TaxTMI 
TaxTMI 
2014 (3) TMI 333
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....ts a departure from the past is not in dispute. The ld. CIT(A) has accepted the assessee's claim on the ground that the said change in its method of accounting by the assessee is a bona fide change and, thus, could not be validly objected to by the Revenue. In our view, the same does not represent a method of accounting, so that there is, firstly, no question of any change therein. Reference in this context may be drawn to the decision in the case of CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122 (SC). The assessee, as in the past, continues to book the detention/demurrage charges on incurring the same. The only question is whether the same ought to be included in working the cost of the goods on which the same stands incurred, i.e., where held in stock as at the year-end. The inclusion in the past was on the ground that the same, being for the delayed removal/clearing of goods, represents a storage cost, so that it is a part of the cost of the goods (raw material) to the assessee. We could not disagree more. Neither the principles of commercial accounting, which would apply in the absence of any specific provision in the Act in the matter, prescribe so nor the Accounting S....
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.... a holding cost, and it would be more appropriate to consider it as a cost for the delayed removal of goods, i.e., beyond the stipulated period. The same thus is only a revenue expenditure of the period to which it relates and no more and, thus, not liable for inclusion in the value of the goods from any stand point. As regards the objection by the Revenue with reference to section 145A of the Act, the same deserves to fail. This is as even if the detention/demurrage charge is considered as not arising on account of a contractual obligation, but a statutory one, i.e., as in the nature of a levy or impost (which would though need to be established), it would stand to be included u/s. 145A only where it represents a qualifying cost - which we have found it as not, and not otherwise. 3.2 The ld. Departmental Representative (DR) placed reliance on the decision in the case of CIT vs. British Paints India Ltd. [1991] 188 ITR 44 (SC). The said reliance by the Revenue, even as observed by the Bench during the course of hearing, is misplaced inasmuch per the same it stands clarified that it is only the correct method of valuation (of inventories) that is to be followed, irrespective of th....
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....s a change has been validated for the current year, an exception to the principle of uniformity in the valuation of the closing and opening stock for that year would have to be drawn. These and the like arguments would thus suggest non-disturbance of the value of the (opening) stock as carried forward from the preceding year, even though the same may not be valid, subject of course to the change in the method of valuation being bona fide. At the same time, however, it cannot be denied that this aspect of the matter forms part of the decision by the apex court in British Paints India Ltd. (supra). In the facts of that case, the A.O., whose action stood approved by the hon'ble court, had applied the changed/revised method of valuation to both the opening as well as the closing stock, and worked out the income of the assessee for the years under reference on that basis. Without doubt, the inclusion of production overhead cost (in valuing WIP) to the opening stock for the first year altered its value from that adopted in its respect for the immediately preceding year, i.e., as the closing stock for that year. Again, whether the change in value stood made at the instance of the A.O....
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....rent from a bare browse thereof, are also rendered prior to the decision by the apex court in British Paints India Ltd. (supra). Rather, we observe this to be the consistent view of the courts of law when such matters came before them, as for instance in the case of CIT vs. Mahavir Aluminium Ltd. [2008] 297 ITR 77 (Del). The Revenue, seeking to revalue the closing stock for Modvat credit in view of section 145A, the hon'ble court held that the opening stock would also have to be valued likewise, irrespective of the closing stock for the immediately preceding year having been valued excluding the same, referring to the guidance note issued by ICAI. True, it could be argued that s. 145A is not applicable in the instant case, as it was in that case. However, the principle extends beyond the application of s. 145A per se, which itself incorporates the said principle, i.e., of like valuation of the opening and the closing inventories, with we having found, on the basis of legal precedents, that this may not necessarily obtain when the change is from one valid basis to another. This is as a change in profit would then be a concomitant of the change in the method of valuation and, fur....