CIT Vs. HANSA FOOTWEAR

JUDGEMENT

(1.) The substantial question of law framed for our consideration is as follows:

(2.) The assessee was in the business of manufacturing footwear. It was initially a partnership firm but subsequently it got converted into a private limited company in accordance with Chapter IX of the Companies Act, 1956. All the partners became shareholders in the company and their respective shareholding was in the same proportion as in the partnership firm.

(3.) The assets of the partnership firm, i.e. footwear, was taken over by the company and the question that arose before the Assessing Officer was whether the closing stock of the partnership firm should be taken at market value or not. According to the assessee, the closing stock should be taken at the cost price and not at the market value.