Revenue appeal partly allowed on excise duty issue. Interest on capital for loans re-decision ordered.

The appeal filed by the Revenue was allowed partly for statistical purposes. The Tribunal dismissed the first ground concerning the addition of excise duty on closing stock under section 145A, upholding the decision of the CIT(A) based on the interpretation that excise duty liability crystallizes upon goods clearance, not manufacture. On the second issue of allowing interest on capital borrowed for interest-free loans to subsidiary companies, the Tribunal set aside the CIT(A)'s order and directed the AO to re-decide the matter in accordance with a High Court directive, allowing this ground for statistical purposes.

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Issues Involved:
1. Addition of excise duty payable on closing stock under section 145A of the Act.
2. Allowance of interest paid on capital borrowed used for interest-free loans to subsidiary companies.

Analysis:

Issue 1: Addition of excise duty on closing stock under section 145A:
The appeal by the Revenue challenges the allowance of excise duty on closing stock by the ld. CIT(A). The Tribunal referred to a similar issue in a previous case and cited the decision of the Hon'ble Bombay High Court regarding section 145A. The High Court clarified that excise duty liability crystallizes on the date of clearance of goods, not the date of manufacture. Since the manufactured sugar was unsold and in stock, the excise duty liability was not incurred. The Tribunal upheld the decision of the CIT(A) based on this interpretation and dismissed the Revenue's ground.

Issue 2: Allowance of interest on capital borrowed for interest-free loans:
The second issue pertains to the allowance of interest paid on capital borrowed, which was used to provide interest-free loans to subsidiary companies. The Tribunal noted a similar issue decided in a previous case and referred to a decision where the issue was restored to the AO for fresh consideration based on a High Court directive. Following this precedent, the Tribunal set aside the CIT(A)'s order and directed the AO to re-decide the issue in line with the High Court's direction for the assessment year 1994-95. Consequently, the Tribunal allowed this ground for statistical purposes.

In conclusion, the appeal filed by the Revenue was allowed partly for statistical purposes, with the Tribunal dismissing the first ground related to excise duty on closing stock and setting aside the order on the second ground regarding interest paid on capital borrowed for further consideration by the AO.

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