The case involves a challenge to the amendment in Section 145A, ...

Valuation of closing stock: Retrospective amendment in Section 145A would not apply if FIFO not adopted for valuing stock in AY 2017-18

Case Laws     Income Tax

May 30, 2024

The case involves a challenge to the amendment in Section 145A, making it mandatory to adopt FIFO or weighted average cost method for valuing closing and opening stock. The court held that prior to the amendment, there was no mandatory provision for a specific valuation method. The Parliament made Clause 16 of ICDS (II) mandatory for all assesses, ensuring uniformity in accounting. The court emphasized that the method used for valuing opening and closing stock must be consistent. The retrospective amendment in Section 145A aims to provide relief to assesses who adopted FIFO in the Assessment Year 2017-18. Assessors following LIFO consistently are not required to switch to FIFO for that year. The court partly allowed the writ petitions, quashing the notices and allowing assesses to value stocks using LIFO or FIFO methods for the relevant assessment year.

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