TMI Blog2015 (2) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be on the basis of closing stock of the previous year i.e. 1988-89. Such argument seems to be attractive, but cannot be accepted at this stage. It has come on record from the assessment year 1983-84 till the assessment year 1988-89, the assessee made to believe that stocks purchased by him stands consumed by the end of the year. Such accounting method even in respect of petty items cannot be said to be an accepted accounting procedure, the notice of such method could be taken by the Assessing Officer while making assessment. We find that the finding of the Commissioner of Income Tax (Appeals) as well as of the Tribunal is not based upon sound reasoning. The reason given is on the basis of the finality of the assessment proceedings in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 18,88,759/- made on account of Closing Stock of stores, spare parts and tools etc.? The respondent - assessee filed its return declaring an income of ₹ 1,06,98,540/- for the assessment year 1989-90. The Assessing Officer disallowed the deduction of ₹ 10,19,200/- under Section 80M of the Act claimed by the assessee and also estimated the Closing Stock as ₹ 20,00,000/- after giving a benefit of Closing Stock of ₹ 1,11,741/- in the assessment year 1983-84, made an addition of ₹ 18,88,259/-. Aggrieved against the order of the Assessing Officer, the assessee filed an appeal. The Commissioner of Income Tax (Appeals) partly allowed the appeal setting aside the addition made by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Tribunal. Ld. DR has not controverted the said decisions either on facts or on law. In the circumstances, we see no reason to interfere with order of CIT (A). Before this Court, in respect of first substantial question of law, learned counsel for the Revenue has referred to the judgment of the Hon ble Supreme Court in Distributors (Baroda) P. Ltd. Vs. Union of India others (1985) 155 ITR 120, wherein it has been held that the deduction under Section 80M of the Act is with reference to the net income rather than the gross dividend income. In view of the said law, in respect of the first substantial question of law, it is held that the decision of the Tribunal in allowing the deduction under Section 80M is contrary to Distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all other items, therefore, petty items have been ignored cannot be accepted. One can understand that if the assessee has taken a stand to have certain percentage of production as opening and closing stocks of the petty items, but to assume that the opening and closing stock would be same is without any correlation to the turnover or the production. It gives flexibility to the assessee to manage stocks affecting the income. Such method of accounting runs counter to the judgment of the Hon ble Supreme Court in British Paints India Ltd. s case (supra). At this stage, Mr. Mittal argued that the finding of the Assessing Officer to take the closing stock of the assessment year 1983-84 and made addition on the basis of such stock is not sust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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