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DCIT, Circle-8, Kolkata Versus M/s Orient Copper Industries Ltd

2015 (11) TMI 1360 - ITAT KOLKATA

Disallowance of loss in respect of valuation of closing stock - change in the method of valuation of stock of shares - CIT(A) deleted the addition - Held that:- It is a basic principle for accounting that the valuation of stock in trade has to be done "at cost or market price, whichever is lower" and the same is in consonance with other important accounting principle that anticipated loss is required to be considered, while drawing the final accounts.

In the present case, the assesse .....

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lower" and since the new method adopted by the assessee was more proper and correct and the same was consistently followed by the assessee in the subsequent years, I am of the opinion that there was no justification on the part of the AO to reject the same merely because it had resulted in loss. CIT(A) appreciated all the relevant facts of the case in proper perspective and allowed the claim of the assessee for loss as a result of change in the method of valuation of closing stock, which was ful .....

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06-07, whereby he deleted the disallowance of ₹ 17,34,218/- made by the AO on account of assessee s claim for loss in respect of valuation of closing stock. 2. The assessee in the present case is an investment and finance company. The return of income for the year under consideration was filed by it on 30.11.2006 declaring a loss of ₹ 5,93,678/-. During the course of assessment proceedings, it was noticed by the AO that there are no purchase and sale of shares made by the assessee du .....

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de should be adopted at cost or market price whichever is lower. Since this opinion of the auditors was based on guidelines issued by the Reserve Bank of India for non-banking finance companies as well as accounting standard issued by the Institute of Chartered Accountants of India, the assessee changed the method of valuation of stock of shares from "at cost" to "cost or market price whichever is the lowest", which resulted into loss. This explanation offered by the assessee .....

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disallowance of assessee s claim for loss of ₹ 17,34,218/-. 3. The disallowance made by the AO on account of its claim for loss due to change in the method of valuation of stock of shares was challenged by the assessee in the appeal filed before the ld. CIT(A) and after considering the submissions made by the assessee as well as the materials available on record, the ld. CIT(A) deleted the addition made by the AO on this issue and allowed the claim of the assessee for loss for the followin .....

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these are very old decisions whereas the guidelines of the Reserve Bank of India by which the appellant made the change in the valuation of shares has been done to fall in line with the present day requirements. In the light of the above discussion and finding, after considering the facts of the case and the submissions made, I am of the considered opinion that the change in the system of valuation of shares which has been effected in this year in relation to those shares which have been appear .....

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T(A), the Revenue has preferred this appeal before the Tribunal. 4. The ld. DR strongly relied on the order of the AO in support of the Revenue s case on the issue involved in this appeal. He submitted that the change in the method of valuation of closing stock as adopted by the assessee was not satisfactorily justified and since it was done by the assessee to suit its purpose, the same was rightly rejected by the AO. He also contended that the guidelines of Reserve Bank of India and the Account .....

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Counsel for the assessee, on the other hand, strongly supported the impugned order passed by the ld. CIT(A) allowing the claim of the assessee for loss as a result of change in the method of valuation of closing stock of shares. He contended that although the stock of shares was earlier valued by the assessee at cost, the said method was changed on the basis of the opinion of statutory auditors, which was duly supported by the relevant RBI guidelines as well as AS- 2 issued by the ICAI. Accordin .....

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