Case Law Details
United Bank of India Vs CIT (Calcutta High Court)
The present accounting principle being followed by the bank is valuation of the closing stock on cost or market value whichever is lower. They want to apply this principle to the stock in trade acquired in the financial year i.e. 1984-85 prior to the assessment year in which the accounting principle was changed so that they could show the change in value of the closing stock and account for the losses accordingly.
The tribunal by its order dated 27th August, 1998, relying on the decision of this court in UCO BANK reported in 200 ITR 68(Cal) ruled that the assessee was not entitled to claim a different basis of valuation of closing stock of these shares and securities from the one adopted its books of accounts and audited annual accounts.
Supreme Court in United Commercial Bank, Calcutta -vs-Commissioner of Income Tax, West Bengal-III, Calcutta reported in (1999) 8 SCC 338 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 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.
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