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PR. COMMISSIONER OF INCOME TAX, BANGALORE AND THE JOINT COMMISSIONER OF INCOME TAX, CIRCLE-12 (3) BANGALORE Versus M/s. STCL LIMITED

2016 (4) TMI 952 - KARNATAKA HIGH COURT

Addition of loss due to fall in value of stocks - genuity of purchases - Tribunal deleted the addition - method of accounting - Held that:- The payment made is undisputed. The custody of the goods namely, iron ore as that of the assessee, though may be lying at the various ports, is also undisputed. When the assessee has made the payment for purchase of a particular quantity of material and the goods are lying in the custody of the assessee, though may be at various ports, the same could validly .....

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value of the stock. On the contrary, it is on account of the objection raised by C.A.G., that the assessee has correctly valued the stock on trade at the market price, prevailing then. The case of manipulation f or avoiding the payment of tax stands on a different footing, but the same has not been pleaded before the Tribunal in the instant case. The decision upon which reliance has been placed cannot be made applicable to the facts of the present case, when the factum of payment made by the ass .....

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her, on the facts and in the circumstances of the case, the Tribunal erred in deleting the addition made by assessing authority on the ground that once the purchases are accepted by the assessing authority and are duly accounted for in the particular year, the loss due to fall in value of stocks represented by those purchases has to be allowed even when the method of accounting adopted by the assessee company for A.Y. 2009-10 was not accordance with the method of accounting regularly employed by .....

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rious ports and was stated to be in possession of the assessee, in the closing stock was in accordance with the method of accounting regularly followed by the assessee or not. That aspect of the matter is, however, wholly immaterial because even if this stock was not to be included in the closing stock, the losses on purchase of iron ore, which was so clearly anticipated a loss and which could be reasonably quantified, was admissible as a deduction. When a trader agrees to buy a product at x val .....

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se goods and the prices at which the order was placed is also not in dispute. Whether the goods ordered by the assessee have been received by the assessee or not is a matter of fact, and the inclusion of goods so received in the closing stock is only a natural corollary of the goods having been received by the assessee. There is no change in the method of valuation of closing stock as it was always valued at the cost price or market price-whichever is less. We are unable to see any legally susta .....

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this fall in value of stock, this addition amounts to double addition of income. All that is material for us is whether the fall in value of stock to the tune of ₹ 29.50 crores should have been allowed as a deduction in this year, i.e. assessment year 2009-10, or not . We are concerned with the assessment year 2009-10 only and, for the detailed reasons set out above, in our considered view the reduction in the value of closing stock, particularly in the light of the fall in the value of ir .....

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so bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned addition of ₹ 29.50 crores. The assessee gets the relief accordingly. 4. The aforesaid shows that, what has been held by the Tribunal is availability of the deduction on account of the reduction in the value of stock in trade. The Tribunal has further recorded the finding of fact that the custody of iron ore was with the assessee lying at various ports. F .....

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ssessing Officer for deletion of the entry and its confirmation thereof, by CIT(Appeal), deserves to be set aside. 5. Learned counsel for the appellant - Revenue has made a two fold submission. One is regarding the correct accounting procedure not followed by the assessee. He submitted that in the earlier year, prior to the assessment year in question, the goods were not shown as stock in trade, but in the account the same was treated as loans and advances. In the subsequent year, to the assessm .....

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ted to next assessment year, which is not permissible and in support of his contention, he also relied upon a decision of the apex Court in case of Commissioner of Income Tax vs. British Paints India Ltd. [(1991) 188 ITR 44] and more particularly, the observations made at Paragraph 21 of the said decision. He therefore submitted that this Court may consider the matter accordingly. 6. On the first aspect, in our view, the contentions raised cannot be accepted for the simple reason that the paymen .....

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