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Commissioner of Income Tax-1 Versus M/s. Indian Rare Earths Ltd

2015 (4) TMI 839 - BOMBAY HIGH COURT

Adoption of value of closing stock - ITAT directing the Assessing Officer to adopt the value of the closing stock as declared by the assessee - Held that:- The objection raised by the assessee on account of the method of accounting is not justifiable, inasmuch as Section 145A deals with the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" and it requires the assessee to follow .....

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been adopted in the earlier years, there was no reason for the Assessing Officer to disallow the same on the ground that the accounting method had changed.

Accordingly, we are of the view that the Judgment of this Court in the case of Heredilla Chemicals [1997 (1) TMI 66 - BOMBAY High Court] will not affect the write off by the assessee in the present case being distinguishable on facts. It is not merely on the basis of obsolescence of any particular equipment that the assessee has c .....

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we dispose of Appeal Nos.1266/2013, 1267/2013, 1290/2013 and 1074/2014. 2. The aforesaid Appeals raise a common question of law, which reads as under:- "Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in directing the Assessing Officer to adopt the value of the closing stock as declared by the assessee which is not in accordance with the principles laid down under the provision of Section 145A(a) of the Income Tax Act?" 3. The facts reveal t .....

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accounting in respect of stores and spares, inasmuch as it wrote off 95% of the value of such stores and spares which had not moved over the last three years and retained only 5% of the residual value. The Assessing Officer was of the view that no specific reasons were mentioned for change of method of accounting. He relied upon the decision of this Court in the case of CIT Vs. Heredilla Chemicals Ltd., reported in (1997) 225 ITR Page 532, in which case an item known as "PAN catalyst" .....

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e view that the assessee would have to wait till the item concerned was sold before claiming any deduction of amounts between the purchase price and the sale price. Furthermore, the Assessing Officer was of the view that the assessee in the present case had changed its method of accounting in the Assessment Year 2001-02. It was a deviation from its consistent policy as regards the method of accounting followed for the preceding 40-50 years. 4. Being aggrieved, the assessee filed an Appeal before .....

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ent Year 2001-02 and decided the issue in favour of the assessee. While doing so, the Tribunal found that the assessee, a Government of India Company, was subject to audit by the Comptroller and Auditor General of India. The market value of the damaged goods was pegged at 5% and the valuation deducted by the assessee had been accepted by the Comptroller's office. Furthermore, the Department had not seriously disputed the value so determined. There was no attempt on the part of the Revenue to .....

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that case had claimed 'obsolescence allowance' under Section 32(1)(iii) of the Income Tax Act. It was in that fact situation, that this Court had held that the assessee's method of valuing the closing stock could not be accepted. The fact situation here being different, the Tribunal, in our view, correctly found that the decision in Heredilla Chemicals would not affect the case on hand and accordingly, it approved the value debited by the assessee for the purposes of writing off in t .....

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Notwithstanding anything to the contrary contained in section 145,- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be- (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to br .....

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