2013 (1) TMI 968 - AT - Income Tax

Excise Duty written off - Deduction u/s 37 - AO noted that some amount was written off by debiting the P L account pertaining to Excise Duty. According to govt scheme, assessee opted to avail a route of exemption of excise duty. AO was not convinced and said that the impugned deduction is allowable against the future expenses, thus assessee was not entitled to write off the such amount in the year under consideration. - HELD THAT - It is evident that the assessee has opted for the exemption route without availing excise duty as per the scheme of govt., therefore, unutilized excise duty as availed on the inputs, was written off in the regular books of accounts fully satisfying the conditions as laid down in s 37. Also, assessee has already surrendered its license under the Excise Act and opted for the exemption route and hence, there is no question of setting off the said expenditure in future. Thus, claim is allowed. Decision in the cases of GIRDHAR FIBRES PVT. LTD. VERSUS ASSISTANT COMISSIONER OF INCOME TAX RANGE-1 SURAT 2012 (11) TMI 161 - ITAT, AHMEDABAD and MOHAN SPG. MILLS VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-I, LUDHIANA 2013 (11) TMI 113 - ITAT CHANDIGARH , relied upon.

Summary

Issues:
- Disallowance of excise duty written-off by the AO
- Allowability of the excise duty write-off as revenue expenditure

Analysis:
1. The appeal by the Revenue challenged the order of Ld.CIT(A)-IV, Surat allowing the excise duty write-off of Rs. 65,24,121 disallowed by the AO. The AO treated the write-off as a wrong claim, questioning the evidence supporting the write-off. The assessee opted for an exemption route without availing Cenvat Credit, leading to the unutilized credit being written off in the books. The CIT(A) upheld the claim, stating it was a revenue expenditure fully satisfying Section 37 of the IT Act. The AO's argument of future expense set-off was rejected, and the claim was deemed wholly and exclusively for business purposes, as per relevant case laws.

2. The Revenue, represented by Sr.DR Mr.T.Shankar, relied on the AO's findings, while the respondent-assessee, represented by AR Mr.Mehul R.Shah, cited precedents from ITAT Bench "B" Chandigarh and ITAT Bench "A" Ahmedabad. The Coordinate Bench Chandigarh in a similar case allowed the write-off of CENVAT credit as business expenditure upon closure of the manufacturing unit. The Coordinate Bench Ahmedabad also supported a similar claim, emphasizing the exclusive method of accounting and the unadjustable nature of the duty paid, leading to the write-off being allowable as business expenditure.

3. Considering the consistent decisions in favor of the assessee on identical facts, the Tribunal upheld the CIT(A)'s decision to allow the excise duty write-off as a revenue expenditure. The Revenue's appeal was dismissed, affirming the correctness of the CIT(A)'s ruling. Consequently, the Revenue's appeal was rejected, and the assessee's claim for the excise duty write-off was upheld, following the precedents and provisions of the IT Act.