London Investment And Mortgage Co. Ltd. vs Inland Revenue Commissioners. London ... on 6 December, 1956
While
anticipated loss is thus taken into account, anticipated profit in
the shape of appreciated value of the closing stock is not
brought into the account, as no prudent trader would care to
show increased profit before its actual realisation. This is the
theory underlying the rule that the closing stock is to be valued
at cost or market price whichever is the lower, and it is now
generally accepted as an established rule of commercial practice
and accountancy. As profits for income-tax purposes are to be
computed in conformity with the ordinary principles of
commercial accounting, unless of course, such principles have
been superseded or modified by legislative enactments,
unrealised profits in the shape of appreciated value of goods
remaining unsold at the end of an accounting year and carried
over to the following year's account in a business that is
continuing are not brought into the charge as a matter of
practice, though, as already stated, loss due to a fall in price
below cost is allowed even if such loss has not been actually
realised. As truly observed by one of the learned Judges in
Whimster & Co. v. Commissioners of Inland Revenue (1), "