Section 277: method of accounting in certain cases

Valuation rules for inventory, goods/services and securities

For computing income under "Profits and gains of business or profession":

• Inventory is valued at the lower of actual cost or net realisable value, computed as per the ICDS notified under section 276(2).
• Valuation of purchase and sale of goods or services, and of inventory, must be adjusted to include any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to their place of location and condition as on the valuation date.
• Inventory that is securities not listed on a recognised stock exchange, or listed but not regularly quoted, is valued at actual cost initially recognised as per the notified ICDS.
• Inventory that is other securities is valued at the lower of actual cost or net realisable value as per the notified ICDS.

Securities held by banks and financial institutions

Inventory that is securities held by a scheduled bank or a public financial institution is valued as per the notified ICDS, after taking into account the extant guidelines issued by the Reserve Bank of India in this regard.

The comparison of actual cost and net realisable value of securities under sub-sections (1) and (2) must be made category-wise.

Definitions

Any tax, duty, cess or fee under any law in force includes all such payments, irrespective of any right arising as a consequence of the payment.

"Public financial institution" has the same meaning as in section 2(72) of the Companies Act, 2013.

Frequently asked questions