Excise duty deposited in account-current is deductible as an expense in the year of manufacturing

The court held that the excise duty paid in advance, which was deposited in the "account-current," was not an advance payment but an expense related to the year of manufacturing. As the duty became payable upon manufacturing and was non-refundable, the assessee was entitled to the deduction in the year the goods were manufactured. The court ruled in favor of the assessee, rejecting the Revenue's argument that the duty amount should be considered as paid in advance. The court disposed of the reference in favor of the assessee.

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Issues Involved:
The judgment involves the issue of whether the addition made under section 43B on account of advance excise duty paid, which was neither debited to the profit and loss account nor sales account nor made part of the purchase price, should be deleted.

Details of the Judgment:

The court was presented with the question of law regarding the deletion of the addition made under section 43B on account of advance excise duty paid. The Tribunal had initially deleted the entire addition, finding that the excise duty became payable as soon as the goods were manufactured, and the amount was deposited in the "account-current," which was non-refundable to the assessee.

The Assessing Officer disallowed the expense claimed by the assessee on account of excise duty paid in advance, which was not covered under section 43B of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) partially confirmed the disallowance, but the Tribunal ultimately deleted the entire addition. The Tribunal found that the excise duty became payable when the goods were manufactured, and the amount was deposited in the "account-current," making it an expense that could not be disallowed.

The Revenue contended that since the goods were not removed during the relevant year, the duty amount should be considered as paid in advance, and therefore, not deductible. However, the court held that once duty became payable upon manufacturing, and the amount was deposited in the "account-current," it was not an advance payment but an expense related to the year of manufacturing.

The court rejected the Revenue's contention, stating that the duty amount deposited in the "account-current" was non-refundable, and therefore, the assessee was entitled to the deduction in the year the goods were manufactured. The court relied on the statutory provisions and previous judgments to support its decision.

In conclusion, the court answered the question referred against the Revenue and in favor of the assessee, disposing of the reference accordingly.

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