Law: Income Tax Act, 1961

Section: 145

I. Section 145 of the Income-tax Act, 1961 - Method of accounting - Valuation of stock (Change of method) - Assessment year 1991-92 - Whether where assessee changed its method of accounting for valuation of closing stock, since changed method of accounting was more scientific and did not result in any evasion of tax, addition made on account of closing stock was unjustified - Held, yes[Paras 6 and 7] [In favour of assessee] II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of(Gratuity) - Assessment year 1991-92 - Assessing Officer observed that amount of gratuity which assessee had returned back was not pertaining to any particular assessment year but relating to many assessment years and assessee had not given any break up of year-wise gratuity written back, and, therefore, amount was added back during current year - Assessing Officer in its order had observed that if said amount was pertaining to assessment years 1984-85 onwards, assessment order would be rectified on this point to that extent - Whether since none of parties was able to tell whether any rectification was made out or not, matter was to be readjudicated to examine whether claim was merely a written back or actual payment - Held, yes [Para 14] [Matter remanded] III. Section 28(i) of the Income-tax Act, 1961 - Business loss - Allowable as (Penalty) - Assessment year 1991-92 - Assessee was under an obligation to provide sugar produced in its factory for purpose of export in terms of Sugar Export Promotion Act, 1958 - Said scheme provided that sugar mills would have to export sugar, failing which an amount would have to be paid - As assessee had not provided sugar for export, an amount was paid to Government and same was claimed as business loss - Assessing Officer disallowed same - Whether if amount in question was penal in nature, then same could not be allowed as business loss and if it was optional either to export sugar or to pay amount, then same could be allowed as business loss - Whether since it was not evident that amount in question was penal in nature or not, matter was to be readjudicated - Held, yes [Para 17] [Matter remanded] CASE REVIEW-I CIT v.…

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