TaxTMI 
TaxTMI 
TaxTMI 
2012 (7) TMI 38
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....ent years 2000-01 and 2002-03 of Rs.2,22,48,968/-, vide order dated 1.12.2007 passed u/s 143(3) of the Income Tax Act, 1961 (in short the Act). 3. On appeal, the ld. CIT(A) partly allowed the appeal of the assessee. 4. Being aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us. 5. Ground Nos.1 to 1.3 are against the confirmation of treatment of interest income of Rs.4,08,096/- as income from other sources and in not allowing deduction u/s 80IB of the Act. 6. The brief facts of the above issue are that during the course of assessment proceedings the AO noted that the assessee has included Rs.4,08,096/- of interest earned on margin money and bank guarantee received from State Bank of India under the head income from business only. On examination of details, he observed that this income is earned by the assessee not carrying out any business activity but by keeping the money in the bank. According to the AO, the nature of income needs to be seen at the point of its generation. In the instant case, the interest has been generated not because of any business activity but because the money was kept in bank. Therefore, such interest income cannot be a part of t....
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....s be reduced from the interest income while determining the income from other sources. Since there is no dispute that the FDRs were made out of borrowed funds, there is a direct nexus between the borrowings and the interest generation. This being so and keeping in view the provisions of section 57(iii) of the Act which provides that in computing the income under the head income from other sources any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income, we are of the view that the assessee is entitled to the deduction of interest paid on borrowed funds and accordingly, the AO is directed to allow the same. The grounds taken by the assessee are, therefore, partly allowed. 10. Ground No.2 is against the direction of the ld. CIT(A) to restrict the relief allowed to the extent of addition of Rs.11,08,904/- made by the AO u/s 145A of the Act. 11. At the time of hearing, the ld.counsel for the assessee did not press the above ground which was not objected to by the ld. DR. 12. That being so, the ground taken by the assessee, is, therefore, rejected being not pressed. ITA No.5103....
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....nt can be made only with regard to the values of purchases, sales and inventory. There was no scope for further debiting any excise duty on closing stock because the excise duty in the closing stock had already been paid at the time of purchase of goods. Therefore, the AO noted that the excise duty collected on effecting sales over and above the excise duty already debited to P&L A/c by way of adjustments to the opening stock and purchases of course, is the only liability which the assessee had to incur during the year. Hence the assessee could not have further debited any excise duty paid in cash over and above the excise duty element available in the opening stock and purchases included by way of adjustments carried out as above. In the instant case it may be noted that the assessee had collected Rs.13.21 crores of excise duty on sales which alone was payable by it and hence debitable to the P&L A/c. However, it has made use of MODVAT credit received on purchase of goods and also available in the opening stock. Thus the excise duty element already available on the debit side of P&L A/c (by way of above adjustments) was much more than the excise duty liability for the year arising....
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....h addition was made by the AO. He further submits that the AO while giving effect to the order of the ld. CIT(A) for the assessment year under consideration after examining the issue has allowed the relief of Rs.11,08,904/- which was added in the assessment order as adjustment u/s 145 of the Act vide order dated 20.7.2009. He also placed reliance on the decisions of the Tribunal in (a) Hawkins Cookers Ltd.(supra), (b) M/s K.V.Arochem P.Ltd V/s DCIT in ITA No.129/Mum/2010 (AY:2006-07) dated 27.4.2011 and (c) ACIT V/s Kaiser Industries Ltd. in ITA No.555(Del)/2010 (AY:2006-07) dated 18.2.2011. He further submits that the order passed by he ld. CIT(A) be upheld. 18. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that before the ld. CIT(A), the assessee has filed working of adjustment required u/s 145A of the Act which is reproduced as under : "Adjustments required u/s 145A Add: 1. Excise duty on sales : Rs.13,21,27,703/- 2. Excise duty on closing stock of Raw Materials : Rs. 16,47,383/- 3. Excise duty on closing stock of WIP : Rs. 36,50,663/- 4. Excise duty on closing stock of Finis....
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....der : "6. We have considered the issue and examined the record. The assessee in the Annual Report itself stated that they are following consistent method of accounting of accepting the liability at the time of clearance of goods. Accordingly a Note was left clearly indicating that there is no effect on the profit. Whether the assessee is following exclusive method of accounting or inclusive method of accounting, necessary adjustments are to be made under section 145A. The A.O. ignoring the submissions made by the assessee made the addition just because there was a Note to the accounts. Before the CIT(A) the assessee has submitted all the evidences which were placed before the A.O. including further evidences as sought by the CIT(A) to justify that no addition can be made on this issue. The CIT(A) in his brief order has given partial credit of an amount of Rs.26,30,059/- stated to be adjustment made in Form ER-I dated 10.04.2006 filed in the paper book at page No. 52 and had given credit to the CENVAT credit availed upto 10.04.2006. He, however, not considered the CENVAT credit availed subsequently before filing the return and as can be seen from the record the assessee has paid mo....
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.... MODVAT credit is set off against the excise duty payable and thereby the liability has been extinguished or reduced, the Supreme Court held that setting off of MODVAT credit is as good as duty paid. The above observation becomes operative only when the unexpired MODVAT credit has actually been set off against the central excise duty payable by the assessee. However, unexpired MODVAT credit available in the hands of the assessee on the last date of the previous year has not been so set off. The two situations are distinguishable. The time lag between two points cannot be ignored. Therefore, it was held that unexpired MODVAT credit cannot be treated as tax paid before it is set off against the duty payable. Coming to the facts of this case, the credit remained unexpired for the simple reason that it was actually adjusted in April-May, 2005. Further, it was adjusted in these months. Therefore, it can be said that the adjustment was as good as the duty paid and it amounts to actual payment. The payment has been made before the due date of filing the return u/s 139(1). The first proviso contains a provision to the effect that nothing contained in this section shall be applicable in rel....