TMI Blog1995 (5) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the assessee's method of valuation of DBM dust which was changed for valuing the closing stock ? " The assessee is being assessed in the status of a company and has been carrying on in its Dalmia Magnesite Corporation Unit in Salem, the business of raising magnesite ore and converting it into dead burnt magnesite (DBM). In the year under consideration, the assessee showed an opening stock value of DBM dust at Rs. 77,50,677, but if showed the same in the closing stock at nil value on the ground that it was having silica content above a specified percentage, i.e., at 15 per cent., and, hence, it had no market value. In the course of assessment proceedings, it was found that in the earlier years, the assessee was valuing DBM dust stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 77,50,677, being the addition made by the learned Assessing Officer for the raw material and packing charges cost of the closing stock of DBM dust and upheld the addition of the balance 2/3rd amount thereof. The matter was thereafter taken to the Tribunal. After consideration of the materials available from the records, the Tribunal held that there is no dispute that the change in the method is bona fide and that there is also no dispute that this product had no market value at all. According to the Tribunal, the realistic method of valuation would be to value it at nil, and accordingly, upheld the contention of the assessee. Hence, the present reference application under section 256(2) of the Income-tax Act is at the instance of the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kaging charges or realisable value, whichever was lower, and the realisable value of DBM dust was considered as nil on the ground that it was not saleable. It has been held in the case of CIT v. Corporation Bank Ltd. [1988] 174 ITR 616 (Kar) thus : " The two principles applicable with regard to the valuation of stock are that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower, and that the closing stock must be the value of the opening stock in the succeeding year. It is, thus, clear that irrespective of the basis adopted for valuation in the earlier years, the assessee has the option to change the method of valuation of the closing stock at cost or market price, whichever is lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also well-settled that irrespective of the basis adopted for valuation for earlier years, the assessee has an option to change the method of valuation of closing stock provided the change is bona fide and followed regularly thereafter. In the present case, the Commissioner of Income-tax (Appeals) found the change adopted by the assessee bona fide. The Tribunal also held that the change in the method of valuation adopted by the assessee was bona fide and the same method was followed by the assessee even subsequently. On the basis of the aforesaid findings, the Tribunal came to the conclusion that a realistic method of valuation in the present case would be to value it at nil. The aforesaid finding arrived at by the Tribunal appears to us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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