ABSTRACT
INCOME AND THE H. C. Edey V ALUATION OF STOCK-IN-TRADE IT is possible to make at least one valid generalisation on the valuation of stock-in-trade for income tax purposes. It is that no cons,istent prjncipie can be found in the Income Tax Acts or in the decisions of the courts as a firm foundation for the valuation. It is true that it has long been generally accepted, on the basis of judicial decision, that in ascertaJining the quantum of profit to be assessed to tax the following fundamental rule is to be observed: namely, that the ordinary principles of commercial accounting are to be followed except to the extent that they conflict with specific rules laid down ,by the Income Tax Acts. Reference was again made to this general principle in Ostime v. Duple Motor Bodies, Ltd.,l though it is not clear how far the decision in that case must be regarded as depending thereon. The Income Tax Acts are silent with respect to the method to be followed in stock valuation in a continuing ,business; hence, applying the principle, one might expect that any generally accepted accounting practice with respect to stock valuation would be acceptable. But Patrick v. Broadstone Mills, Ltd.2 and Minister of National Revenue v. Anaconda American Brass, Ltd.s show that the courts are not prepared to follow this principle in all cases, and are prepared to reject methods of stock valuation that are fully acceptable for the purposes, for example, of presentation of accounts under the Companies Act.
