Inventory write-off for obsolete stock allowed when supported by audited accounts and identifiable stock particulars.

An inventory write-off for obsolete, damaged and expired traded goods was held allowable where it was duly reflected in audited financial statements and supported by stock details and notes to accounts. The Tribunal accepted that identifiable stock particulars and proper disclosure in the accounts established the factual basis for the write-off, and held that disallowance could not be sustained merely on the assumption that the stock had already been valued at cost or net realisable value. On that reasoning, the disallowance was deleted in favour of the assessee.

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Issues: Whether the disallowance of deduction claimed on account of inventory written off as obsolete, damaged and expired traded goods was sustainable.

Analysis: The assessee's inventory write-off was reflected in the audited financial statements and supported by stock details and notes to accounts. The material on record showed that the write-off related to traded goods treated as obsolete, damaged and expired stock, and the Tribunal accepted that the deduction had been properly disclosed in the accounts. The principle applied was that where inventory write-off is supported by audited records and identifiable stock particulars, the disallowance cannot be sustained merely on the view that the stock had already been valued at cost or net realisable value.

Conclusion: The disallowance of the inventory write-off was deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: An inventory write-off is allowable when it is duly supported by audited accounts and identifiable stock particulars, and cannot be disallowed merely on the assumption of double benefit without a contrary factual basis.

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