J.K. Jute Mills Co. Ltd. vs Commissioner of Income Tax, (C), Kanpur

R.K. Agrawal, J.—The income tax Appellate Tribunal, Allahabad has referred the following question of law u/s 256(2) of the income tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:- Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding the claim of the company of Rs.2,65,346 as revenue deduction was not allowable?

The reference relates to the assessment year 1979-80.

Briefly stated, the facts giving rise to the present reference are as follow:-

The facts of the case were that the assessee is a public limited company having income from manufacturing and sale of jute goods. The assessee claimed on the sale of obsolete and unserviceable and damaged stores for Rs. 2,65,346. The Assessing Officer asked the assessee to furnish the details and also to indicate the year of acquisition of the stores and o explain why the stores acquired only 2 or 3 years back were sold at a low price. The assessee expressed its inability to indicate the year of acquisition of the stores. Sales vouchers were produced before the Income Tax Officer who was not satisfied regarding the cost price of those items and, therefore, the deduction was not allowed. The matter was taken up before the Commissioner of income tax (Appeals) stating that there were certain items bought and consumed in the process of manufacture when needed and such items were replaced and, therefore, it was not possible to show the year of purchase with receipt in respect of each general items. According to the assessee, the year of purchase was not relevant to the determination of the loss, more so when the sale price was not disputed. It was urged that in the inventory to the list of the items sold, the assessee could show that the price taken was only the cost price taken from the inventory made in the earlier years. The Commissioner of income tax (Appeals) found that from year to year only the cost price was brought forwards. The Commissioner of income tax (Appeals) considered the decision of the Appellate Tribunal in the case of Mahabir Jute Mils Ltd., Gorakhpur, relied by the assessee. Further, reliance was placed on the 22 nd edition, 1974 of Batliboi''s book on Advanced Accounting etc. and the Appellate Tribunal allowed the claim of that assessee. The Commissioner of income tax (Appeals), in the present case, following the decision of the Appellate Tribunal in the earlier case allowed the claim of the assessee. The Revenue took up the matter before the Appellate Tribunal and both the sides were heard. It was noticed that these various items were shown in the column giving heading "value", which, according to the assessee, was as per inventory, which again represented the cost of the articles. The Appellate Tribunal found that this was an assertion of the assessee and there was no material to indicate that the value shown in the said column represented the costs of those items. According to the Appellate Tribunal, it incumbent on '' the part of the claimant to show the cost of such articles so that the Assessing Authority could ascertain the loss was allowable. The Appellate Tribunal found force in the submissions made on behalf of the Revenue. The Commissioner of income tax (Appeals) allowed the claim of the assessee without dislodging the findings of the Assessing Officer. The order of the Commissioner of income tax (Appeals) was reversed and that of the income tax Officer was restored.

We have heard Sri R.S. Agrawal, learned counsel for the assessee, and Sri A.N. Mahajan, the learned counsel appearing for the revenue.

Sri Agrawal submitted that the Commissioner of income tax (Appeals) has accepted the claim of the assessee when items of spares and stores which were sold at a loss, were shown in the inventory list at cost price and, therefore, mere failure of the assessee to show the acquisition of stores and the purchase price would not make any difference. The loss was liable to be allowed as a revenue loss and the view of the Tribunal is wholly misconceived.

The submission is misconceived. The Tribunal recorded specific finding of fact which hap hot been challenged by raising any separate question that there no material to indicate that the value shown in the said column represented the cost of this item. Merely because the assessee a limited company and the accounts audited, it does not mean that the assessee is absolved of the proving the claim of deduction. As the cost of such articles was not disclosed, the Asserting Authority could not ascertain whether the loss was allowable.

We do not find any illegality in the order of the Tribunal. The view of the Tribunal perfectly legal valid. We, therefore, answer the question referred to us in favour of the Revenue and against the assessee. There shall be no order as to costs.