Advance excise duty for imports is deductible only when the related stock is received, not on mere advance payment.

Advance payment of countervailing excise duty for importing liquor was not deductible under section 43B in the year of payment because the liability had not yet accrued and the amount was linked to stock-in-trade to be received later. The payment was treated as a prepaid expenditure made to obtain the import permit, while deduction was allowed only when the related goods entered the trading account and the outlay could be matched with the relevant stock. The claim for deduction in the year of advance payment was therefore rejected, and the issue was answered against the assessee.

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Issues: Whether excise duty paid in advance for importing liquor can be deducted under section 43B of the Income-tax Act, 1961 in the year of payment, even though the goods were not received during that year.

Analysis: The payment was made as a pre-condition for obtaining the import permit under the State excise law, but the duty was linked to the eventual import and acquisition of stock-in-trade. The statutory provision relied upon permits deduction only where the liability has accrued and the payment is referable to an otherwise allowable business expenditure. The Court distinguished between a mere advance payment and an accrued liability, and held that excise-related outlay connected with stock is to be matched with the year in which the goods are received and reflected in trading results. The decision also treated the amount as correctly shown as prepaid expenditure in the year of payment, with deduction to arise only when the related goods enter the trading account.

Conclusion: The claim for deduction in the year of advance payment was rejected and the question was answered against the assessee and in favour of the Revenue.

Final Conclusion: Advance payment of countervailing excise duty for imports cannot be deducted under section 43B before receipt of the goods, as the amount becomes allowable only when it is matched with the cost of the relevant stock.

Ratio Decidendi: Section 43B does not permit deduction of an advance payment unless the liability has accrued and the expenditure is otherwise allowable in the relevant year; where the payment is connected to stock-in-trade, deduction follows the year of receipt and trading adjustment, not the year of mere payment.

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