TMI Blog2005 (12) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... als) is not justified in allowing the decrease in value of assets (depreciation) as decrease in value of closing stock." 3. The brief facts of the case are stratified as under:- The Assessing Officer disallowed Rs. 3.62 lakhs claimed under the head "Decrease in value of horses" by holding as under:- "The assessee had filed a statement of market value of horses as on 31-3-1994. As per this statement, the value of the horses as on 1-4-1993 was Rs. 8,62,357, the additions being Rs. 5,85,250 the total value was Rs. 14,47,607. On this total value, the assessee had computed decrease in value of horses of Rs. 3,62,607 and arrived at value as on 31-3-1994 of Rs. 10,85,000. For the horses in existence as on 1-4-1993 and 31-3-1994 and for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Madras Race Club. The appellant consistently adopts valuing closing stock by a method on which cost or market value whichever is less. The appellant claims before me that during the year the value of horses increased or decreased according to the races won by them or lost by the horse during the year. Market value varies accordingly. For a number of years appellant, has consistently followed this method. After going through the complete list filed by the appellant as well as the valuation given by the Madras Race Club, I am convinced. Since the appellant is following consistently a method of accounting, there is no necessity to disturb the valuation adopted by the appellant. I am unable to agree with the view expressed by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments perused. 8. We find that one of the contentions of the learned DR is that since the income from horses has been shown as 'income from other sources' in income-tax returns, it cannot be considered as business income. Here, we find that courts have uniformly held that in taxation matters, substance prevails over form. In this regard, we draw support from the principles expressed by Viscount Simon in IRC v. Wesley an and General Assurance Society which reads as under: "It may be well to repeat two propositions which are well established in the application of the law relating to income-tax. First, the name given to a transaction by the parties concerned does not necessarily decide the nature of the transaction. To call a payment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 43(3), with effect from 1-4-1962, which amendment has been effected by the Finance Act, 1995, it must be B held that the birds being 'livestock' could not be regarded as capital assets and, therefore, are required to be valued as part of the stock-in-trade of the assessee. It is settled law that in case of running business, the stock-in-trade has to be valued either on cost basis or on the basis of market price, whichever is lower." 10. Considering the entire spectrum of the case, we find that in order to adjudicate upon the claim of the assessee that the horses are stock-in-trade, the question which needs to be answered is whether the income from lease of horses run in horse races amounts to business or not as per the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. It was found as a matter of fact that there was a systematic activity in maintenance of the horses, in rearing the horses and in earning income from the horses by way of lease of horses and use of the horses in races. In other words, there is a commercially organised activity carried on by the assessee and the horses were used in various races conducted. In our considered opinion, the assessee has employed the horses in normal business as any prudent man would normally do and the case cannot be bracketed with an owner of the horse, who possessed the horses either for pleasure or for the purpose of pride of possession. 13. We, therefore, hold that the activities of the assessee were business activities and there was a profit el ..... X X X X Extracts X X X X X X X X Extracts X X X X
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