The Tax Publishers2019 TaxPub(DT) 8257 (Mum-Trib)

INCOME TAX ACT, 1961

Section 145A

As assessee had filed complete details of valuation of closing stock in its paper book along with statements showing details of subsequent sales with regard to the items of closing stock which were revalued to NRV along with sample copies of invoices with respect to subsequent sales, it was clear that NRV adopted by assessee for the purpose of valuation of closing stock was as per AS-2. Thus, addition made by AO on account of reduction in the value of closing stock was liable to be deleted.

Valuation of closing stock - Accounting method - Diminution in the value of closing stock -

AO disallowed assessee's claim of reduction on closing stock based on the order of earlier years. Assessee contended that it had not claimed reduction in value of closing stock rather it had just classify its closing stock at lower of cost or NRV as per accounting standards. For the purpose of such classification assessee had reduced the value of certain items from closing stock to appropriately reflect its NRV which was lower than the cost. Held: Any adjustment in the closing stock for the instant year would consequently result in the adjustment to the opening stock of subsequent year. Further, the assessee had filed complete details of valuation of closing stock in its paper book along with statements showing details of subsequent sales with regard to the items of closing stock which were revalued to NRV along with sample copies of invoices with respect of subsequent sales. From those details it was clear that NRV adopted by the assessee for the purpose of valuation of closing stock was as per the prevailing accounting practices as AS-2. Thus, addition made by AO on account of reduction in the value of closing stock was liable to be deleted.

Followed:ACIT v. Concorde Motors (India) Ltd. [ITA No. 2333/Mum/2017, dt. 1-10-2019] : 2019 TaxPub(DT) 7525 (Mum-Trib)

REFERRED : CIT v. Alfa Laval (India) Limited (2007) 295 ITR 451 (SC) : 2007 TaxPub(DT) 1547 (SC)

FAVOUR : In assessee's favour

A.Y. : 2013-14 & 2014-15

INCOME TAX ACT, 1961

Section 43B

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT