Section 145A: Method of Accounting in certain cases under Income Tax Act, 1961
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Provisions for Method of accounting under Income Tax Act, 1961 is stated under Section 145, which talks about applicability of Income Computation and Disclosure Standards as notified by Central Government.
In continuation to this section, there are certain cases where provision related with its Methods of Accounting are stated i.e., Section 145A. This section more specifically deals with Income computation under PGBP.
Section 145A talk about certain cases (as stated below), where provisions related with its valuation are stated:
- The valuation of inventory shall be made at lower of actual cost or net realisable value in accordance with ICDS as maybe notified.
- The valuation of purchase and sale of goods or services and of inventory shall be adjusted to include amount of any tax, duty, cess or fees (by whatever name called) actually paid or payable or incurred by assessee to bring goods or services to the place of its location and condition as on date of valuation.
- The inventory being securities not listed on a recognised stock exchange, or listed but not quoted on a recognised stock exchange with regularity from time to time, shall be valued at actual cost initially recognised in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145.
- The inventory other than above, i.e., listed securities, shall be valued at lower of actual cost or net realisable value in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145.
There is one exception to above provisions that inventory being securities held by scheduled bank or public financial institution shall be valued in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145 after taking into account the extant guidelines issued by the Reserve Bank of India in this regard.
Furthermore, the comparison of actual cost and net realisable value of securities shall be made category-wise. It means that valuation of securities shall be done at category level. There might be possibility that there are number of securities under one category, then its valuation will be done at category level by consolidating the all the securities under each category.
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