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TMI Blog1963 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... claim was disallowed by the Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The first question referred relates to this claim and reads as follows : "Whether, on the facts and in the circumstances of the case, a sum of Rs. 4,14,413 being the loss on obsolete machinery and equipment is deductible under section 10(2)(vii) of the Indian Income-tax Act, 1922?" It is settled law that in order to obtain a deduction under section 10(2)( vii) of the Act the machinery should have been used in the previous year. This is clear from Liquidators of Pursa Ltd. v. Commissioner of Income-tax [1954] 25 ITR 265 ; [1954] SCR 767 and Commissioner of Income-tax v. National Syndicate [1961] 41 ITR 225 ; [1961] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for many years prior to that year. Paragraph 1 of the assessment order says : "In or about 1947 the company acquired forest operation machinery from the war disposals. A lot of stores and spare parts were acquired for the various items of machinery for the forest operations. After about two years of working it was found that the mechanised working of the forest was not profitable and therefore the company discontinued such operations and adopted the extraction of timber from the forest through contractors. These machineries have been stated to be out of use ever since then." And paragraph 4 of the order of the Appellate Assistant Commissioner : "In the present case, it is common ground that the assets in question were used only for 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of a certificate from Paul Pothen, Engineer, that 25 per cent. of the original value can be taken as the reasonable value for accounting purposes the assessee company debited to the profit and loss account under the head ' loss on revaluation of stores and spares' a sum of Rs. 1,41,035 arrived at as under and claimed the aforesaid loss as a deduction : Rs. Total value of stores and spares as on 31-3-1957 ... 1,88,047 Total realisable value (25 per cent. of the original value) ... 47,012 1,41,035" The Appellate Assistant Commissioner said : "I am of the view that the loss has been rightly disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the end of 1951 and claimed the difference of Rs. 5,91,250 as a trading loss. For 1952 the securities and shares were valued at the market price both at the beginning and at the end of the year and the resultant difference of Rs. 18,491 was also claimed as a business loss. The court held : (1) that as the change in the basis of valuing the securities and shares at the close of 1951 was made by the assessee bona fide and that basis was continued thereafter, the requirements of section 13 of the Act were satisfied ; (2) that the change in the method of valuation may be detrimental to the revenue ; but that was not a relevant factor in deciding whether the assessee had the right to change the basis of valuation ; and (3) that in decidin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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