Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Valuation of stock - Assessment year 1975-76 - Assessee-bank, while valuing its stock-in-trade, claimed certain amount being difference between cost of securities and market value thereof, as depreciation on account of fall in market value of investments made by it - ITO disallowed assessee's claim on grounds that (i) all along assessee was valuing its investments at cost, (ii) to adopt one method for opening stock and another method for valuing closing stock would result in distortion of true profits, and (iii) said loss had not been written off in assessee's books of account - Whether assessee was entitled to value stock at cost or market value whichever was lower as long as change in method of valuation was adopted bona fide and continued thereafter year to year, notwithstanding the fact that assessee had failed to debit anticipated trading loss in its books of account so as to get aforesaid amount written off - Held, yes Facts For the assessment year 1975-76, the assessee, a banking company, claimed certain amount to be written off as a depreciation on account of fall in the market value of investments made by it. The ITO dis- allowed the assessee's claim to write off the difference between the cost of investments and the market value of the same on the grounds that (i) all along the assessee was valuing the investments at cost and there was no departure from this method at any time in the past, (ii) to adopt one method for opening stock and another for valuing closing stock would result in distortion of true profits, and (iii) said loss had not been written off in its books of account. On appeal, the Commis-sioner (Appeals) allowed the assessee's claim and held that the securi- ties being stock-in-trade of the banking business, it was open for the assessee to value the stock at cost or market value, whichever was lower and that even if the method of valuation in the past had been different, the assessee had the right to change over to the present method, provided such change was bona fide and followed regularly thereafter. The Tribunal upheld the order of the Commissioner (Appeals). On…

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