TaxTMI 
TaxTMI 
2010 (5) TMI 613
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....d accounting policy followed from year to year and that the inventory written off had no market value on account of becoming old and obsolete keeping in view of the fact of fast changing electronic technology from year to year. 3. That the learned Commissioner of Income-tax (Appeals) wrongly rejected the assessee's submissions filed during assessment proceedings and appeal proceedings in support of the claimed deductions. 4. That the learned Commissioner of Income-tax (Appeals) erred in law on facts in ignoring the past history of the case when such disallowances were allowed in appeals in previous assessment years." 2. The assessee is a Central Government organisation. Copy of COD approval for prosecuting the appeal is placed on record. 3. Learned counsel for the assessee, at the outset, contends that ground No. 2 regarding disallowance in respect of writing of inventory of non/slow moving items is covered in its favour by the Income-tax Appellate Tribunal decision dated November 27, 2009 in its own case in I. T. A. Nos. 233 and 1821/Del/2009 for the assessment years 2004-05 and 2005-06. The Income-tax Appellate Tribunal deleted the addition by the following observations....
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....ost of pump. This amount of soft loan is repayable by the company in 10 yearly equal instalments along with interest. The short fall on account of realisation has been met and compensated by means of soft loan provided by IREDA. The Assessing Officer was of the view that there is practically no loss to the assessee-company and hence the amount written off in the books of account was disallowed, as done in earlier years. 6. Aggrieved, the assessee preferred first appeal. However, the Commissioner of Income-tax (Appeals) partly allowed the claim of the assessee by the following observations : "A perusal of the above description shows that items falling within the category of 'intangible items' are the items such as computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, etc. The appellant's claim of loss on sale of SPV water pumps is not similar to the nature of items covered by the scope of 'intangible assets'-as described in paragraph 7 of AS-26. Since loss on sale of SPV pumps, which the appellant had been claiming over the period of ten years, i.e., equivalent to the period of repayment and period of benefit of soft loan, is not ....
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....to change its method of accounting and what the Assessing Officer should have looked into was whether the change is bona fide or not. The assessee-company in this year adopted a policy of writing off of intangible items in the year of occurrence. Since the write off was crystallised due to this change of policy, it cannot be termed as isolated incident nor can be held to be mala fide. It has been argued that the Assessing Officer has nowhere adverted to the issue of change in method of accounting and its bona fides. The Assessing Officer disallowed the same only by following conclusion : "Hence, the assessee-company has saved substantial interest on account of loan provided by IREDA. Hence, practically, there is no loss to the assessee-company and the amount written off is disallowed and added back in the income of the assessee." 8. The learned Departmental representative is heard who supported the orders of the lower authorities. 9. We have heard the rival contentions and perused the material on record. In respect of ground No. 2, i.e., disallowance in respect of writing of inventory of non/slow moving items, we find that the issue is covered in favour of the assessee by the af....
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....ishing titles). Common examples of items encompassed by these broad headings are computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, fishing licences, import quotas, franchises, customer or supplier relationships, customer loyalty, market share and marketing rights. Goodwill is another example of an item of intangible nature which either arises on acquisition or is internally generated." 16. On the aforesaid facts, the learned Commissioner of Income-tax (Appeals) concluded that- (i) there is no change whatsoever in the facts of this year vis-a-vis the facts of last year ; (ii) the change in accounting practice is effectively meant for this year only as it has been made in respect of deferred revenue expenditure as described in paragraph 4 of the order of my learned brother ; and (iii) AS-26 is not applicable to an item of expenditure as it is applicable only to an intangible asset. 17. The learned Departmental representative supports the order of the learned Commissioner of Income-tax (Appeals) by further submitting that the change in accounting system of this item has been made with a view to reduce the tax liability of thi....
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....tion of law. We also agree that the change in the method of valuation of the closing stock was not bona fide because the authorities below have noted that for the assessment year in question seeking of change in the method of valuation of the closing stock was in the year where there was huge rise in the profits of the assessee-company and the change was adopted in order to reduce profits in the relevant year. The fact that the change is not bona fide is more than abundantly clear from the fact that the assessee once again switched back to the old method of valuation of closing stock just one year thereafter in the assessment year 1993-94. The contention of counsel for the appellant that the assessee-company was entitled to follow a scientific basis for valuation of the closing stock is not in issue because no doubt a company can adopt such a method for valuation of the closing stock, but, such valuation of closing stock had to be adopted on a consistent basis and cannot be changed to suit the convenience of the assessee so as to deprive the Revenue of legitimate tax. It has rightly been found by all the authorities below that the change in the valuation stock was not bona fide. No....