Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2014 (11) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 1125 - HC - Income TaxCreation of provision of obsolescence in inventories - Held that:- Accounting Standards notified under Section 145(2) in particular Accounting Standard-I categorically states that the accounting treatment and presentation in financial statements of transactions should be covered by a substance and not merely by legal form. Further Section 145(A) provides notwithstanding anything to the contrary contained in section 145, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be–(a) in accordance with the method of accounting regularly employed by the assessee. Therefore, what is to be seen is how the assessee is maintaining the accounts regularly in the course of his business and the accounting treatment and presentation of financial statement of transactions should be covered by the substance and not merely by the legal form. It is the principle which is to be kept in mind by both the appellate authorities. The aforesaid material clearly demonstrate instead of showing cost price as nil in the profit and loss account, cost price of the items are given in profit and loss account and a provision is made for obsolescence in inventory showing that the market value is nil and that is the mode in which the assessee was also following even for the previous years. - Decided in favour of the assessee
|