COMMISSIONER OF INCOME-TAX Vs. ANDHRA PRABHA LTD

JUDGEMENT

(1.) In pursuance of the direction given by this Court on 7th March, 1983, the Tribunal referred the following two questions for the opinion of this Court under S. 256(2) of the IT Act, 1961, hereinafter referred to as the Act :

(2.) The assessee is a company engaged in the business of printing and publishing newspapers. In arriving at the value of the closing stock of metal and types, the assessee used to estimate the value of such metal and types on an ad hoc basic. Since the assessee used a special type of alloy for making types for printing and the alloy so received in the press-room could not be easily quantified or evaluated, the assessee chose to change its method of valuation from the previous year, relevant to the asst. yr. 1975-76 onwards so as to exclude the value of such alloy in the press room from the valuation.

(3.) On appeal, the AAC considered that the type metal in molten form could be treated as loose tools, and therefore the treatment of such metal as had been done for the purpose of accounting was justified. Aggrieved, the Revenue filed a second appeal before the Tribunal. The Tribunal accepted the assessees case that the change in the method of accounting was bona fide and was not intended merely to reduce the tax liability. The Tribunal found that the change could not be characterised as arbitrary and it was not uncommon to write off on such issues in the case of manufacturing concerns, when it is difficult to evaluate the metal after issue from the store room. Since the reason given for the change is found to be correct and is also in accordance with the recognised practice in the trade and there being no suggestion of the change being mala fide, the Tribunal accepted the view taken by the AAC and confirmed his order.