Case Law Details
Case Name : Commissioner of Income Tax, Vs M/s. Dynavision Limited (Supreme Court of India)
Related Assessment Year :
Courts :
Supreme Court of India
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The supreme court has upheld the principle of exclusion of excise duty component from valuation of closing stock in the case of Dynavision Limited (SC). The important principle laid down in the case of Chainrup Sampatram (24 ITR 481 (SC)) & Hindustan Zinc Ltd (291 ITR 391 SC)) has been reiterated in its decision :
“That, the true purpose of crediting the value of unsold stock is to balance the cost of the goods entered on the other side of the account at the time of the purchase, so that on cancell Please become a Premium member. If you are already a Premium member, login here to access the full content.
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Stock valuation aspect has at most impact of deferring tax liability for few months. In real sense the deferment is only for three months. In case by lower stock valuation assesse get tax benefit in first year, then he has to pay higher tax in second year.
He can save interest for few months. This is because in case of first year he has to pay advance tax by 15th march and self assessment tax by 30th September.The tax saved in first year become payable for next year because income of next year will increase by the same amount by which income of first year is reduced due to stock adjustment.For second year first installment of advance tax is due on 15th June.Therefore, there is hardly any revenue impact in real sense.
Revenue should not dispute on matters which have only impact of deferment of tax for few months or say even one year. However disputes are being raised about stock valuation, allowability of sum paid in first year or second year, due to application of some provisions like S.43B, depreciation allowance etc.
In case of assesses who has suffered loss and there is not even set off of loss in near future, there is no purpose to make such additions which have only deferment of allowance. In such cases , in fact assesses is benefited if a deduction is postponed to a future year as life of loss pertaining to such amount get extended.