( 1 ) IN order to appreciate the question involved in this reference it would be necessary to narrate briefly the facts leading up to the making of this reference. The assessee is a company engaged in the business of manufacture and site of paints. This reference arises out of assessment orders for the years 1963-64 and 1964-65, for which the relevant accounting years ware the calendar years 1962 and 1963, respectively. The assessee had valued raw materials at cost in the closing stock inventory. However, the goods in process and the finished products had been valued at the cost of raw materials only, which, according to the assessee, formed 84. 49% representing overheads. The assessee had contended that it had been the practice to uniformly value the goods-in-process and the finished products at the cost of raw materials only. It was submitted that the paints had a limited storage life and if these were not sold within a certain period these lost their market value. The Income-tax Officer did not accept the said reasoning and contention. He was of the opinion that the basis of valuation of stocks, according to the well-known principles of accountancy, shou