9911796707
TMI Blog1983 (11) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... able value. Had the previous basis of valuation been followed the value of stock of tea would have been more by Rs. 31,68,000 approximately." Consequent to the aforesaid change credit had also been given for a sum of Rs. 16,72,517 which had been debited to the expenses in the following year's account. He asked the assessee to give the reason under which the method had been changed. In reply, the assessee contended that the change had been approved by the Board of Directors at a meeting held on the 4th January, 1978 and since the IT Act did not specify any particular method of valuation of closing stock, the assessee had adopted a method which was scientific and widely accepted in the commercial accounting i.e., cost or market value whiche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of valuation of closing stock was not necessary. Under s. 291 of the Companies Act, the Board of Directors are entitled to exercise such powers and to do such acts and things as the company is authorised to exercise and do. A regular resolution is necessary in respect of only such matters as are laid down in s. 292 of the said Act and the method of valuation of closing stock is not mentioned in this section. Next, it was argued that even the move to revalue the closing stock had already been initiated by the company during the accounting year itself. The opinion of the legal adviser had been sought in the month of December, 1977 and Dr. Paul himself had given such opinion on the 17th Dec 1977. Only the resolution of the Board could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite Food Products Co. Ltd. vs. CIT, West Bengal (1982) 29 CTR (Cal) 8 : (1983) 141 ITR 861 (Cal) wherein the assessee has changed the method of accounting in realisation of interest and their Lordships were of the opinion that in the absence of specific finding that the assessee in maintaining the change was not acting bonafide, the change had to be allowed. In this behalf, the decision in relation to the earlier year reported at page 847 if the same Volume 141 ITR in which the change in the method was held not to be bonafide, was considered to be inapplicable to the later year since the changed method had been consistently followed thereafter. Similarly, so far as the merits of change are concerned, it was contended that according to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income in such a manner as he may determine. It was contended that while the assessee was free to accept the method of accounting, the employment of the same should be regular. Previously, the valuation of closing stock was being made on the estimated realisable value and this method was being followed by the assessee regularly till the earlier asst. yr. i.e., 1977-78. No change had been made by the assessee during the relevant accounting year i.e., upto 31st Dec, 1977, on which date the profits of the assessee had been crystallised. For this proposition reliance was placed upon a number of authorities, namely E.D. Sassoon & Co, Ltd. & Ors vs. CIT Bombay (1954) 26 ITR 27 (SC), Kesoram Industries and Cotton Mills Ltd. vs. CWT (Central), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case and the position of law as discussed above, we are of the opinion that the present change of the assessee being bona fide and being consistently followed in the later years could not have been rejected by the authorities below. We, therefore, accept this ground and direct that the addition on account of under-valuation of the closing stock should be deleted. 6. The other ground relates to certain disallowances u/s 40A (5). The dispute revolves round a sum of Rs. 6,773 spent by the assessee on account of quarters allotted to Mr. P.K. Banerjee. According to the ITO, this was in the nature of a perquisite. Before the CIT (Appeals) the assessee relied upon a decision in CIT vs. Travancore Tea Estates Co. Ltd. (1980) 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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