CIT DELHI-IV Vs. HUGHES COMMUNICATION INDIA LTD

JUDGEMENT

(1.) THESE are appeals filed by the revenue under section 260A of the Income Tax Act, 1961 and they are directed against the order dated 26.12.2011 passed by the Income Tax Appellate Tribunal (,,Tribunal, for short) in respect of the assessment year 2004-05. The order of the Tribunal is a common order passed in cross-appeals.

(2.) THE following questions stated to be substantial questions of law have been proposed by the revenue: -

(3.) SO far as the first question is concerned, it relates to the valuation of the closing stock. The assessee carries on the business of installation of VSAT equipment. The stock consists of two categories; (i) old and used stock which is categorized as defective but repairable, (ii) demo stock. In its accounts the assessee reduced a sum of Rs.90,35,298.00 from the value of the stock on account of impairment and defects. The claim was made on the footing that the "net realizable value" of the stock had fallen below even the cost price. In support of the valuation, the assessee submitted the basis of the estimate which was prepared by its technical department. Certain details were also submitted regarding certain items of stock together with their realisable rate as on 31.03.2003 and 31.03.2004. The assessing officer rejected the assessees claim for reduction in the value of the closing stock made on the basis of the net realizable value being less than the cost and made an addition of Rs.90,35,298.00 to the business profits.