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1 - 10 of 16 (1.19 seconds)Commissioner Of Income-Tax vs P.E. Polson on 29 May, 1945
5. It may be kept in mind that in this case because of the dissolution of the firm the business is continued by the successor firm and the assessments are made under Section 188 separately on the dissolved firm for the period up to the date of dissolution and on the successor firm after that date. That section refers to the provisions of Section 170 for making the assessment, which is a provision for assessment in a case where a person carrying on business has been succeeded by another person. This provision is quite distinct from Section 176, which applies to a case where a business is discontinued. Thus the Act itself recognizes that a case of a succession of the business by one firm on the dissolution of another firm is not a case of a business being discontinued. This recognition is presumably based on the long line of decisions, which have uniformly held that discontinuance did not cover mere change of ownership but referred only to complete cessation of the business - See CIT v. P.E. Polson [1945] 13 ITR 384 at 388 (PC). The provisions of Section 189 make no difference to this situation for it only enables proceedings to be initiated against the dissolved firm or in respect of a discontinued business as if such discontinuance or dissolution had not taken place.
Chainrup Sampatram vs Commissioner Of Income-Tax,West ... on 9 October, 1953
6. The income chargeable under the head "Profits and gains of business" is to be computed in accordance with the method of accounting regularly employed by the assessee as provided by Section 145(1) of the Act. One of the principles adopted generally is to value the closing stock at cost or market value, whichever is less. The Supreme Court has explained this practice in the case of Chainrup Sampatram v. CIT [1953] 24 ITR 481, as under: -
E. D. Sassoon And Company Ltd vs The Commissioner Of Income-Tax,Bombay ... on 14 May, 1954
While anticipated loss is thus taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account as no prudent trader would care to show increased profit before its actual realisation. This is the theory underlying the rule that closing stock is to be valued at cost or market price whichever is lower and it is now generally accepted as an established rule of commercial practice and accountancy. As profits for income-tax purposes are to be computed in conformity with the ordinary principles of commercial accounting, unless of course, such principles have been superseded or modified by legislative enactments, unrealised profits in the shape of appreciated value of goods remaining unsold at the end of an accounting year and carried over to the following year's account in a business that is continuing are not brought into charge as a matter of practice, though as already stated, loss due to a fall in price below cost is allowed even if such loss has not been actually realised. As truly observed by one of the learned Judges in Whimster & Co. v. CIT [1926] 12 TC 813, 827. Under this law (Revenue law) the profits are the profits realised in the course of the year. What seems an exception is recognized where a trader purchased and still holds goods or stocks which have fallen in value. No loss has been realised. Loss may not occur. Nevertheless at the end of the year he is permitted to treat these goods or stocks as of their market value'.
G. R. Ramachari And Co. vs Commissioner Of Income-Tax, Madras. on 8 September, 1960
The case of G.R. Ramachari & Co. (supra), was a case in which there was a decree of court taking the value, which was, therefore, to be substituted. Moreover in both of those cases there was a discontinuance of the business itself which is not the case in the present case.
The Commissioner Of Income-Tax,Bombay vs Chandulal Keshavlal & Co., Petlad on 17 February, 1960
At the same time the High Court referred to the decision of the Gujarat High Court in CIT v. Keshavlal Chandulal [1966] 59 ITR 120, and reproduced with approval the following passage:
Malabar Fisheries Co, Calcutta vs Commissioner Of Income Tax, Kerala on 19 September, 1979
8. There is another reason why the stock of a continuing business does not require to be varied. It is that there is no realisation of stock and the accounting practice normally followed has to be maintained because the business itself has not been discontinued. The Supreme Court has held in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49, that there is no transfer of assets involved even in the sense of any extinguishment of the firm's rights in the partnership assets when distribution takes place upon dissolution. Thus the value put for the stock taken by any partner on dissolution is an agreed value and cannot be substituted by the market value because it is not a realisation sale.
A.L.A. Firm vs Commissioner Of Income-Tax on 10 January, 1975
3. In the appeal before us it was contended on behalf of the assessee that the question of valuing the closing stock at market value could arise only on discontinuance of the business as such and as in the present case the business of the firm was never terminated but had been taken over on succession by another firm, the closing stock was not required to be revalued. It was submitted that the decision of the Madras High Court in the case of A.L.A. Firm (supra) did not apply to a case such as this and reliance was placed on the decision of the Tribunal in the case of ITO v. Krishna Traders [IT Appeal No. 1416 (Mad.) of 1982, dated 30-6-1983].
Popular Workshops vs Commissioner Of Income-Tax on 19 December, 1985
The Kerala High Court decision in Popular Workshops v. CIT [1987] 166 ITR 348 was also a case of discontinuance of the business and the distribution of the stock to the various partners.