2012 (3) TMI 661 - AT - Income Tax

Summary

Issues involved: Appeal against order dated 02.03.2011 passed by CIT (Appeals)-5, Mumbai u/s.143(3) for Assessment Year 2007-08. Issues raised: 1. Addition of unutilised Cenvat Credit Receivable as income. 2. Adjustment to taxable income after section 145A adjustments. 3. Deletion of addition made for unutilized Cenvat Credit.

Issue 1: Addition of unutilised Cenvat Credit Receivable as income
The appellant, a Private limited company in chemical manufacturing, showed unutilised Cenvat Credit receivable in balance sheet. Assessing Officer added the amount to closing stock per section 145A, citing CBDT circular no. 772 and ITAT Mumbai Bench decisions. Appellant argued Cenvat Credit not income, not routed through profit and loss account, and is a benefit set off against excise duty. CIT(Appeals) agreed with Assessing Officer, stating exclusion violates section 145A, but directed verification of capital goods exclusion.

Issue 2: Adjustment to taxable income after section 145A adjustments
Appellant contended that if Cenvat Credit is in closing stock, adjustment should be made in opening stock too, citing judgments of Hon'ble Bombay High Court and Delhi High Court. ITAT upheld inclusion of Cenvat Credit in closing stock per section 145A but directed corresponding adjustment in opening stock as per judicial precedents.

Issue 3: Deletion of addition made for unutilized Cenvat Credit
ITAT partly allowed the appeal, directing Assessing Officer to make corresponding adjustment in opening stock as per judicial precedents and verify exclusion of capital goods amount. Upheld CIT(Appeals) direction for exclusion of capital goods amount if found correct.

Conclusion: ITAT partially allowed the appeal, emphasizing the need for corresponding adjustments in opening stock as per judicial precedents and directing verification of exclusion of capital goods amount.