TaxTMI 
TaxTMI 
1925 (1) TMI 4
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....ch he supposed to arise from the facts as set out in the Commissioner's report. With great respect to the learned Judge, I do not think that the question he framed was the real question raised in the case, and I think that the question as he has framed it is so beset with assumptions and begged questions that it would be impossible to decide fairly what the real point in this case is by any answer that could be given to the highly involved question he formulated. The facts here are very simple. The assessees are a firm of piece-goods merchants in this city and they keep their books and render their accounts to the income-tax authorities in what is known generally as the mercantile system of accounts. It is obviously a very rough and ....
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....se pieces were valued down to Rs. 6 a piece. The result was a trading loss of just over a lakh and I ought to remark, because it has a bearing on what I am going to say later, that if those goods had been put down at Rs. 13-8-0 a piece, their cost price, there still would have been a trading loss of some Rs. 45,000; so that the assessees really stood to gain nothing if the figure of Rs. 6 was an undervaluation. Now comes the next year. In that year they start off their debit side to stock on the 13th of April, 1922, 7,573 pieces at Rs. 13-8-0 a piece by which means they work out, a loss of Rs. 15,000 and odd. The contention of the income-tax authorities is that the stock on the opening of the account must be put at the same value as it was ....
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....course of the argument. Supposing in the year 1921-22 the assessee had underwritten his loss with a firm of underwriters-I believe there are underwriters who will guarantee trading losses-and at the end of the year he goes to his underwriter and says :-I bought at Rs. 13-8-0 a piece ; this stock was worth Rs. 13-8-0 a piece at the beginning of the year ; it is now worth Rs. 6 ; Rs. 7-8-0 is my loss ; please pay me Rs. 7-8-0 ; I do not now what defence the underwriters would have to that claim. Suppose that he goes again next year to the underwriters with the same purpose of having his trading loss underwritten, what are the underwriters going to say if he says that the value of the same stock is Rs. 13-8-0 a piece ? The underwriters would s....
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....e goods in toto for perhaps a course of years. That cannot be permitted. If these goods had been valued at Rs. 6 and the market had gone down to say Rs. 4 he would of course be entitled in this trading year to treat the difference between Rs. 6 and Rs. 4, i.e., Rs. 2 as another loss justly debited to this year. But in the event of the price going up above the market rate at the beginning of the year which we must take as an accurate valuation, the difference is his profit. In our opinion, the answer that we should return to the question is that the assessee, having elected in the previous year to value his stock at the market price of Rs. 6 a piece for the purpose of showing his trade loss during that year, is not entitled in the succeed....
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.... The assessee had a large stock of piece-goods, 12,570 pieces, at the beginning of 1921 which he says he bought at Rs. 13-8-0 per piece. At the end of the year the value of these goods fell in the market to Rs. 6 per piece according to his own statement. In submitting his statement to the income-tax authorities for the year April 1921 to March 1922 (Exhibit A) he has taken into account the falling price in the market for the whole stock in calculating his loss for the year though he had not sold all the stock. He has treated the remaining stock in his hand at the end of the year, 7,573 pieces, as being worth only Rs. 6 a piece and on that footing he has estimated his loss. In the next year instead of taking that stock as being worth Rs. 6 a....