AI Drafter 
TaxTMI 
TaxTMI 
2009 (9) TMI 1008
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....owable as deduction under section 43B of the Act." 3. After hearing the rival submissions the bench admitted the above grounds of appeal and the parties were allowed to make their submission on the same. 4. The Learned Authorised Representative of the Assessee submitted that he is not pressing ground No.1 taken in the additional ground of appeal. Hence, the same is dismissed as not pressed. 5. In Assessment Year 1999-00, the assessee has taken following grounds of appeal. "1. The Ld. CIT(A) has erred in law and on facts in confirming the action of Learned Assessing Officer in reopening the assessment proceedings under section 147 of the I.T.Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and not permissible either in law or on fact. The present proceedings, therefore, are required to be quashed. 2. The Ld. CIT(A) has erred in law and on facts in confirming the action of AO in adding Rs. 24,29,893/-, being the amount of excise duty MODVAT to the value of the closing stock under section 145A of the Act. 3. Both the lower authorities have erred in law and on facts in not properly appreciating and c....
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....MODVAT element, the closing stock was rightly valued by them at the purchase value less MODVAT credit. As per the assessee, if the value of stock was increased in their case then simultaneously the value of purchase would also have increased. It was therefore, contended that there would not be any impact on profit either by using "inclusive" or "exclusive" method. The contention of the assessee was however, not accepted by the Learned Assessing Officer. He observed that the purchase price of the raw material consisted of two elements i.e. basic purchase price + MODVAT credit. As per the Learned Assessing Officer, therefore, under section 145A of the IT Act, the closing stock of raw materials and finished goods etc. should have been valued at a price inclusive of excise duty paid on purchase of such raw material, etc. The AO worked out the ratio (average) referred to by him as ratio "m" of MODVAT credit in purchase of raw material being 7981469/71497311 i.e. 11%. Further from the information provided in clause (d) of Para 32 of the Audit Report under section 44AB. The Learned Assessing Officer found out the ratio of value of raw material consumed to produce the finished goods/value ....
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....of Rs. 11,84,151/- to the total income of the assessee on this account. 11. In appeal before the Learned Commissioner of Income Tax(Appeals), it is contended that the addition made by the Learned Assessing Officer is not justified. It is contended that as per the guidelines issued by institute of Chartered Accountant's of India, an assessee can have either "inclusive method" for accounting entries with regard to MODVAT or "exclusive method". It is explained that in the "inclusive method", the purchase of raw material debited in the books of accounts is inclusive of the corresponding MODVAT element. It is submitted that if an assessee is following this method then the closing stock has to be valued inclusive of MODVAT element. On the other hand, in the "exclusive method" the cost of raw material debited in the purchase account is net of MODVAT element. In this system, the assessee have a separate account for accounting for the excise duty payable and the MODVAT credit available to it. It is explained that it an assessee was following this method of accounting then the closing stock has to be valued exclusive of MODVAT element. It is however, explained that in either of the method....
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.... not explained satisfactorily as to how in assessee's own case for the assessment year under consideration such method would not have resulted into any change in the total income of the assessee. It is further submitted that in view of the provisions of section 145A, the value of purchase should also be increased by including the corresponding MODVAT element. However, it is seen that if the purchase, sales, opening stock and closing all are considered inclusive of the excise duty/MODVAT element, it would be the adjustment to the opening stock and closing stock only, which would affect the income of an assessee. This is so because the excise duty credited in the sales would be set off by the MODVAT element debited in the purchase account. This position can be explained in the following simple examples. In this example for simplifying the position, the opening stock value has been taken at "Nil". Further, total excise credited in sales is taken to be less than the total MODVAT credit available on the purchase of raw material as is also in the case of the assessee for the assessment year under consideration. INCLUSIVE METHOD Trading and manufacturing A/c. Particulars Am....
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....ning stock of the assessment year under consideration. Therefore, the appellant cannot have any grievance on this account at present. Further, it is seen that the ratios "A" and "m" considered by the AO in the assessment order are based on the fact and figures given in assessee's accounts and their audit report itself. In the absence of specific information as to what entries pertained to the MODVAT credit for the specific items of closing stock of raw material etc. remaining as on 31.03.2000, the Learned Assessing Officer cannot be faulted for computing the value of increase in the closing stock in this manner. In view of the above discussion, the addition made by the Learned Assessing Officer to the total income of the assessee on this account is confirmed in principle. It may be pointed out that the addition on account of MODVAT element corresponding to the raw material and work in progress shown in the closing worked out to Rs. 28,23,036/- as computed by the AO also. Therefore, from this figure the AO could not reduce Rs. 16,38,885/- as done by him. This is so because this amount is shown to be the increase in the closing stock value worked out by the assessee if they had used ....
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....see to bring the goods to the place of its location that the said amount forms part of the value. It is not disputed in the present case that the excise duty has not been paid by the assessee on the goods in stock as the goods did not leave the premises. Under these circumstances, there was no justification on the part of the AO in adding the excise duty to the price of the raw material etc. in computing the value of the goods. Therefore, the question formulated by the Department does not arise out of the facts of the case. Accordingly, this appeal is dismissed summarily. It further submitted that the above decision of the Madhya Pradesh high court has been followed by the Ahmedabad Benches of the Tribunal in Asst. Commissioner of Income-tax, Navsari Circle Vs. M/s. Naran Lala Pvt. Ltd. in ITA No.686/Ahd/2006 order dated 20.3.2009., and M/s. Chemicals & Dyestuff Industries Vs. CIT-II,Baroda ITA. No.1077/Ahd/2009 order dated 19.6.2009. 14. The Learned Authorised Representative of the Assessee relied on the decision of Ahmedabad Bench of the Tribunal in the case of Deputy Commissioner of Income-Tax, Baroda ,Circle-1, Baroda Vs. Gujarat FluoroChemicals Ltd. ITA No. 3472/Ahm/2002 da....
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....settled law that the liability of the Excise Duty is an expenditure allowable to the assessee under section 37 of the Act. Section 43B lays down that certain expenses are to be allowed only on actual payment. This section put an embargo abut the deductibility of certain expenditure which are otherwise allowable under this Act. In view of the provision of Section 43B(a) any sum payable by the assessee by way of Excise Duty shall be allowed irrespective of the previous year in which the liability to pay such sum was incurred only in the previous year in which such sum is actually paid. Proviso to section.43B relaxes these provisions and permits an assessee to make the payment on or before the due date of furnishing of the Income Tax Return under section 139(1) of the Act. The fact relating to the payment of Excise Duty in respect of finished goods is not available on record. We, therefore, direct the Learned Assessing Officer to allow the deduction to the assessee in respect of the Excise Duty incurred relating to the finished goods. If the Excise Duty is paid by the assessee before the duty date of filing of the Income tax Return. Thus, we are of the view that the Excise Duty incurr....
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.... asst. yr. 1998-99 (being a transitional year) under s. 145A. The Learned Authorised Representative of the Assessee further submitted that this decision was followed by Hon'ble Bombay High Court in the case of The Commissioner of Income Tax-6 Vs. M/s. The Mahalaxmi Glass Works Pvt. Ltd. Income Tax appeal no.192/2009 order dated 1.04.2009. 16. The Learned Departmental Representative relied on the order of the Learned Commissioner of Income Tax(Appeals). 17. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case, the dispute is regarding valuation of closing stock in view of the insertion of provisions of section 145A of the Act. The Learned Assessing Officer observed that the assessee has not included the element of excise duty which was paid by the assessee on his purchases of raw material. In view of non inclusion of this excise duty in respect of which Modvat Credit was available to the assessee, according to the Learned Commissioner of Income Tax(Appeals), income of Rs. 26,95,884/- was understated by the assessee. On the other hand the claim of the assessee is that by inclusion of this ....
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....per inclusive method also works out to Rs. 300/- which is exactly the same as per exclusive method. Further, the Learned Commissioner of Income Tax(Appeals) in the illustration cited in his order has not accounted for the amount of Modvat utilised by the assessee in payment of excise duty in respect of raw material not utilised for manufacturing. In the illustration, the Learned Commissioner of Income Tax(Appeals) has shown that assessee has utilised amount of Rs. 180/- out of amount of Rs. 200/- of excise duty paid on purchase against the excise duty liability of Rs. 180 on sales. However, this utilization of Rs. 180/- was allowed to the assessee in respect of stock which was not used for manufacturing also to the extent of Rs. 80/-. The Learned Commissioner of Income Tax(Appeals) ignored the fact that if in future the closing stock is not utilised for manufacturing, then the Modvat Credit utilised would be reversed and the assessee would be further liable to pay Rs. 80/- to the Government. In a nutshell the Learned Commissioner of Income Tax(Appeals) arrived at a wrong conclusion because of not considering the assessee's liability for utilization of Modvat Credit in respect of un....
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....interest is consequential and accordingly disposed of this ground of appeal. 20. Ground no.5 of the appeal is directed against the initiation of penalty under section 271(1)(c) of the Act. This ground of appeal of the assessee is dismissed as premature. 21. Ground no.3 of the appeal in Assessment Year 2000-01 reads as under: 3. The Ld. CIT(A) has erred in law and on facts in confirming the action of AO in calculating the deduction under section 80IA first and then calculating the deduction under section 80HHC after excluding deduction claimed under section 80IA from the gross total income of the appellant. Both these deductions ought to have been grated on the same amount of gross total income. 22. At the time of the hearing, both the parties agreed before us that this ground of appeal is covered against the assessee by decision of the Tribunal in the case of Assistant Commissioner Of Income Tax vs. Rogini Garments & Ors. ITAT, CHENNAI ' D ' SPECIAL BENCH (2007) 108 ITD 49 (Chennai)(SB), wherein it was held that in view of the specific restriction provided under s. 80-IA(9), relief under s. 80-IA should be deducted from profits and gains of business before computi....