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Issues: The judgment involves the following issues: 1) Whether unutilized MODVAT credit is part of closing stock, 2) Applicability of Section 145A of the Income Tax Act, 1961.
Issue 1: Unutilized MODVAT Credit The controversy revolved around whether the un-utilized Modvat credit should be added to the total income of the assessee. The Assessing Officer (A.O) observed that the assessee had shown an amount towards un-utilized Modvat credit in the Balance Sheet. The A.O believed that this amount should have been included in the closing stock or added to the computation of total income. The A.O made an addition in this regard. However, the Ld. CIT(A) deleted this addition, citing the decision of the Hon'ble High Court of Bombay in the case of CIT V/s. Indo Nippon Chemicals Co. Ltd. The Ld. CIT(A) emphasized that the assessee had consistently followed the exclusive method for valuation, and even if the inclusive method was applied, the profit would remain the same. The Tribunal concurred with the Ld. CIT(A) and dismissed the revenue's appeal, stating that adjustment to closing stock should also reflect in the opening stock, as per the decision in CIT Vs. Mahalaxmi Glass Pvt. Ltd. Issue 2: Applicability of Section 145A The A.O had raised the question of whether Section 145A of the Income Tax Act, 1961 was applicable in this case. However, the Ld. CIT(A) determined that Section 145A was not applicable. The Tribunal upheld this decision, emphasizing that the assessee's consistent application of the exclusive method for valuation rendered the profit unaffected by the method used. The Tribunal also referred to the decisions of the Hon'ble Bombay High Court and the Supreme Court, which supported the assessee's position regarding the treatment of Modvat credit. In conclusion, the Appellate Tribunal ITAT Pune, in the cited judgment, dismissed the revenue's appeal, affirming the Ld. CIT(A)'s decision regarding the treatment of unutilized MODVAT credit and the inapplicability of Section 145A. The Tribunal highlighted the importance of consistent valuation methods and the consequential adjustments required in stock valuation.
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