This appeal has been filed by Department against order dt. 7th June, 1982 of CIT(A), relating to asst. yr. 1978-79, previous year of which ended on 30th June, 1977. assessee is partnership firm deriving income from business as film producers. During previous year under consideration, assessee released Hindi feature film entitled "ANURODH". distribution rights of that picture was sold during previous year in respect of all territories except two, namely, Tamil Nadu and Kerala; and Andhra Pradesh. assessee found that no person was willing to buy distribution rights in respect of territory of Andhra Pradesh and so he valued closing stock of that distribution right at nil. Regarding territory of Tamil Nadu and Kerala, assessee had entered into agreement with party on 11th March, 1975 to sell distribution right of that territory at Rs. 1,70,000. However, that party never took delivery of picture because it turned out to be flop in other territories. assessee entered into negotiations with that party who finally agreed to pay sum of Rs. 1,35,000 as per agreement dt. 3rd Aug., 1977. It may be stated that accounting year of assessee ended on 30th June, 1977, but its books of accounts were closed and P&L a/c and balance sheet were drawn only in March, 1978. assessee treated distribution right relating to this territory as unsold; took same in closing stock and valued same not at Rs. 1,70,000 but Rs. 1,35,000 as per agreement dt. 3rd Aug., 1977, which was already known in March, 1978 when accounts were closed. Thus, assessee valued closing stock of distribution rights in respect of unsold territories at Rs. 1,35,000 only. ITO did not agree with above calculation adopted by assessee. He invoked r. 9A of IT Rules, 1962 and found that percentage mentioned against territories of Tamil Nadu and Kerala was 3 per cent and that mentioned against territory of Andhra Pradesh was 2.5 per cent, amounting in all to 5.5 per cent. He took 5.5 per cent of total cost of production as value of closing stock of distribution rights in respect of above territories. ITO thus, arrived at figure of Rs. 3,38,384 in place of Rs. 1,35,000 shown by assessee. ITO completed assessment accordingly. assessee appealed to CIT(A) and contended that ITO erred in his decision. He pointed out that r. 9A(9)(c) authorises ITO to discard Rule 9A in cases where application thereof is impracticable. It was urged that i absence of any takers for distribution rights of film, percentages stated in r. 9A could not be made applicable. Hence, valuation adopted by assessee should have been accepted in facts and circumstances of case. CIT(A) agreed with this contention and directed ITO to adopt figure of Rs. 1,35,000 in place of Rs. 3,38,384 taken in assessment order. Shri Roy Slphonso, ld. Representative for Department urged before us that ld. CIT(A) erred in his decision. He stated that percentages stated in r. 9A should have been strictly applied by CIT(A) and no reduction should have been given. On other hand, Shri V. H. Patil, ld. Representative for assessee, urged before us that CIT(A) has done correct thing. He relied on decision of Bombay High Court in case of Smt. Kusumben D. Mahadevia vs. Upadhyay, N. C. & Anr. (1980) 14 CTR (Bom) 20: (1980) 124 ITR 799 (Bom) for proposition that rules made under IT Act or WT Act are merely directory and not mandatory. In any case, he pointed out that r. 9 itself envisages situation where percentages relating to various territories stated therein may not be applicable in particular case. He urged that when certain right is unsaleable in area, application of r. 9A becomes inapplicable. Then it is for assessee to determine method of valuation of closing stock in any one of three recognised methods; namely, at cost, at market value or at cost or market value whichever is lower. He stated that nobody purchased distribution rights in Andhra Pradesh and it was clear by time accounts were finalised and so its value had to be taken at nil/. Similarly, he stated that it was known by time of finalisation of accounts that maximum amount receivable on sale of distribution rights relating to territories of Tamil Nadu and Kerala was only Rs. 1,35,000 and nothing more. He further stated that it is permissible under accepted accounting principles to adopt actual figures available at time of finalisation of accounts in order to give true and fair view of finalisation of business. Since true and fair amount was known to be Rs. 1,35,000 at business. Since true and fair amount was known to be Rs. 1,35,000 at time of finalisation of accounts, same was rightly adopted. We have considered contentions of both parties as well as facts on record. We find force in contention raised for assessee. It is indeed true that Bombay High Court has held in case of Smt. Kusumben D. Mahadevia (supra) that rules made under WT and IT Act are directory and not mandatory. Apart from above, that fact that nobody ever bought distribution rights relating to territory of Andhra Pradesh and fact that assessee got nothing more than Rs. 1,35,000 in respect of territories of Tamil Nadu and Kerala have not been controverted before us. It is also true that method of valuation of closing stock is done at option of assessee. If assessee has chosen to value closing stock at market value, it is not open to ITO to challenge that mode of valuation and adopt different method without assigning adequate reasons. principle that true and fair view of financial position of business concerned should be reported at time of closing accounts is quite well settled. Considering all facts and circumstances of case, we agree with CIT(A) and so we uphold his order. In result, appeal is dismissed. *** FOURTH INCOME TAX OFFICER v. SAMANTA ENTERPRISES