Income Tax Act, 1961
Section 4: Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 12013).
4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 12013).
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1[145. Method of accounting.—(1) Income chargeable under the head “Profits and gains of business
or profession” or “Income from other sources” shall, subject to the provisions of sub-section (2), be
computed in accordance with either cash or mercantile system of accounting regularly employed by the
assessee.
(2) The Central Government may notify in the Official Gazette from time to time 2[income
computation and disclosure standards] to be followed by any class of assessees or in respect of any class
of income.
(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts
of the assessee, or where the method of accounting provided in sub-section (1) 3[has not been regularly
followed by the assessee, or income has not been computed in accordance with the standards notified
under sub-section (2)], the Assessing Officer may make an assessment in the manner provided in
section 144.]
4[145A. Method of accounting in certain cases.—For the purpose of determining the income
chargeable under the head “Profits and gains of business or profession”,––
(i) the valuation of inventory shall be made at lower of actual cost or net realisable value
computed in accordance with the income computation and disclosure standards notified under
sub-section (2) of section 145;
(ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to
include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred
by the assessee to bring the goods or services to the place of its location and condition as on the date
of valuation;
(iii) 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;
(iv) the inventory being securities other than those referred to in clause (iii), 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:
Provided that the inventory being securities held by a 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:
Provided further that the comparison of actual cost and net realisable value of securities shall be
made category-wise.
Income chargeable under the head “Profits and gains of business
or profession” or “Income from other sources” shall, subject to the provisions of sub-section
The Central Government may notify in the Official Gazette from time to time 2[income
computation and disclosure standards] to be followed by any class of assessees or in respect of any class
of income.
Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts
of the assessee, or where the method of accounting provided in sub-section
3[has not been regularly
followed by the assessee, or income has not been computed in accordance with the standards notified
under sub-section
the valuation of inventory shall be made at lower of actual cost or net realisable value
computed in accordance with the income computation and disclosure standards notified under
sub-section
of section 145;
the valuation of purchase and sale of goods or services and of inventory shall be adjusted to
include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred
by the assessee to bring the goods or services to the place of its location and condition as on the 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
of section 145;
the inventory being securities other than those referred to in clause
of section 145:
Provided that the inventory being securities held by a scheduled bank or public financial
institution shall be valued in accordance with the income computation and disclosure standards
notified under sub-section
of section 145 after taking into account the extant guidelines issued by
the Reserve Bank of India in this regard:
Provided further that the comparison of actual cost and net realisable value of securities shall be
made category-wise.