diff --git a/erpnext/controllers/buying_controller.py b/erpnext/controllers/buying_controller.py
index 233b476a14..f28de3b064 100644
--- a/erpnext/controllers/buying_controller.py
+++ b/erpnext/controllers/buying_controller.py
@@ -307,14 +307,15 @@ class BuyingController(StockController, Subcontracting):
 				if self.is_internal_transfer():
 					if rate != d.rate:
 						d.rate = rate
-						d.discount_percentage = 0
-						d.discount_amount = 0
 						frappe.msgprint(
 							_(
 								"Row {0}: Item rate has been updated as per valuation rate since its an internal stock transfer"
 							).format(d.idx),
 							alert=1,
 						)
+					d.discount_percentage = 0.0
+					d.discount_amount = 0.0
+					d.margin_rate_or_amount = 0.0
 
 	def get_supplied_items_cost(self, item_row_id, reset_outgoing_rate=True):
 		supplied_items_cost = 0.0
diff --git a/erpnext/controllers/selling_controller.py b/erpnext/controllers/selling_controller.py
index 19fedb3c38..70e205619d 100644
--- a/erpnext/controllers/selling_controller.py
+++ b/erpnext/controllers/selling_controller.py
@@ -447,15 +447,16 @@ class SellingController(StockController):
 						rate = flt(d.incoming_rate * d.conversion_factor, d.precision("rate"))
 						if d.rate != rate:
 							d.rate = rate
+							frappe.msgprint(
+								_(
+									"Row {0}: Item rate has been updated as per valuation rate since its an internal stock transfer"
+								).format(d.idx),
+								alert=1,
+							)
 
-						d.discount_percentage = 0
-						d.discount_amount = 0
-						frappe.msgprint(
-							_(
-								"Row {0}: Item rate has been updated as per valuation rate since its an internal stock transfer"
-							).format(d.idx),
-							alert=1,
-						)
+						d.discount_percentage = 0.0
+						d.discount_amount = 0.0
+						d.margin_rate_or_amount = 0.0
 
 			elif self.get("return_against"):
 				# Get incoming rate of return entry from reference document
diff --git a/erpnext/selling/doctype/customer/test_customer.py b/erpnext/selling/doctype/customer/test_customer.py
index 36ca2b2fdc..24587564cf 100644
--- a/erpnext/selling/doctype/customer/test_customer.py
+++ b/erpnext/selling/doctype/customer/test_customer.py
@@ -367,7 +367,14 @@ def set_credit_limit(customer, company, credit_limit):
 		customer.credit_limits[-1].db_insert()
 
 
-def create_internal_customer(customer_name, represents_company, allowed_to_interact_with):
+def create_internal_customer(
+	customer_name=None, represents_company=None, allowed_to_interact_with=None
+):
+	if not customer_name:
+		customer_name = represents_company
+	if not allowed_to_interact_with:
+		allowed_to_interact_with = represents_company
+
 	if not frappe.db.exists("Customer", customer_name):
 		customer = frappe.get_doc(
 			{
diff --git a/erpnext/stock/doctype/delivery_note/test_delivery_note.py b/erpnext/stock/doctype/delivery_note/test_delivery_note.py
index 0738bfbd8f..6b8fb9867a 100644
--- a/erpnext/stock/doctype/delivery_note/test_delivery_note.py
+++ b/erpnext/stock/doctype/delivery_note/test_delivery_note.py
@@ -570,15 +570,12 @@ class TestDeliveryNote(FrappeTestCase):
 			customer=customer_name,
 			cost_center="Main - TCP1",
 			expense_account="Cost of Goods Sold - TCP1",
-			do_not_submit=True,
 			qty=5,
 			rate=500,
 			warehouse="Stores - TCP1",
 			target_warehouse=target_warehouse,
 		)
 
-		dn.submit()
-
 		# qty after delivery
 		actual_qty_at_source = get_qty_after_transaction(warehouse="Stores - TCP1")
 		self.assertEqual(actual_qty_at_source, 475)
@@ -1000,6 +997,51 @@ class TestDeliveryNote(FrappeTestCase):
 		self.assertEqual(dn2.items[0].returned_qty, 0)
 		self.assertEqual(dn2.per_billed, 100)
 
+	def test_internal_transfer_with_valuation_only(self):
+		from erpnext.selling.doctype.customer.test_customer import create_internal_customer
+
+		item = make_item().name
+		warehouse = "_Test Warehouse - _TC"
+		target = "Stores - _TC"
+		company = "_Test Company"
+		customer = create_internal_customer(represents_company=company)
+		rate = 42
+
+		frappe.get_doc(
+			{
+				"item_code": item,
+				"price_list": "Standard Selling",
+				"price_list_rate": 1000,
+				"doctype": "Item Price",
+			}
+		).insert()
+
+		make_stock_entry(target=warehouse, qty=5, basic_rate=rate, item_code=item)
+		dn = create_delivery_note(
+			item_code=item,
+			company=company,
+			customer=customer,
+			qty=5,
+			rate=500,
+			warehouse=warehouse,
+			target_warehouse=target,
+			do_not_save=True,
+			do_not_submit=True,
+		)
+
+		self.assertEqual(dn.items[0].rate, 500)  # haven't saved yet
+		dn.save()
+
+		# rate should reset to incoming rate
+		self.assertEqual(dn.items[0].rate, rate)
+
+		# rate should reset again if discounts are fiddled with
+		dn.items[0].margin_type = "Amount"
+		dn.items[0].margin_rate_or_amount = 50
+		dn.save()
+
+		self.assertEqual(dn.items[0].rate, rate)
+
 
 def create_delivery_note(**args):
 	dn = frappe.new_doc("Delivery Note")