Law: Income Tax Act, 1922

Section: 66(2)

Section 13 of the Indian Income-tax Act, 1922 - Valuation of stock - Assessment year 1953-54 - Assessee's stock of snake and crocodile skins lost both local and foreign market - Whether assessee stock become dead stock and its market price became nil and, therefore, assessee was gratified in Valuing stock 'at nil' - Held, yes. FACTS The assessee carried on the business of purchase and sale of snake skins. He held a stock of snake and crocodile skins which found no market. The assessee carried a stock but upon which he did not place any value. The ITO, however, rejected this plea. His view was that the assessee had obtained overdraft facilities from the banks on the security of these skins. He purported to value these varieties of skins at a total of Rs. 96,028. The result was that there was an assessment on a larger income. On appeal, the AAC sustained the addition. On further appeal, the Tribunal, held that even if there was no market, the assessee could not abruptly place 'nil' valuation upon skins. The Tribunal proceeded to value the skins at somewhat lower rates than those adopted by the ITO end determined the value of this part of the closing stock at Rs. 43,708. HELD It seemed exceedingly difficult to accept the reasoning adopted by the Tribunal in justifying the addition. The Tribunal purported to hold that if the assessee had written off his stock, he would have been justified in doing so. It accepted also the position that the fancy market for snake skins had disappeared, as was strongly supported by the circumstance that the turnover had fallen from Rs. 25 lakhs to Rs. 6 lakhs. Its reference to well-accepted; principles of accountancy that the assessee could reduce the value and place; "nil" value only after some lapse of time when it became clear that the skins were only dead stock, in fact, supported the very action taken by the assessee. It had been found as a matter of fact that in so far as virian and baby skins are concerned, during the whole of the previous year, only Rs. 12 worth of the first variety and Rs. 112 worth of the second variety could be sold. In the case of cobra skins, alone there had been no demand for these skins subsequently.…

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