2019 (3) TMI 395

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....rcumstances of the case, ought not the Tribunal have held that the revaluation of certain old inventories which were obsolete and non moving items of spares was in accordance with law? (ii)Whether in the facts and circumstances of the case the assessee was entitled for deduction of the written off value of the obsolete spares and stores? 2. The undisputed facts are that the assessee, a public sector undertaking, had been valuing its assets in the balance sheet. On a verification of the accounts by the Comptroller and Auditor General (C&AG), it was found that the assessee had been valuing assets which had become obsolete. There was also an audit objection raised insofar as the valuation as revealed from the balance sheet of the a....

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....ee in (1964) 51 ITR 329 [Forest Industries Travancore Ltd. v. Commissioner of Income Tax, Kerala] was distinguished insofar as the decision having proceeded on the premise of a concession by the Department as to the spares being stock in trade. The decision of the Apex Court in (1991) 188 ITR 44 (SC) [Commissioner of Income Tax v. British Paints India Ltd.] was found to be of no help to the assessee insofar as the decision having found the income tax officer to be justified in rejecting the books of accounts if the ordinary principles of commercial accounting are not followed. 4. In the present case, the AO found the following reasons to decline the claim. (1) The assessee altered the method of accounting inventory in the previo....

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.... appellate authority. The Tribunal agreed with the observations of the CIT (Appeal) in the earlier years, insofar as 20% alone having been declined as scrap value for obsolete spares revalued in those years. Adopting the very same reasoning, the assessee was permitted 80% of the claim with respect to 100% devaluation claimed items, again, apportioning 20% as the scrap value of such items. However, with respect to the items in which 50% devaluation was claimed, the Tribunal found that the committee had not spoken of the utility value or about the physical condition and the 50% devaluation was recommended by the committee without doing any realistic appraisal of each of the items included in the list of 313 items. 7. Before we look at the ....

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..... This works out to the prejudice of the revenue, but that sole reason cannot result in it being disallowed. The valuation was an accepted practise and it was necessitated as the situation warranted a revaluation of obsolete stores and spares. The method of revaluation cannot be faulted for reason of it having been accepted by accounting principle AS-2. The assessee had also carried out a similar exercise of devaluation in the earlier years, which were allowed to the extent of 80%, the 20% being disallowed as scrap value. 9. The decisions of two other High Courts were also relied on by the assessee. (2015) 375 ITR 276 (Bombay) [Commissioner of Income Tax-1, Mumbai v. Indian Rare Earths Ltd.], considered the issue of non-moving stores and....