TaxTMI 
TaxTMI 
2004 (9) TMI 569
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....dited to the Profit & Loss A/c at the figure of total consideration received including reimbursement of excise duty received from the customers. 4.Excise duty payable should be debited to the Profit & Loss A/c to the extent of the net amount i.e. the gross excise duty payable on goods manufactured during the P.Y. as reduced by the amount of modvat credit available with reference to the raw materials consumed during the P.Y. The allowance of deduction in respect of net excise duty payable would however be subject to the provisions of section 43B read first proviso to the above section and such deduction would be allowable only on the basis of actual payment. If the Profit & Loss A/c on being recast along the above lines discloses the same end result as the result disclosed by the appellant-company following the exclusive method of modvat accounting, then the addition made by the Assessing Officer would have to be treated as annulled. However if there is a difference, the difference should be adjusted in the assessed income of the business. The assessment made by the Assessing Officer on the above issue would have to be set aside for re-examination along the above lines. The ground ....
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....d the appeal is dismissed. 1995/Mum./2000 (Assessee's appeal) 9. This appeal by the assessee is directed against the order of the CIT passed under section 263 for the assessment year 1996-97. 10. The CIT on examining the records noticed that the profit of Rs. 36,94,620 was under-estimated by the assessee as shown in the audit report which was to be taxed and further that the Assessing Officer has allowed excess deduction under section 80-IA including interest income of Rs. 12,19,939 as business income while computing the claim under section 80-IA. Therefore he held that the opinion that the order passed by the Assessing Officer on 8-8-1997 was erroneous and prejudicial to the interest of the Revenue. A show-cause notice was served and hearing took place on 20-1-2000. 11. Assessee is in the field of manufacturing various kinds of wire rods and bars. CIT noticed that the assessee had translated the current assets/liabilities and he formed the opinion that due to change in accounting policy, assessee has under estimated the profits. In the note 2 to Schedule 20 of the audited accounts, it was observed as follows :- "(2) Change in accounting policy - Current assets/liabilities are....
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....or the year under consideration. He distinguished the decisions relied on by the assessee. 13. Coming to the interest earned on fixed deposits kept as margin money for opening letters of credit in relation to the imports and also interest on delayed payment of sale proceeds both local and exports, it was contended it had a direct nexus with manufacturing activities of S.S. Wire and S.S. Bright Bars. The CIT held the interest earned by the assessee should have been considered in the working of deduction under section 80-IA. The decisions relied on by the assessee are also distinguishable, he held CIT held Assessing Officer should have excluded interest income while working out the claim of the assessee under section 80-IA, as has been considered for the purpose of deduction under section 80HHC. He therefore cancelled the assessment and directed the Assessing Officer to complete the assessment afresh in the light of the discussion. Aggrieved by the above order of CIT passed under section 263, assessee is in appeal before the Tribunal. 14. Inviting our attention to Schedule 20, which is "Notes forming part of the accounts as at 31st March, 1996", given at pages 11-12 of the assessee....
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.... under :- "90% of interest earned is not deducted from the business income while computing deduction under section 80HHC of the Act as said interest is on delayed payment from customers both local and exports and also interest on the fixed deposits kept as margin money against letter of credits opened for imports of goods. Since investment is not on investment of export is submitted that the net interest should be considered while computing deduction under section 80HHC." 17. It was further submitted by the assessee's representative that the issue was considered by the Assessing Officer in detail in respect of the assessee's claim. Assessee relied on the following decisions :- (a) Melmould Corpn.'s case ( supra). (b) Kesoram Industries & Cotton Mills Ltd.'s case (supra). (c) West Coast Paper Mills Ltd.'s case (supra). (d) Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC). (e) CIT v. Gabrial India Ltd. [1993] 203 ITR 108 (Bom.). (f) Indian Express Newspapers Bombay (P.) Ltd. v. IAC [1991] 39 ITD 276 (Bom.). (g) Tubes & Malleables Ltd. v. CIT [1995] 216 ITR 5 (Mad.). 18. The ld. DR replying to the above, relying upon the decision of the Hon'ble Supreme Court in the case....