IN HIGH COURT OF JUDICATURE AT MADRAS DATE : 24.03.2015 CORAM HONOURABLE MR. JUSTICE R.SUDHAKAR AND HONOURABLE MR. JUSTICE R.KARUPPIAH T.C.A. NO. 148 OF 2015 Commissioner of Income Tax Chennai. .. Appellant - Vs - Dynavision Ltd., Chennai. .. Respondent Appeal filed under Section 260A of Income Tax Act against order dated 21.02.2002 passed by Income Tax Appellate Tribunal, 'C' Bench, Chennai, made in ITA No.1534(Mds)/93 for assessment year 1988-89. For Appellant : Mr. T.Ravikumar Standing Counsel JUDGMENT (DELIVERED BY R.SUDHAKAR, J.) This Tax Case (Appeals) is filed by Revenue as against order of Income Tax Appellate Tribunal relating to assessment year 1988- 89 raising following substantial question of law: "Whether in facts and circumstances of case, 2 Tribunal was justified in law in holding that excise duty paid/payable will not form part of closing stock?" 2. brief facts of case are as follows: assessee is engaged in business of manufacture and sale of television sets. For assessment year 1988-89, Assessing Officer, while computing assessment under Section 143(3) found that assessee had not included in closing stock element of excise duty. Accordingly, he added said sum to income of assessee on ground of undervaluation of closing stock. Aggrieved by same, assessee preferred appeal before Commissioner of Income Tax (Appeals), who allowed appeal by directing Assessing Officer to allow relief. Aggrieved by said order, Revenue preferred appeal before Tribunal. Tribunal by following decision in respect of assessee's own case pertaining to previous assessment year dismissed appeal. As against same, Revenue is before us. 3. Learned Standing Counsel appearing for Revenue fairly conceded before this Court that issue involved in present case in respect of very same assessee has been decided against Revenue in decision reported in [2012] 348 ITR 380 (SC) (Commissioner of Income-Tax V. Dynavision Ltd.), wherein on similar question of law 3 raised, Supreme Court held as follows: " 3. At outset, it may be stated, that, it is not in dispute that assessee has been following consistently method of valuation of closing stock which is "cost or market price, whichever is lower." Moreover, Assessing Officer conceded before Commissioner of Income-tax (Appeals) that he revalued closing stock without making any adjustment to opening stock (see page 50 of paper book). Lastly, though under section 3 of Central Excise Act, 1944, levy of excise duty is on manufacture of finished product same is quantified and collected on value (i.e. selling price). Before concluding, we may rely on judgment of this court in case of Chainrup Sampatram v. CIT reported in [1953] 24 ITR 481 (SC) in which it has been held that, "valuation of unsold stock at close of accounting period was necessary part of process of determining trading results of that period. It cannot be regarded as source of profits. That, true purpose of crediting value of unsold stock is to balance cost of goods entered on other side of account at time of purchase, so that on cancelling out of entries relating to same stock from both sides of account would leave only transactions in which actual sales in course of year has taken place and thereby showing profit or loss actually realized on year's trading. entry for stock which appears in trading account is intended to cancel charge for goods bought which have remained unsold which should represent cost of goods". (see also : para. 8 of judgment of this court in case of CIT v. Hindustan Zinc Ltd. reported in [2007] 291 ITR 391 (SC). 4. For above reasons, we hold, that, addition of Rs. 16,39,000 to income of assessee on ground of undervaluation of closing stock was wrong and that order of Commissioner of Income-tax (Appeals) is accordingly upheld. Consequently, this civil appeal filed by Department is dismissed with no order as to costs." R.SUDHAKAR,J. 4 AND R.KARUPPIAH,J. 4. In view of above, following above-said decision of Supreme Court in respect of very same assessee for assessment year 1987-88, question of law is answered against Revenue and in favour of assessee. This Tax Case (Appeal) stands dismissed. No costs. Index : Yes/No (R.S.J.) (R.K.J.) Internet : Yes/No 24.03.2015 sl To 1. Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2. Commissioner of Income Tax (Appeals) - I, Madras. 3. Assistant Commissioner, Central CircleII(1), Madras - 34. T.C.A. NO. 148 OF 2015 Commissioner of Income-tax, Chennai v. Dynavision Ltd