valuer of such r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method from year to year of valuing the raw-films saved, 10% below the market value for the purposes of working out its annual income. The assessee carries on the business of processing raw-films. The remuneration for this service rendered consists not merely of cash being the processing charge made but also the savings of the raw-films which constituted remuneration in kind. The ld counsel has referred to the elaborate discussion on receipts in kind available of Kanga & Palkhivala's Income tax. Referring to the difficulty in sale of raw-films imported and consequent difficulty in taking into account the films saved as profit of the assessee, it is pointed out by the ld. counsel that working out of the income in any particular case is depen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the accounting years ending 31st December, 1977, 31st December, 1978 and even 31st December, 1979 there was no change made in the method of valuing the raw-films and incorporating the result in the Profit & Loss Account of the assessee. This stand of the assessee, therefore, that it has changed the method of accounting to a more correct one which resulted in the revision of its profit by a sum of Rs. 3, 27, 902 cannot be accepted. Apart from this the assessee has been in existence and carrying on its business for more than 20 years. A regular method of valuing raw-films saved from year to year has been followed. As correctly pointed out by the ld. counsel for the department, any savings from the raw-films tendered by the assessee's cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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