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Valution of closing stock of shares

Manvi Mehrotra (Associate Tax Consultant) (88 Points)

25 September 2013

A company deals in purchasing and selling shares through a broker. What will be the method to value the closing stock of the securities?

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14 Replies

Ankit (CA, CS) (3064 Points)
Replied 25 September 2013

it will be valued at cost since, it is not inventory of the company

Manvi Mehrotra (Associate Tax Consultant) (88 Points)
Replied 25 September 2013

See, the company is investing in shares through a broker and all the transaction of purchase and sale of securites are being recorded in the form of purchases and sales in books of accounts..

the co. has sold shares of the value exceeding Rs. 1 Cr..

so is the co. liable for tax audit u/s 44AB?

and why do are we not following the basic method i.e. cost or nrv, whichever is lower?

Ankit (CA, CS) (3064 Points)
Replied 25 September 2013

Dear Manvi,

As far as the shares/derivatives go, the Turnover for 44AB is the amount of profit/loss…and not the sale/purchase
Since these are not goods, and as such AS 2 wont apply..these are ST investments

Manvi Mehrotra (Associate Tax Consultant) (88 Points)
Replied 25 September 2013

can u send me some relevant links to support ur answer?

Ankit (CA, CS) (3064 Points)
Replied 25 September 2013

can you give me your email id?...i ll email it to u

Manvi Mehrotra (Associate Tax Consultant) (88 Points)
Replied 25 September 2013

manvimehrotra @ gmail.com

Thankyou so much..:)

Ankit (CA, CS) (3064 Points)
Replied 25 September 2013

You are welcome…

Will email it to you the files by evening….is that ok???

Manvi Mehrotra (Associate Tax Consultant) (88 Points)
Replied 25 September 2013

Thanks..

Its a little urgent..if u can tell me the relevant section or site, i wl search it myself..we have a client waiting on this issue..

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 25 September 2013

go through this link it will help you. or see section 43(5)

/forum/tax-audit-turnover-u-s-44ab-in-shares-trading-145303.asp

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 25 September 2013

valuation of shares covered in as 13 not in as 2. as 2 says cost or nrv wie lower and as 13 says long term holdings to be valued at cost

Manvi Mehrotra (Associate Tax Consultant) (88 Points)
Replied 25 September 2013

lokesh..

can you explain me one thing..

suppose a company is purchasing and selling shares through a broker throughout the year.

partial selling is intra day where as partial selling is not intra day but sold within the year...

do i need to breakup the whole overall business into speculative and non speculative?

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 25 September 2013

for better solution you should advice to keep separate account for trading & investment. but in this current case there is need of proper breakup into speculative & non speculative..