TMI Blog2018 (6) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... ost and from that no firm conclusion could be drawn a tax payer was free to employ his own method of keeping accounts to value the stock in trade whether at cost or market price. Then it went on to say that the emphasis was on determination of real income. Again it observed that where from the computation, the real income could not be properly deduced, the computation should be made in the manner determined by the Income Tax officer. We think that the computation made by the assessee for the subject assessment year does not disclose the real income and that changing the method of valuation of closing stock to cost or market price whichever was lower would determine the income correctly. - ITR No. 19 of 1999 ITR No. 7 of 2000 - - - Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce constituted the stock-in-trade of the banking business and the assessee will be entitled to change over to the present method of valuation of the closing stock at cost or market price whichever in lower and in view of the fact that there is no appeal preferred by the department against the said finding and direction, the Tribunal was justified in law in holding that the assessee cannot for the purpose of the Income Tax Return claim the valuation of the closing stock on the basis of cost or market price whichever is lower and the profit or loss cannot be computed on such method? 3. Whether on the facts and in the circumstances of the case and in view of the finding of the Tribunal that all the assessee during the relevant accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar reaching effects. During the period involved, the Reserve Bank of India compelled banks to invest a proportion of the investment that they received in securities and shares in public limited companies. Since it was not the banks decision and they were acting in accordance with the decision and direction of another body, they treated the investment as stock in trade, treating the closing stock on cost basis, in their books of account. However in their income tax return they valued this closing stock on market value or cost whichever was lower. Since the price of the shares fell the assessees showed huge losses in their return although their books of account did not reflect it. The Board of Directors of the assessee bank in its meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket value, whichever is lower; (2) In the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can be drawn. A taxpayer is free to employ for the purpose of his trade, his own method of keeping accounts, and for that purpose, to value stock-in-trade either at cost or market price; (3) A method of accounting adopted by the tax payer consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation; (4) The concept of real income is certainly applicable in judging whether there has income or not, but in every case, it must be applied with care and within their recognised limits; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me tax as stated earlier, what is to be taxed is the real income which is to be deduced on the basis of the accounting system regularly maintained by the assessee and that was done by the assesses in the present case. On an appreciation of the above judgement it clearly appears that the court stressed on the determination of real income rather than theoretical principles of accountancy. It says that if the securities and shares were valued at cost and from that no firm conclusion could be drawn a tax payer was free to employ his own method of keeping accounts to value the stock in trade whether at cost or market price. Then it went on to say that the emphasis was on determination of real income. Again it observed that where from the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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