From 25852879f6068006a44b173461dc0007d2ecfe00 Mon Sep 17 00:00:00 2001
From: ljain112 <ljain112@gmail.com>
Date: Fri, 13 Mar 2026 11:53:08 +0530
Subject: [PATCH] fix: correct item valuation when "Deduct" is used in Purchase
 Invoice and Receipt.

(cherry picked from commit e68f149d3afa469d92ab6dc20a34ff8981ea4fdd)

# Conflicts:
#	erpnext/controllers/buying_controller.py
---
 erpnext/controllers/buying_controller.py      | 51 ++++++++++++++++
 .../purchase_receipt/test_purchase_receipt.py | 59 +++++++++++++++++++
 2 files changed, 110 insertions(+)

diff --git a/erpnext/controllers/buying_controller.py b/erpnext/controllers/buying_controller.py
index 06a8f25b186..53a26536cf7 100644
--- a/erpnext/controllers/buying_controller.py
+++ b/erpnext/controllers/buying_controller.py
@@ -401,6 +401,57 @@ class BuyingController(SubcontractingController):
 
 		update_regional_item_valuation_rate(self)
 
+<<<<<<< HEAD
+=======
+	def get_tax_details(self):
+		tax_accounts = []
+		total_valuation_amount = 0.0
+		total_actual_tax_amount = 0.0
+
+		for d in self.get("taxes"):
+			if d.category not in ["Valuation", "Valuation and Total"]:
+				continue
+
+			amount = flt(d.base_tax_amount_after_discount_amount) * (
+				-1 if d.get("add_deduct_tax") == "Deduct" else 1
+			)
+
+			if d.charge_type == "On Net Total":
+				total_valuation_amount += amount
+				tax_accounts.append(d.account_head)
+			else:
+				total_actual_tax_amount += amount
+
+		return tax_accounts, total_valuation_amount, total_actual_tax_amount
+
+	def get_item_tax_amount(self, item, tax_accounts):
+		item_tax_amount = 0.0
+		if item.item_tax_rate:
+			tax_details = json.loads(item.item_tax_rate)
+			for account, rate in tax_details.items():
+				if account not in tax_accounts:
+					continue
+
+				net_rate = item.base_net_amount
+				if item.sales_incoming_rate:
+					net_rate = item.qty * item.sales_incoming_rate
+
+				item_tax_amount += flt(net_rate) * flt(rate) / 100
+
+		return item_tax_amount
+
+	def get_item_actual_tax_amount(
+		self, item, actual_tax_amount, stock_and_asset_items_amount, stock_and_asset_items_qty
+	):
+		item_proportion = (
+			flt(item.base_net_amount) / stock_and_asset_items_amount
+			if stock_and_asset_items_amount
+			else flt(item.qty) / stock_and_asset_items_qty
+		)
+
+		return flt(item_proportion * actual_tax_amount, self.precision("item_tax_amount", item))
+
+>>>>>>> e68f149d3a (fix: correct item valuation when "Deduct" is used in Purchase Invoice and Receipt.)
 	def set_incoming_rate(self):
 		"""
 		Override item rate with incoming rate for internal stock transfer
diff --git a/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py b/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
index d2e0397a7ce..8508031578d 100644
--- a/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
+++ b/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
@@ -1217,6 +1217,65 @@ class TestPurchaseReceipt(FrappeTestCase):
 
 		pr.cancel()
 
+	def test_item_valuation_with_deduct_valuation_and_total_tax(self):
+		pr = make_purchase_receipt(
+			company="_Test Company with perpetual inventory",
+			warehouse="Stores - TCP1",
+			supplier_warehouse="Work In Progress - TCP1",
+			qty=5,
+			rate=100,
+			do_not_save=1,
+		)
+
+		pr.append(
+			"taxes",
+			{
+				"charge_type": "Actual",
+				"add_deduct_tax": "Deduct",
+				"account_head": "_Test Account Shipping Charges - TCP1",
+				"category": "Valuation and Total",
+				"cost_center": "Main - TCP1",
+				"description": "Valuation Discount",
+				"tax_amount": 20,
+			},
+		)
+
+		pr.insert()
+
+		self.assertAlmostEqual(pr.items[0].item_tax_amount, -20.0, places=2)
+		self.assertAlmostEqual(pr.items[0].valuation_rate, 96.0, places=2)
+
+		pr.delete()
+
+		pr = make_purchase_receipt(
+			company="_Test Company with perpetual inventory",
+			warehouse="Stores - TCP1",
+			supplier_warehouse="Work In Progress - TCP1",
+			qty=5,
+			rate=100,
+			do_not_save=1,
+		)
+
+		pr.append(
+			"taxes",
+			{
+				"charge_type": "On Net Total",
+				"add_deduct_tax": "Deduct",
+				"account_head": "_Test Account Shipping Charges - TCP1",
+				"category": "Valuation and Total",
+				"cost_center": "Main - TCP1",
+				"description": "Valuation Discount",
+				"rate": 10,
+			},
+		)
+
+		pr.insert()
+
+		self.assertAlmostEqual(pr.items[0].item_tax_amount, -50.0, places=2)
+		self.assertAlmostEqual(pr.items[0].valuation_rate, 90.0, places=2)
+
+		pr.delete()
+
 	def test_po_to_pi_and_po_to_pr_worflow_full(self):
 		"""Test following behaviour:
 		- Create PO