2007 (8) TMI 779 - HC - Income Tax

Summary

Issues involved:
1. Exclusion of Excise Duty on unsold items while determining closing stock value.
2. Allowability of specific expenses under section 30 to 36 of Income-tax Act.
3. Allowance of expenses on rent/repairs and depreciation of Guest House under sections 30 to 46 of Income-tax Act.
4. Relief of custom duty paid included in closing stock as allowable under sec. 43-B.

Issue 1:
The Tribunal was correct in law in holding that the Excise Duty on unsold items is to be excluded while determining the value of the closing stock as adopted by the assessee. The decision in Berger Paints India Ltd. vs. Commissioner of Income Tax [2004] 266 ITR 99 (S.C.) supports this position, leading to an affirmative answer in favor of the Assessee and against Revenue.

Issue 2:
The Tribunal was correct in law in holding that the expenditure on account of repairs, taxes which are specifically allowable under section 30 to 36 are not covered under sec. 37 (2A) of the Income-tax Act. The decision in Britannia Industries Ltd. vs. Commissioner of Income Tax and Another [2005] 278 ITR 546 (SC) necessitates an answer in the negative, in favor of the Revenue and against the Assessee.

Issue 3:
The Tribunal was correct in law in directing to allow expenses amounting to Rs. 58,341/- on rent/repairs and depreciation of Guest House under sections 30 to 46 of the Income-tax Act. The reference is disposed of accordingly, indicating a decision in favor of the Assessee.

Issue 4:
The Tribunal was correct in law in allowing relief of custom duty paid included in closing stock as allowable under sec. 43-B following the order of the Tribunal (Special Bench). This issue aligns with the decision in Berger Paints India Ltd. vs. Commissioner of Income Tax [2004] 266 ITR 99 (S.C.), resulting in an affirmative outcome for the Assessee against Revenue.