2017 (11) TMI 1429 - SC - Income Tax

Entitlement to claim deduction u/s 43B - excise duty paid in advance in the Personal Ledger Account ( PLA ) - accrual of expenses - Held that - The self removal scheme and payment of duty under the Act and the Rules clearly shows that upon deposit in the PLA the amount of such deposit stands credited to the Revenue with the assessee having no domain over the amount(s) deposited. In C.I.T. vs. Pandavapura Sahakara Sakkare Karkhane Ltd. (1991 (9) TMI 38 - KARNATAKA High Court) and C.I.T. vs. Nizam Sugar Factory Ltd. (2001 (9) TMI 62 - ANDHRA PRADESH High Court) as had occasion to consider as to whether the amounts credited to the Molasses Storage Fund out of the sale proceeds of molasses received by the assessee constitute taxable income of the assessee. Under the scheme, the assessee had no control over the amounts deposited in the fund and the assessee was also not entitled to withdraw any amount therefrom without the approval of the authorities. Further the amount deposited could be utilized only for the purpose specified. In those circumstances, the High Court held and in our view correctly, that the deposits made, though a part of the sale proceeds of the assessee, did not constitute taxable income at the hands of the assessee. We do not see why the same analogy would not be applicable to the case in hand. The above discussions, coupled with the peculiar features of the case, noticed above i.e. consistent practice followed by the assessee and accepted by the Revenue; the decisions of the two High Courts in favour of the assessee which have attained finality in law; and no contrary view of any other High Court being brought to our notice, should lead us to the conclusion that the High Courts were justified in taking the view that the advance deposit of central excise duty constitutes actual payment of duty within the meaning of Section 43B of the Central Excise Act and, therefore, the assessee is entitled to the benefit of deduction of the said amount. - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to claim deduction under Section 43B of the Income Tax Act for excise duty paid in advance in the Personal Ledger Account (PLA).

Analysis:

Issue 1: Entitlement to claim deduction under Section 43B of the Income Tax Act for excise duty paid in advance in the Personal Ledger Account (PLA):
The Supreme Court addressed the question of whether an assessee is entitled to claim deduction under Section 43B of the Income Tax Act for excise duty paid in advance in the PLA. The Revenue argued that actual payment of duty occurs only at the stage of removal, not at the deposit stage in the PLA. They contended that the amount in deposit is akin to a loan and can be refunded, thus not constituting actual payment of duty. However, the assessee argued that their consistent practice of claiming deduction and adding back the amount in the PLA had been accepted by the Revenue previously. They cited decisions of High Courts in their favor and emphasized that the deposit in the PLA represents actual payment of duty. The Court noted the statutory requirement of depositing excise duty in the PLA, the strict procedure for payment and adjustment against clearances, and the lack of control by the assessee over the deposited amount. The Court also referred to previous High Court decisions supporting the view that advance deposit of excise duty constitutes actual payment, aligning with the legislative intent behind Section 43B. Given the consistent practice, acceptance by Revenue, and absence of contrary High Court views, the Court upheld the High Courts' decisions in favor of the assessee, affirming that the assessee is entitled to the deduction.

In conclusion, the Supreme Court dismissed the appeals and affirmed the decisions of the High Courts, maintaining that the advance deposit of central excise duty in the PLA constitutes actual payment of duty under Section 43B of the Income Tax Act, entitling the assessee to claim the deduction.