Captive consumption valuation requires profit addition based on period-wise actual profits, not a flat uniform percentage.

Profit is a relevant element in valuing captively consumed goods, because assessable value for goods not sold should reflect cost of production or manufacture including the profit the assessee would normally earn on sale. The profit addition, however, cannot be fixed on an arbitrary uniform rate across all periods. It must be determined period-wise by reference to the actual profit shown in the balance sheet and profit and loss account for the relevant assessment period, rather than by applying a flat percentage for every year.

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Issues: Whether, in valuing goods captively consumed for further manufacture, profit must be added to the cost of production and, if so, whether a uniform percentage of profit from one period can be applied for all assessment periods.

Analysis: The valuation of goods not sold by the assessee is governed by the cost of production or manufacture including profits, if any, which the assessee would normally have earned on sale of such goods. Profit is therefore a relevant element in the assessable value of captively consumed goods. However, the percentage of profit to be added cannot be fixed arbitrarily or uniformly for all periods without reference to the actual profit shown for the relevant period. The proper approach is to adopt the profit reflected in the balance sheet and profit and loss account for the respective assessment period.

Conclusion: Profit is to be added to the cost of captively consumed goods, but the addition must be worked out period-wise on the basis of the profit attributable to the relevant period and not by applying a flat 6.97% for all years.

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