M/S. Sanjeev Woolen Mills vs Commissioner Of Income-Tax, Mumbai on 24 November, 2005
645/2005, 742/2005, 796/2005, 817/2005, 794/2005, 71/2011,
1166/2011 & 1168/2011. Page 16 of 23
considered by the Supreme Court in the case of Sanjeev Woolen Mills v.
CIT Mumbai (2005) 279 ITR 434 (SC) and it has been observed that
closing stock can be valued on cost price or at market price, if the market
price is less than the cost. However, the said principle does not apply if
the market value of the closing stock is more than the cost, as profits
cannot be brought to tax on notional basis. In view of the aforesaid legal
position there cannot be any doubt that the respondent-assessee was
entitled to value the closing stock at cost price or market price whichever
is lower. The respondent/assessee were admittedly exporting sugar and in
view of the findings recorded above, closing stock could be valued at cost
or market price, if it was lower than the cost price.The second question is
accordingly answered in affirmative and in favour of the respondent-
assessee and against the Revenue.