TMI Blog1965 (2) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... 59, corresponding to the accounting year ended March 31, 1958, and concerns the valuation of certain motor spare parts. The assessee is one of a few companies started to take over all spare parts of the makes of cars from the General Motors on their giving up their Indian branches. Since the import and assembly of these makes in India were banned, the demand for these spares of the older models already on the road began to decline from year to year. For the purpose of assessment for the year ended March 31, 1958, the assessee made a return under section 22 of the Act showing an income of Rs. 3,15,995. In valuing their opening and closing stock of the spare parts taken over by the assessee-company from the General Motors, they adopted the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, indicated that the market had not fallen. It is this conclusion of the Appellate Tribunal that is assailed in this reference under section 66(2) of the Act. It is urged by Mr. Swaminathan, learned counsel for the assessee, that the assessee has adopted this method consistently for a number of years and that no exception was taken to it by the department all these years. It is also his contention that this system of accounting is a well recognised one, and, in fact, is in vogue not only in this country but in various other countries like the United States of America. He further maintains that the reasoning of the Tribunal relating to the surplus stocks or the slow-moving articles is irreconcilable with that bearing on the spare pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer could make a recomputation of the stock, he should find that the profits and gains could not be properly deduced from the method followed by the assessee. We do not think that the proviso is attracted to this case. For one thing, it is not asserted on behalf of the revenue that, by resorting to this method, the assessee was attempting to disguise their income or that there was difficulty in ascertaining the true profits and gains derived by the assessee from his business. Admittedly, these stocks were not excluded from the inventory, and, whenever any individual item was sold from either of the two categories, the entire sale proceeds were brought into account, and the difference between the value as disclosed in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange is determined, the material control division should be immediately notified ,so that outstanding purchase orders of affected parts or raw material scan be cancelled where possible. Sometimes, when engineering changes are contemplated, the available inventory and firm commitments of applicable materials are first determined to ascertain the probable extent of result an to obsolescence due to the proposed changes. If a serious degree of obsolescence would result from an immediate engineering change, the effective date of change or 'breaking point' may be delayed. However, if an engineering change must be made as a safety factor or to prevent any serious competitive market losses, material obsolescence must follow as a necessary evil. Ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to articles classified as obsolete, this class of articles when sold brought a price higher than the cost price ,the Tribunal was not inclined to sustain the addition made by the Income-tax Officer in that behalf. It is interesting to note that the Tribunal found that by reason of the ban the demand for spare parts of the older model shad diminished year to year and the sales thereof "were few and far between." That being the position, we do not think that there was any justification for the Tribunal to interfere with the conclusion of the Appellate Assistant Commissioner. It is not shown to us that this method is either improper or patently false. There is, therefore, no justification requiring the assessee to change the method which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted that the method adopted by the assessee is subject to the objection indicated in the proviso. In fact, the only reason adduced by him for rejecting the valuation in question was that in the valuation of these stocks furnished by the assessee to the State Bank of India a different mode of calculation was adopted by them. We think that this difference would not justify the rejection of the method followed by the assessee for ascertainment of his income under the Income-tax Act. What section 13 contemplates is the method of accounting for purposes of disclosing his income and profits. The figures furnished by him to the State Bank of India for purposes of obtaining an over draft are not concerned with the actual stock valuation for de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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