To implement the incentive scheme, sugar was rightly valued at levy price

CIT vs. Bannari Amman Sugars Ltd (Supreme Court)

Valuation of opening and closing stock is a very important aspect of ascertainment of true profits. An improper valuation could result in rejection of books of account though all that is needed for rectifying it, is to make an addition or necessary adjustment based on proper valuation. Valuation of stock, whatever be the method, should be consistently followed. Method of valuation is generally at cost or the market value whichever of the two, is lower. As the incentive scheme was held to be a capital receipt in Ponni Sugars 306 ITR 392 (SC), the assessee is right in valuing the closing stock of incentive sugar at levy price which was less than the cost of manufacture of sugar (cost price).