2013 (4) TMI 852 - AT - Income Tax

Summary

Issues involved: Appeal filed by Revenue against CIT(A) order for assessment year 2005-06 regarding deletion of MODVAT credit as income.

Facts: Assessee company in chemical business declared income of Rs. 1,24,44,110/-, with total loss determined at Rs. 83,02,886/- under section 143(3). Dispute arose over unutilized MODVAT credit of Rs. 94,82,796/- treated as income by Revenue.

Assessment Proceedings: A.O. disallowed Rs. 39,98,872/- MODVAT credit set off against revenue receipts, citing capital nature of modvat received on plant and machinery. CIT(A) deleted the addition based on Jay Laminate Pvt. Ltd. case.

CIT(A) Decision: CIT(A) relied on Jay Laminate Pvt. Ltd. case where unutilized MODVAT was held as prepaid expenditure, not constituting income. Revenue appealed against this decision.

Appellate Tribunal's Analysis: Tribunal upheld CIT(A) decision, citing Jay Laminate Pvt. Ltd. case precedent. Coordinate bench held unutilized MODVAT as prepaid expenditure, not taxable income. Apex Court precedent also supported this view.

Conclusion: Revenue's appeal was dismissed as unutilized MODVAT credit was deemed as prepaid expenditure, not constituting taxable income based on legal precedents. Tribunal found no reason to interfere with CIT(A) decision.