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2019 (2) TMI 1645 - HC - Income TaxValuation of closing stock - ITAT accepted the weighted average method, adopted by the assessee, to treat the valuation - assessee relied on India Accounting Standard 2 (India AS-2), framed by the Institute of Chartered Accounts of India - HELD THAT - This Court has considered the Revenue s contentions. The FIFO method, which the AO preferred, is one of the Accounting Standard 2 method. However, equally the weighted average method is also a recognized mode for valuing the stock. The AO s opinion that the assessee had adopted inconsistent approach was not correct, as is borne out by the table extracted in the ITAT s order. As a result, this Court is of the opinion that no substantial question of law arises in this appeal.
Issues:
Valuation of closing stock using weighted average method under Income Tax Act for A.Y. 2008-09. Analysis: For the relevant assessment year (A.Y. 2008-09), the appellant adopted the "weighted average method" to value its stock, relying on India Accounting Standard 2 (India AS-2) framed by the Institute of Chartered Accounts of India. The Assessing Officer (AO) disagreed with this method, stating that it did not reveal the true value of the stock. The CIT(A) also rejected the appellant's appeal. However, the ITAT found that the valuation methodology used by the appellant was consistent with previous years and allowed the appeal. The High Court examined the Revenue's arguments and noted that the AO favored the FIFO method, which is one of the methods under Accounting Standard 2. However, the weighted average method is also an accepted mode for stock valuation. The Court disagreed with the AO's view that the appellant had adopted an inconsistent approach, as evidenced by the ITAT's findings. Consequently, the Court concluded that no substantial question of law arose in this appeal. Therefore, the High Court dismissed the appeal, upholding the ITAT's decision to accept the weighted average method for valuing the closing stock for the assessment year in question.
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