TMI Blog2022 (2) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... of the period for which it is contracted to be stored. Of course, it stands clarified that this does not give rise to any general proposition, being essentially a question of fact as to the accrual or the vesting of the right to receive in the given, undisputed facts and circumstances, and it was well open to the parties to, independent of the time set for the payment of charges, agree differently on the terms of the accrual or the vesting of the right to receive. It stands accordingly held that in the given facts and circumstances of the case no part of the cold storage charges for the business cycle Feb. - Nov. accrues on the part performance of the contract by the cold storage upto March-end. That being the case, the direct, input cost on the said part performance of the contract for the months of February March shall be set aside as 'closing stock' for being adjusted on the accrual of the corresponding income, with a similar adjustment being made for the opening stock, and for the same reason, altering thus the returned income to the extent of a difference between the two. Not so doing, it is explained, would result in the profit of one period being transferred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made by the Revenue for the said year, up to assessment year 2004-05, whereafter only the Tribunal, following the order by it in another case (M.B. Cold Storage Pvt. Ltd., in ITA No. 680/Lkw/2009, dated 19/5/2010), confirmed the adjustment to the assessee's income, violating the principle of consistency. He was, however, on inquiry, unable to show the Revenue having, on examining the issue under reference, issued a finding upholding the basis of the recognition of income, i.e., without any adjustment either for revenue or expenditure, for any other year. The 'assessment' for AY 2008-09, as also for AY 2006-07, it was on inquiry clarified by him, to be not regular assessments, but only processing of the returns of income u/s. 143(1), and which explains the non-appeal for these intervening years. On the Bench further stating that it was, nevertheless, bound by the decision by the Division Bench (DB), he would submit that he shall demonstrate (or attempt to) that the only issue involved in the instant appeals is the application of the well-settled (by a series of decisions by the Apex Court) law, to the undisputed facts of the case and, further, which, despite being rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or the removal of the produce, if earlier. The assessee is constrained both by custom as well as the terms of the contract, as indeed by the directions of the State Government and the District Authorities in the matter, which decide not only the 'rent' period, but also the rate/s as well as the time of the receipt aforesaid, and for which he would take the Bench to the documents substantiating the same, being the receipt issued by the assessee (PB pg. 58); the order dated 27/1/2009 by the Pr. Secretary, State Government (PB pg. 56); and the reply dated 22/6/2010 by the Potato Development Officer, Farukhabad to the assessee's letter of even date clarifying that cold storage charges are not recovered in advance (PB pg. 59). The directions by the Administration are principally to protect the interest of the small farmers, i.e., vis- -vis the cold storages, apprehending their dominant status qua the farmer-customer. It is, therefore, only on the conclusion of the contract period, which is generally from October 15 to November 30, that the cold storages, as the assessee, are, subject to the non-removal of the goods earlier, entitled to receive the cold storage charges, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct also holds like-wise, i.e., that the accrual of income is on the basis of the amount becoming due. The Tribunal, however, has omitted to consider that it is only on being 'legally due', as stated therein, that the right to receive inures, and proceeds to determine accrual of income on the basis that the assessee is following mercantile method of accounting, as was the case in M.B. Cold Storage (supra). The same is not to be confused, he would explain, with the due date of recovery of a debt, the right to receive which, even if at a later date, has already vested, as in the case of sale of goods on credit basis. In that case there is a transfer of property on the delivery of goods, resulting in accrual of the right to receive, which is though kept in abeyance for the period of the credit. It is, in that case, a subsequent discharge of an existing debt. In the instant case, on the other hand, the contract is incomplete as on March 31, and the assessee has not performed its' part of the contract, i.e., keeping the potatoes in a good, marketable condition up to November 30 or, at the option of the farmer, up to the removal of goods at an earlier date. It is not the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally due or not, having been incurred, a provision in its respect is, in view of the matching principle, admissible. This is as the concept of income itself signifies only net income, i.e., net of expenditure there-against. That, in fact, it was added, is the whole basis of the concept and accounting for closing stock (as at the year-end). Shri Singh would, upon seeking time, respond by relying on the decision in Taparia Tools Ltd. vs. Jt. CIT [2015] 372 ITR 605 (SC), reading out the relevant part thereof, wherein the Apex Court, after considering and distinguishing the decision by it in Madras Indl. Inv. Corp. Ltd. (supra), held that an expenditure stands to be deducted on incurring the liability in its respect irrespective of any other consideration, including therefore the accrual or otherwise of the corresponding revenue, or the period of utilization of the resource in respect of, or the service against, which it is incurred. Though rendered in the context of interest expenditure, the same would be valid for any other expenditure. 3.5. The ld. Sr. DR, Shri Kumar, would, after obtaining time to respond, submit that the facts of the case at hand are identical to that for A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law relied upon before it, with there being, again, nothing to show of any consideration of the case law relied upon before it by the Tribunal in M.B. Cold Storage (supra). The said orders by it are thus sub silentio qua the said decisions; rather, even the issue at hand, i.e., whether any part of the income by way of cold storage charges for the contract period ending November 30 (of the following year) accrues to the cold storage during the (relevant) previous year ending March 31 in the facts and circumstances of the case? As explained in State of UP vs. Synthetic and Chemicals Ltd. [1991] Scale (2) 110 [SCC (4) 139] (PB pgs. 45-68), a decision which is not express and is not founded on reasons nor it proceeds on a consideration of the issue, cannot be deemed to be the law decided so as to have a binding effect. 3.7. The hearing was closed at this stage, rejecting Sh. Kumar's feeble plea seeking time for answering the argument as to sub silentio by Sh. Singh, as without merit. As explained thereat, the non-binding effect of the earlier orders by the Tribunal in it's facts and circumstances, and the law in the matter, is basic to the assessee's case, the onus to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in any case, liable to be challenged before the Tribunal. It is not for this Tribunal to insist either party for an early disposal of the matter by the Hon'ble High Court which, though in the interest of all concerned, is for the parties to decide. For the lower Court, which would, rather, ordinarily follow its' earlier decision, maintaining thus a status quo, it would suffice that the matter is pending adjudication by the higher Court, which was confirmed as so by Sh. Singh and, rather, is the basis of the argument by Sh. Kumar. The proposition is well-settled, and for which I draw support from the decision in K.N. Agarwal v. CIT [1991] 189 ITR 769 (All). Why, Sh. Kumar, as clarified from his answers to the queries by the Bench, had no objection to the appeals being heard were the earlier order by the Tribunal, upholding the Revenue's case, to be followed, and which could certainly not be pronounced upfront, but only upon a careful consideration of the case of either party before it, including of course as to the law of precedence. The earlier orders by the Tribunal 6.1. Next, I may consider the matter from the standpoint of the rule of precedence, a decision b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the storing of potatoes and ends with the return of stored potatoes. For storing the potatoes the assessee is charging rent. However, the rental income is accounted for at the time of uplifting of potatoes by the farmers. The cycle starts from the loading of the potatoes in the month of January to March. Thereafter, potatoes are stored for the month of April to September and lifting takes place from October to December. In the Income Tax matters, an income pertaining to a previous year is taxed in the assessment year, the previous year is defined in section 3 of the I.T. Act, 1961 which means the financial year immediately preceding the assessment year. In the present case, the assessment year is 2006-2007 which starts from 1 April 2006 and ends on 31 March 2007. The previous year, therefore, starts from 1 April 2005 and ends on 31st March, 2006. So in the instant case the taxable profit earned by the assessee from 1 April, 2005 to 31 March, 2006 is chargeable to tax in the assessment year 2006-2007, however, for charging the profit to tax, a method of accounting followed by the assessee is to be kept in mind, the method of accounting to be followed has been prescribed in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me liable to pay, though he has made no payment then. The profit thus computed is, obviously, the profit earned, not realized, and similarly, the loss computed is the loss sustained not paid. 8.2 The Hon'ble Supreme Court in the case of Keshav Mills Ltd. vs. CIT (1953] 23 ITR 230 observed that the mercantile system of accounting or what is otherwise known as the double entry system is opposed to the cash system of book keeping under which a record is kept of actual cash receipts and actual cash payments, entries being made only when money is actually collected or disbursed. That system bring into credit what is due, immediately it becomes legally due and before it is actually received and it brings into debit expenditure in respect of which a legal liability has been incurred before it is actually disbursed. The profits or gains of the business which are thus credited are not realized but having been earned are treated as received though in fact there is nothing more than an accrual or arising of the profits at that stage. They are book profits. Receipt being not the sole test of chargeability and profit and gains that have accrued or arisen or are deemed to have accrued o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out the income of ₹ 11,15,482/- which is required to be considered for year under consideration. At the same time, the assessee is entitled to the set off of the income which had already been included in this year, i.e., income from January to March, 2005. We, therefore, direct the Assessing Officer that the benefit of the aforesaid set off of the income is to be allowed against the addition made by him. Since the assessee had realized rent of ₹ 36,74,610/- for the potatoes uplifted in the financial year 2005-2006 which also included the period of 1 January, 2005 to 31 March, 2005, therefore, the assessee is entitled to the set off of ₹ 9,18,652/- (1/4th of ₹ 36,74,610/-) against the addition of ₹ 11,15,482/- (1/4th of ₹ 44,61,930/-) which has been worked out by the Assessing Officer out of rent realized at ₹ 44,61,930 for 49,577 bags loaded in the financial year 2006-2007. The said income of ₹ 11,15,482 is not to be considered in the subsequent year since it has been considered in the present assessment year i.e., assessment year 2006-2007. In this manner, an addition of ₹ 1,96,830/- (₹ 11,15,482 - ₹ 9,18,652) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted during the currency of the period for which goods are agreed to be stored therein. This is not only in accordance with the accrual system of accounting but also the 'matching concept' which requires that costs should be accounted for in such quantum and period which is directly related to be income for which they are being incurred. The reverse also holds true. Therefore, since the costs are being incurred on the cold storage facility throughout the currency of the period for which it is let, the total rental received for the same should also be accounted for as income on a period on proportionate basis. In the case of the assessee company, the income of cold storage rent is charged for one complete cycle irrespective of the period for which the potato was kept in the cold storage. Thus, as the rent is directly related to the complete cycle period or say season the income should be proportionately apportioned on the basis of the period of completed cycle. (emphasis, supplied) The same passage in fact also appears, as part of the AO's reasoning, reproduced at para 5 (pgs. 4-8), of the Tribunal's order for AY 2005-06 (at pg. 6). 6.2. There is, as ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rent weighed with the Tribunal in deciding in the manner it does. In which case, the issue arising for it's consideration would be as to whether an income in the nature of rent (on which there is it is emphasized no finding by the Tribunal), i.e., a period income, would accrue over time, independent and irrespective of the contract between the parties. And which bring us back to the terms of said contract, conspicuous by any reference in it's orders by the tribunal, as indeed the delineation of issue afore-stated. Viewed from any angle, thus, its' orders are distinguishable, and cannot per se be regarded as binding precedents; rather, a binding president inasmuch as the latter order merely follows the earlier one. Further still, there is also no consideration of the case law relied upon by the assessee before the Tribunal, which has been aplenty, for which reference is drawn to para 10 (pg. 12) and para 5 (pg. 14) of its' orders in the assessee's case for AY 2005-06 and in M.B. Cold Storage (supra) respectively; the principal case law cited in the former being also E.D. Sassoon Co. (P.) Ltd. (supra); CIT v. Gajapathy Naidu A. [1964] 53 ITR 114 (SC); CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting of the rent income 'accrued' during the year, i.e., to the proportionate extent. In sum, therefore, the decision by the Tribunal is predicated on the hire charged by the assessee, or the cold storages in general, as qualifying to be in the nature of rental income, which is charged per unit of time or, being charged for a period of time, could be so imputed, so that, either way, it inures or arises proportionately, i.e., in the proportion of time and, accordingly, is liable to be accounted for or recognized as income on time basis. This is as in such a case 'time' becomes the basis, the essential ingredient, for which the charge is made, as for ten months, beginning February 01, up to November 30, of the current year in the instant case, which though happens to fall in two previous years corresponding to two consecutive assessment years, resulting in the controversy over the year in which the income of the fourth quarter of the financial (previous) year is to be assessed to tax. The first question that therefore arises is if it is indeed in the nature of rent, as regarded by the Tribunal in the assessee's own case for AY 2005-06 and in M.B. Cold Storage (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngside and in addition to storing the goods and, thus, use of house property to that extent. However, the said processes, as refrigeration, or labour for maintenance or other minor processes that may be required, though essential, being only toward the said preservation, are again incurred in relation to time, or principally so. Why, even in case of rental income, the owner may be obliged to carry out repairs to, or otherwise incur expenditure for the upkeep of, the house property let - and which are, rather, not linearly related to time, so that the said income may also not be wholly passive in nature, but principally so. In fine, the income under reference has all the incidents of a period income, even if payable (or receivable) at the end of the period. No wonder the hire charge is raised for a defined period per unit (of quantity), as per bag (of potatoes) inasmuch as the same consumes a definite space. Both the elements of rent, i.e., making available a resource, and for a definite period of time, are thus present. There being no separate consideration of or finding by the Tribunal in the matter, as the same forms the basis of its' orders, even if by way of an obiter dicta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts' decision, that would throw light on the principle/s applied and, further, constitute the ratio decidendi of its' decision, attracting the doctrine of precedence. This is the subject matter of well-settled law, explained once again in the context of a case under the Act by the Apex Court in Mavilayi Service Cooperative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC), to which therefore reference is drawn. While holding that it is only the ratio decidendi of a judgment that is binding as a precedent, it explains that it is the statement of the principles of law applicable to the legal problem disclosed by the facts that alone is the binding ratio of a case. And that the judgment itself, based on the combined effect of the statement of the principles of law applicable to the material facts of the case cannot be described as the ratio decidendi of the judgment. Nor can, it further explains, it be said that it (ratio decidendi), which alone has to be given effect, would follow logically therefrom. With respect, i find myself unable to discern the ratio decidendi, as explained by the Apex Court, of the said orders by the Tribunal for being adopted following the rule of precedence; its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assing of the accounting entries, that determines whether an income has accrued or not, which depends on the satisfaction or otherwise of the test of accrual in the given facts and circumstances, requiring, thus, the delineation, followed by consideration, of the material facts. As explained per its' several decision by the Apex Court, rather than being determinative of the fact of accrual, once an income has accrued, necessary accounting entry is to be passed in the books of account, booking the said income, where the method of accounting is mercantile (viz. CIT v. Chuni Lal Mehta [1971] 82 ITR 54 (SC); Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 835 (SC); CIT v. Birla Gwalior (P.) Ltd. [1973] 89 ITR 266 (SC); Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC); Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746 (SC); Taparia Tools Ltd. (supra)). As such, rather than being the 'cause', an accounting entry booking income in accounts is the 'effect' of the accrual of income, which is largely a question of fact, i.e., in view of the clear, settled law of it being signified by the vesting or even the accrual of the right to receive, and toward which, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damental to 'rent'. This aspect stands also considered by the Board in regarding cold storage charges as not 'rent', i.e., for the purposes of TDS, as no right to use any specific portion of the cold storage arises to the customer, who therefore cannot be regarded as 'tenant'. In the instant case, on the other hand, services, which include, besides storage, refrigeration and, as explained by Shri Singh during hearing, manual reshuffling of the potatoes from time to time, though required to be and, thus, carried out and, further, only evenly over time, cannot be said to be 'availed of' or 'received' by the farmer, who has only contracted to receive the goods (potato) at the beginning of the marketing season in October-November, so that his potato is to be necessarily preserved by the cold storage up to that time, i.e., as clarified, latest by November 30. It is therefore only on the preservation of potatoes, i.e., in good, marketable condition, up to that time, that assessee has made good his promise. And is, accordingly, entitled, in terms of both, its' contract as well as custom, to receive the cold storage charges. Further, even as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; (vendor). Income, it may be appreciated, can only flow from another and, accordingly, requires for its accrual, incurring corresponding liability by him. Reference here may be made to the decision in CIT vs. Excel Industries Ltd. [2013] 358 ITR 295 (SC), wherein the Apex Court referred to its decisions in Birla Gwalior (P.) Ltd. (supra); CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 (SC); Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC); Jodha Mal Kuthiala (R.B.) v. CIT [1971] 82 ITR 570 (SC), among others, to hold as under: 'It is well-settled that income-tax cannot be levied on hypothetical income. Income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purpose of taxability that the income is not hypothetical and it has really accrued to the assessee.' 7.5. It could, I am conscious, be argued that the goods (potato) lying with the assessee-cold storage, inasmuch as the assessee acquires a lien over it, i.e., qua, and to the extent of, the cold storage charges, the same is (or can be considered as) a consideration for the said charges by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; as no one would, at least ordinarily, incur more cost on storage than the value of the goods stored, more so where the same are perishable in nature. 7.6. There is, as such, in the given facts and circumstances, i.e., the nature and peculiarities of the contract, including the essence of time, no accrual of income (cold storage charges) over time, and no right to receive the same accrues, much less vests in the assessee on the part performance of the contract. Answering thus the issue arising (refer para 7.4), i.e., in the negative. No adjustment qua any part of the gross revenue for the business cycle/contract period (February-November) is to be made for the year ending March. No corresponding adjustment, consequently, is to be made for the preceding business cycle. Of course, I may hasten to add that it is equally permissible for the parties to agree differently, in which case the same would prevail. Here it may be relevant to refer to Calcutta Co. Ltd. (supra). In the facts of that case, the assessee, a land developer, accepted part payment from the buyers of the plots of land, crediting, however, the full amount of sale in its' books; the sale deeds bearing the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh system. In its words: (pg. 239) 'That system brings into credit what is due, immediately it becomes legally due and before it is actually received and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed.' This, however, is not in issue in the instant case, being rather a part of the well-settled law and, in fact, representing a common ground between the parties. That apart, the Tribunal does not, with respect, state as to when, therefore, the cold storage charges become legally due to the assessee in the facts and circumstances of the case, which, where so, would have in all probability; the facts being not disputed, led it to an acceptance of the assessees's case. 7.7. The question that arises next is if any adjustment qua expenditure, primarily direct expenditure, being, as explained by Shri Singh during hearing, as principally on labour, fuel and power, incurred during the period February-March is to be made with a view to determine correctly the profits and gains of the cold storage business for the year ending March. Shri Singh would, on this question being posed by the Bench during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The matching concept is a principle for recognizing costs (expenses) against revenues or against the relevant time period in order to determine the periodic income. This principle is an important component of accrual basis of accounting. The object of another accounting standard, viz. AS 22 is to reconcile the matching principle with the fair valuation principles. It may be noted that recognition, measurement and disclosure of various items of income, expenses, assets and liabilities is done only by Accounting Standards and not by the provisions of the Companies Act. The concept of timing difference introduced by AS 22 is of no help to the assessee here. This has to be read with the concept of deferred revenue expenditure and is a subject matter of different contemplation altogether. The provisions of s. 154(1A) and other appellate effect provisions are sufficient to rectify the apparent distortions of subsequent years and create a true picture of profits of the assessee. It is therefore incorrect to say that the question raised (by the Bench) is not germane or does not arise for consideration, being, rather, intrinsic to the determination of income, implying net of expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 481 (SC), that the closing stock itself is a source of profit or income. It is only on properly accounting therefor that the correct profit or, as the case may be, loss of the business for the accounting period can be determined, as only the cost in respect of goods sold, i.e., income qua which only had accrued, could be properly setoff there-against to ascertain the income on the sales during the accounting period. The concept of stock accounting is independent of the method of accounting, as explained by the Apex Court in CIT vs. Krishnaswami Mudaliar A. [1964] 53 ITR 122 (SC), also referred to by the Bench during hearing, which was a case where cash system of accounting was being followed by the assessee. In its' words: 'Whichever method of book-keeping is adopted, in the case of a trading venture, for computing the true profits of the year the stock-in-trade must be taken into account. If the value of the stock-in-trade is not taken into account, in the ultimate result the profit or loss resulting from trading is bound to get absorbed or reflected in the stock-in-trade unless the value of stock-in-trade remains unchanged at the commencement of the year and the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and not the period to which it relates, even as clarified in Calcutta Co. Ltd. (supra). This also agrees with the concept of conservatism, a fundamental accounting assumption. Future being uncertain, such expenditure is ordinarily not carried forward, and it is only in exceptional circumstances, as where there is no relation between the expenditure and the income for the relevant period, causing a material mismatch, that the said expenditure is deferred in accounts, the prime example being advertisement expenditure. One may not, if only to eschew digressing from the issue at hand, dwell further in the matter. Suffice to state that accounts being prepared on a 'going concern' basis, expenditure on an activity or provision of resource would be sought to be correlated, to the extent possible, for being charged to the operating statement of the period to which the revenue from the said activity or the corresponding utilization of the resource is recognized in accounts, so as to enable ascertaining the correct operating results for a given accounting period. Here, again, conservatism being a paramount consideration in accountancy, this proposition would be subject to the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal, i.e., whether income in the nature of interest, rent, etc., i.e., period income, which is principally a function of time and, thus, inures with it, would accrue to the service provider with the lapse of time or only in terms of the underlying contract. Accrual of income being, it being well-settled, on the accrual or the vesting of the right to receive it, it is opined that it would be so only on the basis of the contract defining the rights and obligations of the parties inter se, so that the principle of accrual would apply to a period income as well. The matter is found to be governed by, inter alia, the decision in E.D. Sassoon Co. Ltd. (supra), wherein the terms 'accrue' and 'arise' stand explained to indicate, in contradistinction to 'receive', as the 'right to receive'. Further, in the context of the facts of that case, the Hon'ble Court held that on a true construction of the managing agency agreement, also referring to sec. 219 of the Contract Act, the contract of service between the managed company and the managing agents was entire and undivisible. The remuneration or commission became due from the company to the managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders by the Tribunal on earlier occasions, including in the assessee's own case for an earlier year, which were by its' Division Bench, the same were relied upon and pleaded for being followed, being, as argued, binding on a SMC Bench. It was, however, found that there had been no statement of the general principle/s of law nor indeed of the issue or the legal problem arising, with even the relevant facts, material to the decision, being not as presented before the Tribunal - which can only decide on the basis of the facts brought forth based on the material on record, on the earlier occasions, which orders were thus sub silentio the relevant aspects/issues. Why, even in the instant appeals, the appellant's case, as presented, was not with reference to the accrual or otherwise of rental income in the given facts and circumstances of the case, i.e., as presently discerned by the Tribunal, resulting, consequently, in the statement of a different issue or legal problem arising for adjudication, i.e., from that presented before it. In fact, as found, the issue arises; the law being well-settled, only in view of the income under reference being a period income. It was un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the application of concept of closing stock (as also opening stock) in respect of the concomitant expenditure, i.e., even where the revenue generating activity is principally in the nature of services. The legal principle at work here is that it is the income of the relevant year alone that is to be ascertained and brought to tax for that year, and which is necessarily requires application of the concept of closing stock, and its non-application or undervaluation of closing stock (or overvaluation) would lead to transfer of profit/loss of one period to another. Reliance is principally placed inter alia, on Chainrup Sampatram (supra); Calcutta Co. Ltd. (supra); and British Paints India Ltd. (supra). 8.3. Each of the several decisions by the Apex Court referred to in this order is only to bring forth the well-settled principle/s of law explained and elucidated by it in fact per, rather, a series of decisions, so that they comprise the law of the land and, in fact, stand followed by the Hon'ble High Courts across the country. This reference to the decisions by the Apex Court, it is clarified, only toward establishing the authenticity of what is being stated in this order ina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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