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of <h1>Income Tax Act Clarifies Stock Valuation for Firm Dissolution and Conversion: Market Value Adoption Required Per Sections 145 & 170.</h1> The circular addresses the valuation of closing stock during the dissolution, takeover, or conversion of a firm into a company under the Income Tax Act, 1961, specifically sections 145 and 170. It highlights objections raised by the Comptroller and Auditor General regarding stock valuation in such cases and references the Supreme Court's decision in ALA Firm vs. Commissioner of Income-tax, which mandates market value adoption for stock upon firm dissolution. The Ministry of Law concurs that market value should be used in succession cases under section 170, but determining whether a transaction constitutes a transfer or succession involves a mixed question of law and fact. The circular emphasizes the need for assessing authorities to evaluate each case individually.
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