TaxTMI 
TaxTMI 
2018 (2) TMI 508
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....he assessee is a limited company engaged in the business of dealing in shares. The assessee is also a registered non-banking finance company and is duty bound to comply with the prudential norms as notified by the Reserve Bank of India with regard to disclosure and presentation of its financial statements. The Ld. AO during the course of assessment proceedings noticed that the assessee company derived income from profit in share difference for Rs. 15,00,052/- and dividend of Rs. 40,750/-. The Ld. AO from the profit and loss account of the assessee noticed that the assessee had incurred net loss of Rs. 35,22,062/-. He further noticed that the said loss had apparently arose due to diminution in value of closing stock of shares as on 31.03.2004. The assessee had the closing stock of shares comprising of both quoted as well as unquoted shares. In respect of quoted shares, the assessee had valued the closing stock at the lower of cost or market price. In respect of unquoted shares, as directed by the Reserve Bank of India prudential norms vide notification no. DFC.119/DG(SPT)-98(as amended up to 01.10.2002) dated 31.01.1998, the assessee had valued the closing stock of unquoted shares a....
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....dential norms vide its notification dated 31.01.1998. It was further pleaded that Chartered Accountant in his report had categorically mentioned that there was no change in the method of valuation of closing stock adopted by the assessee during the year as compared to earlier years. 5. The Ld. CIT(A) appreciated the contentions of the assessee and granted relief to the assessee by observing as under: "Having considered the submissions of the appellant and the case laws relied upon I find that there is merit on the contentions of the assessee, and the AO cannot discriminate unquoted shares and quoted shares when it comes to valuation for the purpose of closing stock, as there are no such provisions which allow him to do so. I find merit in the contention of the assessee-appellant that the requirement of law is that for the value of the inventory, the method regularly employed is to be followed, as that there is no dispute over the fact that assessee's method of valuation of stock has been, "lower of cost and market value whichever is lower" and that the assessee company has regularly followed the same method of valuation of stock all along in the past. That the said meth....
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....ertificate for arriving at the breakup value per share together with its workings. We find that the assessee had placed reliance on the said CA's certificate and had accordingly valued its closing stock by adopting the breakup value per share as on 31.03.2004, as it was lower than cost of the unquoted shares. We also find from the accounting policy of the assessee company which are part of the audited financial statements and from point 1C enclosed in page 32 of the paper book on the accounting policy followed for 'stock-in-trade', the assessee had reported as under: "Current Investments are classified as "Stock of Shares" under Current Assets. Quoted equity shares are valued at lower of cost and market value and unquoted equity shares are valued at lower of cost & breakup value in accordance with prudential norms prescribed by RBI." We also find that the assessee has been consistently following this method of valuation of closing stock of unquoted shares without any deviation thereon as has been categorically mentioned by the Ld. CIT(A) in his order, which remained uncontroverted by the Revenue before us. In view of the aforesaid facts and findings we do not find any j....
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.... however did not heed to the contentions of the assessee and proceeded to uphold the disallowance made by the Ld. AO in this regard. Aggrieved, the Assessee is in appeal before us on the following grounds: 1. For that on the facts and circumstances of the case, the learned Commissioner of Income Tax(A)-23, Kolkata erred in sustaining the disallowance of interest of Rs. 5,31,000/- paid on loan used for purchase of shares of Ganpati Sugar Industries Ltd. which was part and parcel of stock-in-trade. 2. For that the learned Commissioner of Income Tax(A) should have held that the borrowed money was used only for purchase of shares being part of stock in trade as such the interest paid on such business borrowing should have been allowed as part of business expenditure u/s 36(1)(iii) of the I.T. Act, 1961. 3. For that the appellant craves to put in additional ground before or at the time of hearing of appeal. 11. We have heard the rival submissions. It is not in dispute that the borrowings were made by the assessee in the earlier years. It is not in dispute that such borrowed funds to the tune of Rs. 90 lacs. were used by the assessee for making advance towar....