Law: Income Tax Act, 1961

Section: 256(1)

Income-tax----Business income---Deduction---Deficiency in stock---Loss not allowable as deduction. In the assessment year 1971-72 relevant for the accounting year ending June 30, 1970, the Income-tax Officer disallowed deduction claimed by the assessee towards reserve for deficit stock of Rs.1,87,544. According to the assessee, the reserve represented the estimated value of damaged stock. The Income-tax Officer found that the value of goods had not been written off in the books of account, and hence disallowed the claim. The Tribunal confirmed the same on the ground that the assessee had not proved the loss of stock and the assessee could claim the loss as a deduction only when the departmental enquiry under the Cooperative Societies Act finally settled as to how the loss arose and whether anything could be recouped from those in charge of the stock. On a reference: Held, that the legal position was that unless it was shown that there was a loss by way of deficiency in stocks in the year of account and a reserve had been created for that loss, no deduction could be claimed for that reserve. If the deficiency had been written off in the year of account it would be taken as a loss of stock and the reserve created for the purpose would be allowed as a deduction to the extent of the deficiency written off. North Arcot District Cooperative Supply and Marketing Society Ltd. v. CIT (1987) 165 ITR 623 (Mad.) fol. Goenka (R.N.) v. CWT (1989) 176 ITR 129 (Mad.); North Arcot District Cooperative Supply and Marketing Society Ltd v. CIT (1998) 230 ITR 33 (Mad.) and Union of India v. Raghubir Singh (1989) 178 ITR 548 (SC) ref. THIS JUDGMENT DELIVERED BY: N.V. BALASUBRAMANIAN, J.---At the instance of the assessee, the Income-tax. Appellate Tribunal, Madras, has stated a case and referred the following question of law under section 256(1) of the Income Tax Act, 1961. "Whether, on the facts and circumstances of the case, a sum of Rs.1,87,544, representing reserve for deficit stock on account of handling was includible in the income of the society?" The assessee is a cooperative and marketing society and the assessment year concerning the tax case reference is the assessment…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492