Supreme Court: Deduct Interest on Receivables from Assessable Value of Goods

The Supreme Court allowed the appeals, directing authorities to consider the deductibility of interest on receivables and bank charges from the assessable value of goods. The Court emphasized the deductibility of interest on credit sales and post-manufacturing expenses from the price of goods, in line with past judgments.

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Issues:
1. Deductibility of interest accruing on advances from the price.
2. Deduction of bank charges and collection charges.

Issue 1: Deductibility of Interest:
The appellant claimed deduction for interest on delayed payments averaging between 3 to 12 months. The claim was supported by a Certificate of Chartered Accountant. However, the assessing authority, appellate authority, and Tribunal rejected the claim, stating that the contract did not specifically provide for such interest on credit sales. The Tribunal emphasized that interest deductible should be limited to the period mentioned in the invoice to avoid unintended consequences. The Supreme Court referred to past judgments, highlighting that interest on delayed payments is deductible from the value of goods if the sale is on credit and interest is charged from the date of delivery till the realization of payment. The Court emphasized that interest should be excluded from the price mentioned in the invoice to determine the assessable value.

Issue 2: Deduction of Bank and Collection Charges:
Regarding the deduction of bank charges and collection charges, the Court clarified that such charges are post-manufacturing and post-clearing expenses and should be deductible from the assessable value. The Court relied on previous judgments to support this position, emphasizing that bank charges, including those for clearance of outstation cheques, should not form part of the price of goods at the time of removal. The Court concluded that these charges are excludable from the price while calculating the assessable value of the goods. The Court directed the authorities to examine whether interest on receivables and bank charges are deductible from the assessable value of goods at the time of removal, in line with previous decisions.

In conclusion, the Supreme Court allowed the appeals, modifying the Tribunal's order to direct the authorities to consider the deductibility of interest on receivables and bank charges from the assessable value of goods. The Court's decision was based on the principles established in past judgments, emphasizing the deductibility of interest on credit sales and post-manufacturing expenses from the price of goods.

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