Valuation of closing stock on "market price"

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

09 April 2012 Dear Experts and Professionals

One of my friend father who is having DAAL MILL manufacturing & processing of DAAL. The stock (F.G.S) of which is valued on "MARKET PRICE" basis.

Is it correct to value the same on Market Price basis? As-2 suggest to value Clo. Stock of F.G.S on Cost or M.P which ever is lower.

When i pointed out about deviation from AS-2, he invite my attention that he is valuing Clo. Stk. on M.P (which is higher then the cost price) and the A.O does not have any objection in accepting higher stock.

Further the auditor also reported in audit report that the valuation at Market Price is in line with Sec.145(A) of I.T Act 1961.

Please suggest me the correct treatment. Also clarify what are the possible outcome is valuation at M.P is adopted.

thanking you

CA Kishore Tallam

CA Kishore Tallam (Expert)
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11 April 2012 Accounting standards are applicable only to Companies and hence, an individual need not follow ASs.
However, is such method of valuation is permitted under income tax act, it can be followed.

Querist : Anonymous

Querist : Anonymous (Querist)

11 April 2012 Dear Mr.Kishore

Please do not provide incomplete or guess answere to the query asked.

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