Valuation of Inventory [Section 145A] :

The valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head ‘Profits and gains of business or profession‘ shall be in accordance with the method of accounting regularly followed by the assessee. Such value will be arrived at after being adjusted to include the amount of any tax, duty, cess or fee (by whatever name called), actually paid or incurred by the assessee to bring the goods to their present location and condition.

Further, for the purpose of valuation, any entitlement to rebate or set -off, etc. there from should not be considered. In this context, the following points may be noted:

•  This section applies irrespective of section 145 laying down method of accounting to be followed, to determine business income.
•  It applies only in respect of valuation of purchase and sale of goods and inventory (opening as well as closing stock).
•  Otherwise, business income should be computed in accordance with method of accounting regularly employed.
•  In valuation of sale and purchase of goods as well as inventory, any amount actually paid or incurred on any tax, duty, cess or fees, (“duty etc.” in relation to purchase and sale of goods) shall be included.
•  Duty, etc., must have been actually paid or incurred to bring the goods to the place of its location and condition, as on the date of valuation.
•  The amount of duty, etc., included in value of inventory, should not take into account any right arising as a consequence of payment, meaning any credit or set-off or rebate etc.