1998 (7) TMI 37

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....st price. No statutory rule requiring valuation on that basis has been relied upon to support that contention. Counsel for the Revenue sought to infer such a requirement from the law laid down by the Supreme Court in the case of A.L.A. Firm v. CIT [1991] 189 ITR 285. That was a case where the partners had valued the stock-in-trade at the time of dissolution at the market rate, but had disputed the liability for tax on the amount by which the value of stock-in-trade exceeded the cost price, on the ground that the income was only notional. The Supreme Court while considering the plea elaborately considered the manner in which the stock-in-trade is to be valued and after referring to the decisions of the Supreme Court in the cases of Chainrup....

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....d from that exception. What was said in the context of a dissolution of a firm for the purpose of ensuring the proper adjustment of the rights of the parties entitled to share in the assets of the firm cannot be extended to a case where a proprietary concern is transformed into a partnership firm and the closing stock of the proprietary business is treated as part of the capital contribution of the erstwhile proprietor by valuing the stock in the manner in which it had been valued in the books of the proprietary concern, viz., the cost price. There is no rule as already observed which provides that the stock-in-trade of a proprietary concern when brought into a partnership firm as part of the capital contribution, should be valued at the ma....