Reduction in Price of Stock-in-Trade can be allowed while Computing Business Income only in Trading Account: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) held that a reduction in the price of the stock-in-trade can be allowed while computing business income only in trading accounts. But, if such a provision is made outside the trading account then the reduction may not be allowable.

The assessee, PNB Gilts Ltd is a Non-Banking Financial Company (NBFC), filed its return of income declaring total income. The return of income filed was selected for scrutiny assessment, which was completed under section 143(3) of the Income-tax Act, 1961 after making certain additions or disallowances. Aggrieved, the assessee filed an appeal before the CIT(A), who partly deleted the addition or disallowances which were made by the Assessing Officer. Aggrieved, the Revenue is in appeal before the Tribunal raised the ground that whether diminution or reduction in the price of the stock-in-trade can be allowed while computing business income.

The tribunal consists of a Judicial Member, Bhavnesh Saini, and an accountant member, O.P. Kant observed that the assessee is at liberty to value its stock at cost or market value, whichever is lower as per the consistent method of accounting, and such reduction if any, in value of the shares held as stock-in-trade will be allowed. But, if such a provision is made outside the trading account (only while computation of income) then the same may not be allowable.

However, it was not clear whether the provision for diminution in value of stock-in-trade has been made out of the trading account or within the trading account, therefore, the tribunal finds it appropriate to restore the issue to the file of the Assessing Officer for verifying the facts from the books of accounts and other records of the assessee and to decide the issue in dispute afresh in accordance with the law.