TaxTMI 
TaxTMI 
2002 (8) TMI 56
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.... of section 43B of the Income-tax Act, 1961, the assessee is entitled to a revenue deduction in respect of customs and excise duty component of the value of the closing stock?" The assessee is a manufacturer of cement, as also asbestos sheets. For the purpose of manufacturing asbestos sheets, the assessee imported asbestos fibre on which it paid customs duty. While a major portion of the quantity so imported was utilised in the manufacture of sheets in the relevant assessment years, at the end of each assessment year, there remained with the assessee some portion of the imported stock of asbestos fibre on which it had paid duty. While the assessee showed in its accounts the value of the consumption of raw materials including the duty ele....
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....to other places of storage and the value of the closing stock included not merely the cost of production, but also the excise duty paid thereon. There was, therefore, no question of converting any liability into an asset. If the assessee had not paid the duty, but had kept the amount that would have been payable as duty in a separate account, that amount certainly would have formed part of the assets of the assessee. So far as the valuation of the raw material is concerned, even the assessee had very rightly shown the value of the closing stock of the raw material as inclusive of the customs duty that had been paid thereon at the time of importation. The Tribunal has observed that it was common ground that all along the assessee was valu....
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....e assessee had not made any claim under section 43B of the Act for the deduction of the amount of duty paid and, therefore, it was entitled to value the closing stock of raw material in a manner which would exclude the amount of the customs duty. Though the submission appears to be superficially attractive, on closer examination, it is required to be rejected. The closing stock, it is now well settled, is required to be valued at cost, or at market value, whichever is lower. It was at no point of time the case of the assessee that the market value of the stock of imported asbestos fibre was lower than the value of the fibre inclusive of the customs duty paid thereon. The cost to the assessee was at all times, the value of the imported mater....
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....n the rate of exchange at any time after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towards the whole or a part of the cost of the asset or for repayment of the whole or a part of the moneys borrowed by him from any person, directly or indirectly, in any foreign currency, for the purpose of acquiring the asset, the amount by which the liability is so increased or reduced during the previous year shall be added to, or, as the case may be, deducted from, the actual cost of the asset. The application of section 43A, in respect of the development rebate provided for under section 33 is excluded by reason of section 43A(2) which prohibits....
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....payment of the whole or part of the cost of the assets or of the loan in foreign currency, the original actual cost, to the assessee, of the machinery or plant or other capital asset, is required to be increased or, as the case may be, reduced, correspondingly..." After considering that circular and the argument advanced before it, the apex court concluded thus: "The result of the above discussion is that once the language of sub-section (1) is attracted to a particular case, sub-section (1) applies. Once sub-section (1) is attracted, its application is excluded qua development rebate, by the operation of sub-section (2)." The necessary consequence is that in a case where section 43A(1) of the Act is attracted and the matter under ....