Section 28(via) of the Income Tax Act, 1961 states “The fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner shall be chargeable to tax under the head "Profits and gains of business or profession”. Central Board of Direct Taxes vide Notification No. SO 4213(E) dated 30-08-2018 inserted new Rule 11UAB which provides rules for the determination of fair market value of inventory:
| Inventory |
Fair Market Value |
| Immovable Property |
The value adopted or
assessed or
assessable by any
authority of the
Central Govt. or a
State Govt. for the
purpose of payment
of stamp duty on the
date on which the
inventory is converted
into, or treated, as a
capital asset. |
| Jewellery,
archaeological
collections, drawings,
paintings, sculptures,
any work of art,
shares or securities
referred to in rule
11UA |
Value determined in
the manner provided
in sub-rule (1) of rule
11UA on the date on
which the inventory is
converted into, or
treated, as a capital
asset. |
| Any other property |
Price that such
property would
ordinarily fetch on
sale in the open
market on the date
on which the
inventory is converted
into, or treated, as a
capital asset. |
