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2021 (11) TMI 255 - AT - Income TaxDisallowance u/s 43B - custom duty expenditure not claimed as expenses in the year of actual payment as appellant was entitled to receive special benefits as per Custom Excise Rules but said special benefits were not received hence expenses were claimed as revenue expenditure in year under consideration - HELD THAT - As assessee has paid custom duty which was allowable deduction of the assessee under Section 43B of the Act in the year of payment itself. However, the assessee was expecting certain special benefits as per Custom and Excise Rules; therefore, the assessee did not claim it in that year. Ultimately, those benefits were not given to the assessee and, in this year, he has written off the alleged customs duty receivable in the accounts and claimed it as revenue expenditure in the profit and loss account. We find that the learned First Appellate Authority has rightly adjudicated this issue after putting reliance upon the decision of the ITAT in the case of ACIT Vs. Rangoli Industries Pvt. Limited 2013 (1) TMI 968 - ITAT AHMEDABAD and no interference is called for.
Issues:
Disallowance of custom duty expenditure under Section 43B of the Income Tax Act, 1961. Analysis: The Revenue appealed against the CIT(A)'s order deleting the disallowance of custom duty expenditure of ?3,22,561 added by the Assessing Officer under Section 43B. The appellant claimed custom duty as revenue expenditure in the year under consideration, stating that the duty was paid in earlier years but not claimed due to expected benefits. The CIT(A) noted that the payment of custom duty was not in dispute and held that Section 43B did not require expenditure to be claimed only in the year of payment. Citing a previous ITAT decision, the CIT(A) allowed the claim as revenue expenditure, which was upheld by the ITAT. The ITAT emphasized that the appellant had paid the custom duty, making it an allowable deduction under Section 43B, even though benefits were not received as expected. The ITAT referred to other cases where similar issues were adjudicated. In one case, the write-off of CENVAT credit was allowed as business expenditure when a manufacturing unit was closed down. The ITAT held that the write-off of CENVAT credit was allowable under Section 37(1) in the year of closure of the business. Another case discussed the exclusive method of accounting for excise duty, where duty paid but not debited as part of purchases was considered allowable as business expenditure. These cases were cited to support the decision to allow the custom duty expenditure as revenue expenditure in the current year. Regarding the Cross-Objection, the assessee challenged the reopening of the assessment and raised a general ground of appeal. The CIT(A) upheld the reopening with well-reasoned findings, which were accepted by the ITAT. As the assessee did not provide any support for the Cross-Objection, and since no one appeared on behalf of the assessee, the ITAT rejected the Cross-Objection. Consequently, both the appeal by the Revenue and the Cross-Objection by the assessee were dismissed by the ITAT. In conclusion, the ITAT upheld the CIT(A)'s decision to allow the custom duty expenditure as revenue expenditure, emphasizing that the payment of duty was made in earlier years, even though expected benefits were not received. The ITAT also supported the reopening of the assessment and rejected the Cross-Objection filed by the assessee due to lack of merit and supporting documentation.
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