TaxTMI 
TaxTMI 
2006 (5) TMI 417
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of Rs. 10,49,854 being unutilised MODVAT credit for the purpose of valuation of closing stock. Alternatively, it is urged that CIT(A) further erred in not directing the Assessing Officer to increase the value of opening stock of the subsequent assessment year i.e., 2000-01 by a similar amount. 2. Facts of the case are that assessee filed return of income for assessment year 1999-2000 on 31-12-1999 declaring a total income of Rs. 30,46,760. In the assessment proceedings under section 143(3), Assessing Officer observed that assessee had debit balance of Rs. 10,49,854 in the MODVAT account and called for assessee's explanation as to why the unutilised MODVAT credit should not be added to the closing stock as this amount pertains to the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anation.-For the purpose of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payments notwithstanding any right arising as a consequent to such payment." 4. Assessing Officer further observed that these provisions have been introduced with effect from 1-4-1999. They make it clear that the valuation of stock should include any tax, duty, cess or fee paid or incurred by the assessee to bring the goods to place of its location and condition as on date of valuation. The other contention of assessee that the unutilised MODVAT credit as on 1-4-1998 amounting to Rs. 17,12,961 may be allowed to be set off against the unutilised MODVAT credit as on 31-3-1999, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10,49,854 to the income returned by the assessee of Rs. 30,46,760. 5. CIT(A) observed that, as per the provisions of section 145A, the valuation shall be first in accordance with the method of accounting regularly employed by the assessee and further it will be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods to its place as on the date of valuation. It means that the valuation of raw materials as well as finished goods will be done as per the provisions of section 145A of the Act which has been made operative with effect from 1-4-1999 applicable from the assessment year 1999-2000. The provisions of section will apply in spite of the provisions of section 145 and f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the provisions of section 145A. AR filed before us a Note containing workings in respect of the above claim and also relied on 'Guidance Note' issued by the Institute of Chartered Accountants of India, in support of the submissions that MODVAT credit is not liable to be considered for credit in respect of the entire purchases though not consumed. 7. DR strongly relied on the orders of lower authorities and the provisions of section 145A. 8. We have considered the arguments of both the sides, perused the material on record and the orders of lower authorities. We are of the view that as per the provisions of newly introduced section 145A, inventory has to be valued by including the element of tax, duty, cess or fee etc. There were two a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ck for the next assessment year, which issue only being consequential in nature and not being in respect of this assessment year, does not require any separate adjudication. However, assessee is open to apply before the Assessing Officer to get rectification of the order for subsequent year by substitution of the closing stock of this assessment year as the opening stock, in view of the amended provisions of section 145A, which are applicable from this assessment year onwards. 10. It has been held by the "J" Bench of ITAT in the case of M/s. The West Coast Paper Mills Ltd. in [I.T.A. Nos. 3187 & 3750/M/03, dated 3-4-2006] as follows : "In order to ensure that the values of the opening stock and closing stock the correct value, an amen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by means of addition to the opening stock will reduce the taxable income and will only result in not applying the provisions of section 145A of the Act in the year in question. The provisions, in our view, as introduced will have only to take into consideration the element of the tax, duty, cess or fee paid in the sales, purchases and inventory. It will not have an impact on the closing stock carried forward because what can be debited to this year's profit and loss account is the closing stock of the earlier year. There can be no exception to the rule that the closing stock of the earlier year will have to be necessarily the opening stock of this year. The change in the method of valuation of the closing stock as a result of section 145A ....