INCOME TAX ACT, 1961

Section 145A

Valuation of closing stock - Treatment of - Liability on account of exchange fluctuation -

AO noticed that assessee-company debited foreign exchange fluctuation loss in respect of raw materials and finished goods. AO was of the opinion that such loss constituted cost of purchase. Therefore, following the preceding year's assessment order, the AO held that the foreign exchange loss was attributable to closing stock, hence, should be added to the value of closing stock. Further, noticing that the assessee had foreign exchange fluctuation gain in the preceding assessment year and the closing stock of the preceding assessment year was reduced to that extent, thus, the AO held that the opening stock of the impugned assessment year was also needed to be reduced to that extent. Held: It was evident that AO merely relying upon the orders passed by his predecessor-in-office in assessee's own case for preceding assessment year, made the impugned addition. However, it was pertinent to note that while deciding assessee's appeals for earlier assessment years related to identical addition, the Tribunal held that the value of closing stock is not to include the liability on account of exchange fluctuation. Thus, ultimately, the Tribunal deleted the addition made to the opening and closing stock. Further, the same view was reiterated by the Tribunal over and again while deciding assessee's appeals Therefore, following the consistent view of the Tribunal in the preceding assessment years, the addition made by the AO on account of adjustment to the opening and closing stock was deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 14A Read with Rule 8D

SUBSCRIBE FOR FULL CONTENT