TMI Blog1928 (2) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... been similarly allowed to the non-applicant. (iii) Whether a similar loss of ₹ 3,564, in respect of the Katni shop should have been allowed to the non-applicant. (iv) Whether a loss of ₹ 22,676 in respect of the value of the wheat of the Jubbulpore shop should have been allowed to the non-applicant. (v) Whether Dharmada receipts, amounting to ₹ 8,129, were improperly included in the income of the non-applicant. 4. The first three questions mentioned above admittedly stand or fall together, the same principle being involved in connexion with the question of whether or not these losses could be properly claimed by the non-applicant in the year under assessment. In para. 2 of the Assistant Commissioner's report of the 15th February 1928 a fair enough description is given of the method adopted by the non-applicant in connexion with the items we have mentioned above. In the case of stock jobbing business and the like, it has apparently been the practice of the non-applicant to adopt a somewhat special method of keeping accounts. There are two such obvious methods; one to spread the profits or losses over the whole term of years in which trans actions oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployed is such that, in the opinion of the Income Tax officer, the income, profits and gains cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Income Tax officer may determine. 9. Turning to para. 35 of the instructions regarding the Income Tax law and rule to be found at page 97 of the Income Tax Manual, the possibility of assessing the non-applicant in accordance with the system of account as he has adopted, is clearly adumbrated in the last sentence of para. 1 of Instruction No. 36. For our own part we are wholly unable to see why the non-applicant should not be allowed to claim the losses in question under the system of account adopted by him. If that system of account is considered by the Income Tax officer as an unsuitable or an improper one, he can issue specific orders in the matter under the proviso to Section 13, but until he has done so, we are of opinion that the system of account adopted by the non-applicant should, in the meanwhile, have been accepted for the purpose of assessment of Income Tax in the year under assessment. It seems obvious that whether the book system of account adopted by the non-ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Birla Jute Mills, accepted, for purposes of estimation of profits, precisely the same system of accounting which he now objects to when, as in the case of New Great Eastern Mills shares, a loss has occurred. This position seems to us contrary to the most elementary principles of justice and equity and, in reality, amounts to saying that an assessee's income in any given year is what he has made out of a profitable branch of business, but that, at the same time, any loss made in another absolutely analogous branch of his business should not be taken into account in determining what his assessable income is. 11. We see, moreover, that considerable difficulty is likely to arise in the method of accounting which the Commissioner of Income Tax considers should have been adopted by the assessee. He apparently desires the assessee in each year to estimate his losses on the stock of shares in question. Any such system, it seems to us, might prove a highly unsatisfactory one. The market price of shares on the stock exchange vary immensely even from day to day and any such system, based on the idea of arbitrarily closing accounts on a certain date, might prove a highly artificial and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to the loss of ₹ 3,564 in respect of the Katni shop. 14. The fourth question referred for decision is whether the loss of ₹ 22,676, incurred in connexion with the value of bags of wheat, at the Jubbulpore shop should have been allowed. At the beginning of the account year the non-applicant found himself with 2,227 bags on hand and took credit for these at the actual price he had paid for them, viz. ₹ 20 a bag. The Commissioner of Income Tax, however, only allows ₹ 10 a bag, as he finds that in the year in question that was their actual market value. If the Commissioner of Income Tax is correct in his estimate of the value, it follows that in the preceding year or the previous one, the non-applicant must have incurred a loss of ₹ 10 per bag in connexion with the said stock. Admittedly, this was never claimed and, as the assessee had in previous years neither showed profits nor claimed losses in this stock, we are of opinion that every consideration of justice and equity required that the stock should be valued at the original price paid by the assessee for it, if we are to arrive at a really correct and not an arbitrary calculation of its profits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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