Nil valuation of closing stock upheld where unsaleable snake skins had no market value

Closing stock must be valued at cost or market value, whichever is lower. Where the evidence showed no local or foreign market for the unsold snake skins and the stock had become unsaleable during the accounting year, the market value was effectively nil. The assessee was therefore entitled to adopt nil valuation for the closing stock, and any later sale would be taxed in the subsequent year when realised.

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Issues: Whether the Tribunal was justified in valuing the closing stock of unsold snake skins at Rs. 43,708.

Analysis: The accepted rule for valuing stock is cost or market value, whichever is lower. The evidence showed that there was no market for the snake skins either locally or abroad and that the relevant varieties had become unsaleable in the accounting year. Where the market value had in substance fallen to nothing, the assessee was entitled to value the closing stock at nil. Such valuation did not prejudice the revenue, because any later sale would bring the full sale proceeds into the following year's profits.

Conclusion: The Tribunal was not justified in fixing the closing stock at Rs. 43,708. The assessee was entitled to value the unsold snake skins at nil, and the question was answered in favour of the assessee.

Ratio Decidendi: Closing stock must be valued at cost or market value, whichever is lower, and where the market value is nil, the assessee may adopt nil valuation.

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