TaxTMI 
TaxTMI 
2008 (9) TMI 616
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.... of closing stock to that amount of Rs. 14,53,767. Before the CIT(A), it was submitted by the assessee that the assessee has followed a method of accounting, there is in fact, no impact on the profit and loss account of the company on giving effect of section 145A. The assessee produced the working before the CIT(A) which is as under :- Particulars Amt. (Rs.) Amt. (Rs.) Net profit as per Profit & Loss Account 7,18,98,566 Add: Excise Duty on Closing Stock (As per provisions of section 145A) Finished goods 2,11,32,299 Raw material 3,25,63,272 5,36,95,571 12,55,94,137 Less: (a) Excise Duty deemed to be paid under section 43B for finished goods as the same has been debited in RG 23A (2,11,32,299) (b) Amount of Excise Duty on Purchases (remained in Closing Stock) not debited to Profit & Loss Account now debited (3,25,63,272) (c) Excise Duty to be included in opening stock (as per provisions of section 145A) (5,22,41,804....
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....all such payment notwithstanding any right arising as a consequence to such payment." 3.2 The adjustments provided in this section can be made while computing the income for the purpose of preparing the return of income. These adjustments are as follows : (a)Any tax, duty, cess or fee actually paid or incurred on inputs should be added to the cost of inputs (raw materials, stores etc.); if not already added in the books of account. (b)Any tax, duty, cess or fee actually paid or incurred on sale of goods should be added to the sales, if not already added in the books of account. (c)Any tax, duty, cess or fee actually paid or incurred on the inventory (finished goods, work-in-progress, raw materials etc.) should be added to the inventories, if not already added while valuing the inventory in the accounts. 3.3 The Institute of Chartered Accountants of India on insertion of section 145A issued guidance Note on Tax Audit under section 44AB of the Act explaining the statutory requirements to give the effect of section 145A which are as under:- "23.9 The statutory required under section 145A can be explained by the following example: Particulars Qty. Rate Rat....
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....sp; material stock of finished goods Total 100 10 1000 (c) Less 20 10 200 closing stock of raw material (d) Raw 80 10 800 material consumed ....
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.... credit (n) Raw 80 10 800 material consumed (o) To manu- 80 10 800 facturing cost (p) To excise 60 3 180 duty on finished goods (q) To excise duty 20 3 ....
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.... Increase in closing stock of raw 40 material on inclusion of excise duty (l-c) 6. Increase in closing stock of finished 60 goods on inclusion of excise duty (t-i) 7. Increase in excise duty on closing 60 stock of finished goods as a result of its inclusion in closing stock of finished goods (q) 8. Accounting of MODVAT credit 160 availed and utilized on raw materials consumed in payment of excise duty on finished goods accounted on the basis of raw material consumed (m) Total 440 440 The computation of total income would appear as under:- Rs. Rs. Rs. Profit as per profit and loss account on the 300 basis of exclusive method (see paragraph 23.10) ....
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....e assessee follows exclusive method of accounting and effect of section 145A is to be given. It may be noted that after making the addition to the closing stock under section 145A, it will be possible to claim a separate deduction for excise duty actually paid after the year end but before the due date for filing the return of income on production of evidence as provided under section 43B. Therefore, in the above illustration if the assessee has paid Rs. 60 added in the valuation of closing stock of finished goods before due date of filing the return deduction for the same can be separately claimed in the computation of income under section 43B, if other conditions of that section are satisfied. 3.5 In case where there is no actual payment but adjustable against MODVAT account, whether the assessee is entitled to claim deduction under section 43B. For this purpose we would like to refer the decision of ITAT Special Bench, Chandigarh in the case of Dy. CIT v. Glaxo Smithkline Consumer Healthcare Ltd. [2007] 107 ITD 343 wherein it was held that the MODVAT balance as such does not amount to payment. The balance becomes equivalent to the payment only at the point of time the assesse....