Re: capitalising of stock in trade

An addition was made in respect of stock found during survey as the department did not rely on the evidence of a challan filed by the assessee, who had taken the stock on approval from the party. The department made addition considering the same to be assessee’s stock. Now the assessee is in an appeal before the CIT(A), appeal filed before 31.1.2020 and wants to go for VSV scheme. Once he pays the tax for the stocks found with him, can he capitalise the stocks in his books of account?

The accounting entries will be independent and would not be saved by the scheme. It is fair to assume that the accounting entries by itself would not attract the income tax under the regular provisions of the Income Tax Act. However the liability to MAT u/s 115JB for that year would require to be contested if such tax is levied. The issue under the Companies Act and SEBI laws and the listing agreements and of the corporate governance and also of the CSR spends would require to be deeply examined. There are no immunity as on date  under these laws.

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