Indian Kanoon - Search engine for Indian Law

3.3. The decision in Himson Textile Engineering Industries (P.) Ltd. v.

Assistant Commissioner of Income-tax, Circle - 1, (2013 35 taxmann.com 528 (Guj)) andM/s. The West Coast Paper Mills Ltd. (I.T.A. Nos. 3187 & 3750/M/03) supports this contention, wherein the court upheld the statutory mandate of section 145A, emphasizing the need for inclusive valuation methodology. 3.4. The appellant further contends that adjustments to closing stock would lead to double taxation. However, it is humbly submitted that adherence to section 145A is essential to avoid such unintended consequences. Double taxation can be avoided by correctly applying the provisions of the Income Tax Act for each assessment year. 3.5. The decision in Croydon Chemical Works Ltd. vs. Assistant Commissioner of Income Tax, Circle 6(2), Mumbai ([2007 ]11SOT

295) by the Hon'ble ITAT Mumbai reinforces the requirement to include taxes, duties, etc., in closing stock valuation by applying the inclusive method per section 145A. Further, the decision of the "J" Bench of Hon'ble ITAT, Mumbai in the case of M/s. The West Coast Paper Mills Ltd. (I.T.A. Nos. 3187 & 3750/M/03) reinforces the legislative intent behind section 145A. The judgment elucidates that while the transition to the inclusive valuation method may impact the year of implementation, it achieves tax neutrality over subsequent years. 3.6. The appellant further argues that the use of exclusive method of valuation will not impact the year's profit. However, this assertion is erroneous. It is humbly submitted that adhering to section 145A may result in an increase in profit for the assessment year, as the unutilized CENVAT credit and sales tax set-off available at the end of the financial year may exceed those available at the beginning, thus affecting the profit calculation.

10.2. Relianceis placed on the decision of Hon'ble Bombay High Court in case of CIT vs. Mahalakshmi Glass Works Pvt.Ltd., reported in (2009) 318 ITR 116,when it is held that, section 145A of the act provides for adjustment not only with respect to closing stocks but also with respect to opening stock purchases and sales, and directed the assessing officer to recompute the profits of the assessing after making adjustment in the opening stock purchases and sales as well. He submitted that Hon'ble Bombay High Court relied on the decision of Hon'ble Delhi High Court in case of CIT vs Mahavir Alluminium Ltd., reported in (2008) 297 ITR 77, wherein an identical question concerning the valuation of inventory as contemplated under section 145A of the act was considered.

A.Y. 2005-06 M/s. Larsen & Toubro Limited 10.4. We further note that section 145A is a non-obstante clause. Therefore, to give effect to section 145A, the opening stock as on 1stday of immediately subsequent financial year will have to be increased by any tax, duty, cess or fee stock if the same has not been added for the purpose of valuation in the accounts. We therefore do not find any assistance from the decisions cited by the Ld.DR in her written submission as are distinguishable on facts. The Ld.AO is therefore directed to give the effect of section 145A as per above discussion. Accordingly ground No.2 raised by the assessee stands allowed.