Forex

According to a recent Supreme Court ruling, it is settled law that the true profit of a business for an accounting period cannot be ascertained without taking into account the value of the stock in trade at the end of the period and that such valuation is a necessary element in the process of determining the trading profit of the period.

A RECENT ruling of the Supreme Court has gone into the age-old question of valuing closing stock. This issue has been considered in the context of an exporter valuing the stock in trade at market price, though its cost was lower, simply to inflate the profits which were exempt in the relevant year under the provisions of Section 80-HHC of the Income-Tax Act, 1961.
According to the Court, the recognised and settled accounting practice is that the closing stock has to be valued on cost basis or on the market value basis, only if the market value of the stock is less than the cost value.