TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 323
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....pondent-Assessee during the relevant period was engaged in the business of manufacture and sale of alcohol and vanaspati. In addition, the assessee was having rental and interest income. 3. As is apparent from the substantial question of law which has been admitted for hearing, the issue raised is limited and a narrow one. The Assessing Officer, in the assessment order dated 26.12.2006 made addition of Rs. 3,04,39,626/- for the following reasons: "6. Excise duty in closing stock It is noticed that excise duly has not been included in the value of closing stock in compliance to the verdict of the Hon'ble SC in the case of C1T Vs British Paints Ltd. (188 ITR 44 SC) holding that valuation of stock only at the actual cost of raw material/....
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....nly discussion in the assessment order and no other aspect or facts were examined. 4. The aforesaid reasoning records the stand of the respondent-Assessee that the excise duty had not been claimed as an expenditure in the profit and loss account and had not been included in the valuation of stock. This, the Assessing Officer held was contrary to the ratio of the Supreme Court in CIT Vs. British Paints Ltd. [1991] 188 ITR 44 (SC). The said reasoning is wrong and legally untenable, unless the respondent-assessee had included and treated the excise duty as an expenditure in the profit and loss account. In such cases, the entry in the profit and loss account is required to be matched or balanced with the corresponding increase in the valuation....
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....would leave only the transaction in which actual sales in the course of the year has taken place and thereby showing the profit or loss actually realized on the year's trading. The entry for stock which appears in the trading account is intended to cancel the charge for the goods bought which have remained unsold which should represent the cost of the goods". (see also: para 8 of the judgment of this Court in the case of Commissioner of Income Tax v. Hindustan Zinc. Ltd. [2007] 291 ITR 391/161 Taxman 162". (emphasis supplied) 5. We note that the legislature, by Finance (No.2) Act, 1998, has enacted Section 145A of the Income Tax Act, 1961 (Act, in short), with effect from April 01, 1999, which reads as under: "145A. Method of account....
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....uty, cess, fee has been incurred by the Assessee to bring the goods to the place of its location and condition as on the date of valuation. In Commissioner of Income Tax Vs. Lakshmi Sugar Mills Co. Ltd., [2013] 215 Taxman 126 (Del.), appeal filed by the Revenue was allowed after recording that the excise duty, no doubt was unpaid, but the goods had been removed and therefore, the duty was payable. Thus, the taxable event had occurred, liability incurred and Section 145A of the Act was applicable. Reference was made to the decision of the Supreme Court in Orient Paper Mills Ltd. Vs. Union of India, AIR 1967 SC 1564. It was observed that removal of goods from the factory premises, or any other specified place, implied that the excise duty was....
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....ression 'incurred by the assessee' relates to the liability determined as tax, duty, cess or fee payable in bringing the goods to the place of its location and condition of the goods. Explanation to Section 145A(b) makes it further clear that the income chargeable under the head profits and gains of business shall be adjusted by the amount paid as tax, duty, cess or fee. Therefore, the expression 'incurred' in Section 145A(b) must be construed to mean the liability actually incurred by the assessee. 10. Where the excisable goods are manufactured and are lying in stock on the last day of the accounting year, whether the manufacturer has incurred liability to pay excise duty on the manufactured goods is the question". 7. In ....
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.... inserted. This section provides that the valuation of purchase, sale and inventory shall be made in accordance with the method of accounting regularly employed by the assessee and such valuation shall be further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called), actually paid or incurred by the assessee to bring to goods to the place of its location and condition as on the date of valuation." 9. We may note that in the present case, it is not contention of the Revenue that MODVAT credit or duty in respect of the inputs has not been included in the value of the closing stock. This is not what is averred and asserted in the assessment order or an argument, which was raised before the Tribunal or even bef....