Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram
Income Tax - Highlights / Catch Notes

Home Highlights November 2024 Year 2024 This

Constitutionality and legality of Income Computation and ...


Tax authorities mandating FIFO/Average Cost for inventory valuation, excluding LIFO method.

Case Laws     Income Tax

November 6, 2024

Constitutionality and legality of Income Computation and Disclosure Standards (ICDS) II and Notification 87/2016, which mandate the use of the First In First Out (FIFO) or Weighted Average Cost method for inventory valuation, excluding the Last In First Out (LIFO) method, while computing income under the head of Profits and Gains of Business or Profession under the Income Tax Act. The court held that FIFO, LIFO, and Weighted Average Cost are recognized methods for inventory valuation, and the adoption of any particular method aims to reflect the fairest approximation of the cost incurred. The valuation of unsold stock is a necessary process for determining trading results, not the source of profits. The amendment to Section 145A and ICDS II were not manifestly arbitrary, as they aimed to provide a uniform method of inventory valuation for assessees computing income under the specified head. The court found no unreasonable classification or violation of the equal protection rule, as the prescription applies to all assessees in the specified category. The appellants cannot claim a fundamental right to follow a particular inventory valuation method that would prevail over statutory prescription. The decision to amend Section 145A and implement ICDS II was based on recommendations from expert financial bodies.

View Source

 


 

You may also like:

  1. 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....

  2. Difference in stock valuation - valuation of the closing stock - LIFO or FIFO method - It is an admitted case that the assessee has been continuously adopting the LIFO...

  3. For the purpose of inquiry u/s 142- Valuation of inventory has to be done through cost accountant now. Also, for the purpose of section 144 amended to exclude the period...

  4. Valuation by DVO - addition based on estimated cost disregarding actual cost as per books - applicability of section 142A before amendment - non-rejection of books - AO...

  5. Levy of Entertainment tax - Valuation - consideration towards the services excluding the service tax component or on both - No proof is available on records to show that...

  6. Addition on account of valuation of closing stock by following FIFO method - assessee had miserably failed to demonstrate that it was following continuously weighted...

  7. The taxpayer, an IT/support services provider, received reimbursements from its associated enterprises (AEs) for the cost of providing such services. The tax authorities...

  8. Disallowance of interest - Valuation of inventory - There is no such provision in section 145A(A) to include interest cost in the value of inventory - Therefor...

  9. This case deals with transfer pricing adjustments made by the tax authorities regarding international transactions involving sale of Paclitaxel, Disodium Pamidronate,...

  10. Control of income-tax authorities - U/s 118 of IT ACT 1961 - Specifies the income-tax authority or authorities as subordinate to such other income-tax authority or...

  11. Reopening of assessment - Revenue has not been able to bring on record that how by following FIFO method of valuation of inventory based on cost, the profits of the...

  12. Method of Valuation - inter unit transfer of goods - captive consumption - Appellant was justified in reducing the assessable value to the actual cost of production (i.e....

  13. Levy of tax on lotteries - Valuation - when prize paid by the distributor/agent is not contemplated to be excluded from the value of taxable supply, we are not persuaded...

  14. Validity of order of passed by the Revisional authority - The respondent authorities acting as quasi judiciary authority by invoking the power under statute are expected...

  15. Valuation - Cable Operator’s Services - Appellant cannot exclude the amounts received for maintenance charges from taxable value in view the Sub-Rule 1 of Rule 5 of...

 

Quick Updates:Latest Updates