9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2006 (5) TMI 417 - AT - Income TaxMODVAT credit - Method of accounting in certain cases - HELD THAT - We are of the view that as per the provisions of newly introduced section 145A, inventory has to be valued by including the element of tax, duty, cess or fee etc. There were two alternative methods that were prevalent up to 31-3-1999 being, one inclusive and the other is exclusive. In the inclusive method, the element of tax, duty, cess or fee was always included as an element of cost. In the exclusive method which was in force up to 31-3-1999 the element of tax, duty, cess or fees etc., were excluded. With effect from 1-4-1999, the element of tax, duty, cess or fee should always be treated as a part of the cost and the inclusive method has to be only adopted. It is in this direction that the aforesaid amendment had been made by the Finance (No. 2) Act, 1998 by introducing section 145A. The closing stock of the earlier year which is accepted by the department should be taken as the opening stock of the year under consideration and any change as a result of the provisions of section 145A is only upon the closing stock. There is no ambiguity in the provisions of section 145A of the Act. In the result, appeal of the assessee is treated as partly allowed only for statistical purposes.
Issues:
1. Valuation of closing stock including unutilized MODVAT credit. 2. Interpretation of section 145A for valuation of stock. 3. Application of section 145A to include tax, duty, cess, or fee in stock valuation. 4. Impact on opening stock valuation due to section 145A. 5. Charging of interest under section 234C based on assessed income. Issue 1: Valuation of Closing Stock: The appeal concerns the inclusion of unutilized MODVAT credit in the valuation of closing stock. The Assessing Officer added Rs. 10,49,854 to the closing stock, which the appellant contested. The appellant argued that MODVAT credit should not be considered for stock valuation, citing past assessments. However, the Assessing Officer relied on the newly introduced section 145A, which mandates including tax-related amounts in stock valuation. Issue 2: Interpretation of Section 145A: Section 145A, introduced from 1-4-1999, requires the valuation of stock to include taxes, duties, cess, or fees paid by the assessee. The CIT(A) upheld the Assessing Officer's decision based on this provision, emphasizing that it overrides previous methods of stock valuation. The appellant's contention that MODVAT credit should be excluded was rejected, aligning with the statutory requirements of section 145A. Issue 3: Application of Section 145A: The CIT(A) explained that section 145A applies from 1-4-1999 and necessitates the inclusion of MODVAT in closing stock valuation. The appellant's reliance on prior court decisions was countered by the CIT(A) based on the applicability of the new provision. The tribunal concurred with this interpretation, emphasizing the mandatory nature of section 145A for determining stock value. Issue 4: Impact on Opening Stock Valuation: Regarding the appellant's request to adjust opening stock valuation, the tribunal clarified that changes due to section 145A only affect closing stock. The tribunal referenced a previous case to support the notion that altering opening stock valuation would distort the value of the previous year's closing stock. The tribunal dismissed the appellant's alternative ground related to the treatment of closing stock for the subsequent year. Issue 5: Charging of Interest under Section 234C: The tribunal directed the Assessing Officer to charge interest under section 234C based on the shortfall in returned income, not the assessed income. This issue was treated as allowed only for statistical purposes, indicating a partial allowance of the appeal. In conclusion, the tribunal upheld the Assessing Officer's decision to include unutilized MODVAT credit in the valuation of closing stock based on the provisions of section 145A. The appellant's arguments against this inclusion were dismissed, emphasizing the statutory requirements for stock valuation under the new provision. The tribunal's detailed analysis and application of relevant legal principles resulted in a partial allowance of the appeal, primarily concerning the charging of interest under section 234C.
|
