COMMISSIONER OF INCOME TAX CALCUTTA Vs. BRITISH PAINTS INDIA LIMITED
LAWS(SC)-1990-12-32
SUPREME COURT OF INDIA (FROM: CALCUTTA)
Decided on December 13,1990

COMMISSIONER OF INCOME TAX,CALCUTTA Appellant
VERSUS
BRITISH PAINTS INDIA LIMITED Respondents





Cited Judgements :-

COMMISSIONER OF INCOME TAX DELHI II NEW DELHI VS. SOHAN LAL [LAWS(DLH)-2002-5-270] [REFERRED TO]
COMMISSIONER OF INCOME TAX DELHI II NEW DELHI VS. LATE SHRI SOHAN LAL [LAWS(DLH)-2002-5-192] [REFERRED]
COMMISSIONER OF INCOME TAX VS. HOTLINE TELETUBE AND COMPONENTS LTD [LAWS(DLH)-2008-8-29] [REFERRED TO]
MAHABIR RICE MILL VS. INCOME TAX OFFICER [LAWS(ALL)-2004-11-22] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. INDIAN NATIONAL TANNERY PVT LTD [LAWS(ALL)-2004-11-222] [REFERRED TO]
CHAKRA FINANCIAL SERVICES LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(APH)-2012-2-1] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. UCO BANK [LAWS(CAL)-1991-7-44] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. MOTOR INDUSTRIES COMPANY LIMITED [LAWS(KAR)-2001-4-49] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. J P PATEL BOMBAY PVT LTD [LAWS(MPH)-2003-4-16] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. SYNDICATE BANK [LAWS(KAR)-2002-12-49] [REFERRED TO]
Hela Holdings Pvt LTD VS. Commissioner of Income tax [LAWS(CAL)-2002-9-13] [REFERRED TO]
Juggilal Kamlapat Udyog LTD VS. Commissioner of Income tax [LAWS(CAL)-2004-1-4] [REFERRED TO]
K S Mehta HUF VS. Commissioner of Income Tax [LAWS(CAL)-2005-2-33] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. MUTHOOT FINANCE CORPORATION [LAWS(KER)-2000-9-30] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ATUL PRODUCTS LIMITED [LAWS(GJH)-2001-2-58] [REFERRED TO : (1991) 188 ITR 44 (SC) : TC 2R.113]
COMMISSIONER OF INCOME TAX VS. WILLARD INDIA LIMITED [LAWS(ALL)-2001-1-90] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD [LAWS(KER)-1998-3-54] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD [LAWS(KER)-1998-3-10] [REFERRED TO]
MELMOULD CORPORATION VS. COMMISSIONER OF INCOME TAX [LAWS(BOM)-1993-2-113] [REFERRED TO]
GEO TECH CONSTRUCTION CORPORATION VS. DEPUTY COMMISSIONER OF INCOMETAX ASSMT SPECIAL RANGE [LAWS(KER)-2006-2-8] [REFERRED TO]
GERMAN REMEDIES LTD VS. DY COMMISSIONER OF INCOME-TAX [LAWS(BOM)-2005-10-88] [REFERRED TO]
IOT INFRASTRUCTURE AND ENERGY SERVICES LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX [LAWS(BOM)-2010-6-75] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. SMITHKLINE BEECHAM CONSUMER BRANDS LTD [LAWS(P&H)-1996-9-77] [REFERRED TO]
SINGH CONSTRUCTION CO VS. ASSISTANT COMMISSIONER OF INCOME [LAWS(PAT)-1997-9-60] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. FAZILKA CO OPERATRIVE SUGAR MILLS LIMITED [LAWS(P&H)-2001-10-21] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ROOPCHAND NAWAL CHAND GANDHI [LAWS(RAJ)-2007-11-43] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. LAKSHMI SUGAR MILLS CO. LTD. [LAWS(DLH)-2012-12-283] [REFERRED TO(SC)]
COMMISSIONER OF INCOME TAX VS. MCLEOD RUSSEL (INDIA) LTD. [LAWS(CAL)-2014-2-88] [REFERRED TO]
COMMISSIONER OF INCOME TAX UDAIPUR VS. HINDUSTAN ZINC LTD [LAWS(SC)-2007-5-78] [REFERRED TO]
SANJEEV WOOLEN MILLS VS. COMMISSIONER OF INCOME TAX [LAWS(SC)-2005-11-68] [REFERRED TO]
DEVSONS PVT LTD VS. COMMISSIONER OF INCOME TAX [LAWS(DLH)-2010-11-201] [REFERRED TO]
GARDEN SILK MILLS PRIVATE LIMITED VS. DEPUTY COMMISSIONER OF INCOME TAX [LAWS(GJH)-1998-11-76] [REFERRED TO]
GINNI FILAMENTS LTD VS. COMMISSIONER OF INCOME TAX [LAWS(ALL)-2011-3-61] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. INDO NIPPON CHEMICAL COMPANY LIMITED [LAWS(BOM)-2000-8-51] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. D M BRICKS INDUSTRIES [LAWS(P&H)-1994-2-82] [REFERRED TO]
KEDAR SINGH AND COMPANY VS. INCOMETAX APPELLATE TRIBUNAL [LAWS(PAT)-1997-7-13] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. HARYANA MINERALS LTD [LAWS(P&H)-1998-12-75] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. INDIAN TELEPHONE INDUSTRIES [LAWS(KAR)-2011-5-47] [REFERRED TO]
CIT VS. RAM SINGH [LAWS(RAJ)-2014-1-46] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. KISAN COOPERATIVE SUGAR FACTORY LTD. [LAWS(ALL)-2013-9-215] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. EMA INDIA LTD [LAWS(ALL)-2005-7-261] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. SHERWANI SUGAR SYNDICATE LTD [LAWS(ALL)-2006-10-232] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. SVP INDUSTRIES LTD. [LAWS(DLH)-2014-9-48] [REFERRED TO]
ASSISTANT COMMISSIONER OF INCOME TAX VS. NARMADA CHEMATUR PETROCHEMICALS LTD. [LAWS(GJH)-2010-4-279] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. JAGATJIT INDUSTRIES LTD. [LAWS(DLH)-2010-9-336] [REFERRED TO]
ASSISTANT COMMISSIONER OF INCOME TAX VS. VIKRAM TRACTORS [LAWS(ALL)-2008-4-299] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. NAHAR SPINNING MILLS LTD. [LAWS(P&H)-2008-2-179] [REFERRED TO]
MADNANI CONSTRUCTION CORPORATION (P) LTD. VS. COMMISSIONER OF INCOME TAX [LAWS(GAU)-2006-12-68] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. INDOMAG STEEL TECHNOLOGY LTD. [LAWS(DLH)-2010-7-454] [REFERRED TO]
JAGAN NATH GURBACHAN SINGH VS. INCOME TAX OFFICER [LAWS(IT)-1993-6-26] [REFERRED TO]
MCLEOD RUSSEL (INDIA) LTD. VS. DY. COMMISSIONER OF INCOME TAX [LAWS(CAL)-2001-3-42] [REFERRED TO]
LML LTD. VS. JOINT COMMISSIONER OF INCOME TAX [LAWS(IT)-2014-5-112] [REFERRED TO]
DEPUTY COMMISSIONER OF INCOME TAX VS. SUDHIR V. SHETTY [LAWS(IT)-2014-8-19] [REFERRED TO]
COMMISSIONER OF INCOME TAX (CENTRAL) VS. HIGHWAY CYCLE INDUSTRIES LTD. [LAWS(P&H)-2015-1-59] [REFERRED TO]
THE COMMR. OF INCOME TAX AND THE ASSISTANT COMMISSIONER OF INCOME TAX VS. M/S. PSI HYDRAULICS [LAWS(KAR)-2012-10-234] [REFERRED TO]
VIJAY SOLVEX LTD. VS. COMMISSIONER OF INCOME TAX [LAWS(RAJ)-2015-2-247] [REFERRED TO]
BHAGYODAY INVESTMENTS PVT LTD VS. COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANA [LAWS(P&H)-2014-2-416] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RAKESH MAHAJAN [LAWS(HPH)-2015-9-27] [REFERRED TO]
THE COMMISSIONER OF INCOME TAX, DELHI - II, NEW DELHI VS. LATE SHRI SOHAN LAL THROUGH LEGAL HEIRS [LAWS(DLH)-2002-5-297] [REFERRED TO]
THE COMMISSIONER OF INCOME TAX VS. SRISHTI CONSTRUCTION [LAWS(P&H)-2015-10-120] [REFERRED TO]
PR. COMMISSIONER OF INCOME TAX AND ORS. VS. STCL LIMITED [LAWS(KAR)-2016-3-126] [REFERRED TO]
CENTRAL HATCHERIES PRIVATE LTD VS. COMMISSIONER OF INCOME-TAX [LAWS(MPH)-2007-9-146] [REFERRED]
ASSTT CIT VS. D AND H SECHERON ELECTRODES (P) LTD [LAWS(MPH)-2007-11-82] [REFERRED]
THE COMMISSIONER OF INCOME TAX VS. M/S. VIDARBHA TOBACCO PRODUCTS PVT. LTD. [LAWS(BOM)-2017-2-228] [REFERRED TO]
PRINCIPAL COMMR. OF INCOME TAX VS. MARG LTD. MARG AXIS [LAWS(MAD)-2017-7-42] [REFERRED TO]
VEERA EXPORTS VS. ASST. COMMISSIONER OF INCOME TAX CIRCLE [LAWS(GJH)-2017-6-59] [REFERRED TO]
VIRBHADRA SINGH (HUF) THROUGH ITS KARTA VIRBHADRA SINGH VS. PRINCIPAL COMMISSIONER OF INCOME TAX [LAWS(HPH)-2017-10-33] [REFERRED TO]
PRINCIPAL COMMISSIONER OF INCOME TAX VS. M/S. PANCHSHEEL COLONIZERS PVT. LTD. [LAWS(RAJ)-2018-2-257] [REFERRED TO]
SHRI RAM KUTIR KHANDSARI UDYOG PVT LTD VS. PRINCIPAL COMMISSIONER OF INCOME TAX-1 ASHOK MARG [LAWS(ALL)-2017-2-283] [REFERRED TO]
PR COMMISSIONER OF INCOME TAX, JAIPUR-3 VS. HANDMADE PAPER & BOARD INDUSTRIES [LAWS(RAJ)-2017-10-138] [REFERRED TO]
PRINCIPAL COMMISSIONER OF INCOME TAX-I VS. PANCHSHEEL COLONIZERS PVT LTD [LAWS(RAJ)-2018-3-139] [REFERRED TO]
CIT CENTRAL JAIPUR VS. M/S. UNIQUE BUILDERS AND DEVELOPERS AND ANOTHER [LAWS(RAJ)-2017-5-308] [REFERRED TO]
SHRI P. AMARNATH REDDY VS. DEPUTY COMMISSIONER OF INCOME-TAX [LAWS(MAD)-2018-11-44] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. M/S. CHHATA SUGAR COMPANY LTD. [LAWS(ALL)-2018-7-349] [REFERRED TO]
CMI FPE LIMITED VS. UNION OF INDIA [LAWS(BOM)-2019-3-215] [REFERRED TO]
L.SATHEEK VS. STATE OF KERALA [LAWS(KER)-2020-11-87] [REFERRED TO]
PPN POWER GENERATING COMPANY PRIVATE LTD. VS. COMMISSIONER OF INCOME TAX [LAWS(MAD)-2020-9-978] [REFERRED TO]


JUDGEMENT

Thommen, J. - (1.)These appeals by certificate arise from the judgment dated August 22, 1974 of the Calcutta High Court in I.T. R. No. 9 of 1970 (reported in 1976 (1) Cal LJ 102) concerning the assessment years 1963-64 and 1964-65, relevant to the accounting years ended 31-12-1962 and 31-12-1963. Answering the question referred to it in the negative and against the Revenue, the High Court stated that the Income-tax Appellate Tribunal was not justified in rejecting the method of valuation of the goods in process and the finished products on the basis of the cost of raw material after excludi altogether t e overhead expenditure. The Tribunal had by its .Order dated 27-2-1969 upheld the findings of the Income-tax Officer, as confirmed by the Appellate Assistant Commissioner, that the assessee's goods in process and finished products were liable to be valued at 100 percent of the cost which included the overhead expenditure and not at 84.49 per cent. as claimed by the assessee.
(2.)The assessee is a limited liability company engaged in the business of manufacture and sale of paints. It contended before the authorities that it had been its consistent practice to value. the goods in process and finished products exclusively at cost of raw materials and totally excluding overhead expenditure. The justification for this practice, according to the assessee, was that the goos being paints had limited storage life and, if not quickly disposed of, they were liable to loose their market value. This contention of the assessee was rejected by the Income-tax Officer observing that at no time had the assessee claimed any deduction on account of deterioration or damage to goods. The Officer held that there was no justification to recognise.a practice, as claimed by the assessee, of valuing its stock otherwise than in accordance with the well-recognised principle of accounting which required the stock to be valued at either cost (raw material + expenditure) or market price, whichever was the lower. Recalculating the value of the opening and closing stocks by adding the overhead expenditure, the Officer made an addition of Rs. 1,04,417/- for the assessment year 1963-64 and allowed a deduction of Rs. 3,338/- for the assessment year 1964-65. These orders, as stated above, were confirmed by the Assistant Appellate Commissioner and by the Tribunal.
(3.)The Tribunal held that there was no evidence to show that the goods in stock deteriorated in value and there was no justification for excluding the overhead expenditure in valuing the stock. If it was in the interest of the business to value stock solely' with reference'to the cost of raw materials and w,ithout including the overhead expenditure, such valuation was not appropriate to the computation of income chargeable under the Income-tax Act. The High Court noticed that there was no evidence of deterioration of the goods in stock. But after an exhaustive review of the case law on the question, the learned julges came to the conclusion that, having regard to the consistent practice of the assessee, the Tribunal was not justified in rejecting the assessee's method of valuation of its stock-in-trade.
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