High Court confirms ITAT's weighted average method for stock valuation, rejecting FIFO.

The High Court upheld the ITAT's decision to accept the weighted average method for valuing closing stock for A.Y. 2008-09, dismissing the appeal and finding no substantial question of law. The Court disagreed with the Revenue's preference for the FIFO method, noting that the weighted average method is an accepted mode for stock valuation and that the appellant's approach was consistent with previous years.

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Issues:
Valuation of closing stock using weighted average method under Income Tax Act for A.Y. 2008-09.

Analysis:
For the relevant assessment year (A.Y. 2008-09), the appellant adopted the "weighted average method" to value its stock, relying on India Accounting Standard 2 (India AS-2) framed by the Institute of Chartered Accounts of India. The Assessing Officer (AO) disagreed with this method, stating that it did not reveal the true value of the stock. The CIT(A) also rejected the appellant's appeal. However, the ITAT found that the valuation methodology used by the appellant was consistent with previous years and allowed the appeal.

The High Court examined the Revenue's arguments and noted that the AO favored the FIFO method, which is one of the methods under Accounting Standard 2. However, the weighted average method is also an accepted mode for stock valuation. The Court disagreed with the AO's view that the appellant had adopted an inconsistent approach, as evidenced by the ITAT's findings. Consequently, the Court concluded that no substantial question of law arose in this appeal.

Therefore, the High Court dismissed the appeal, upholding the ITAT's decision to accept the weighted average method for valuing the closing stock for the assessment year in question.

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