2024 (2) TMI 282 - HC - Income Tax

Deduction u/s 43B - Payment of Excise duty - double deduction - excise duty in case of unsold stocks at the end of previous year is not treated as expenses - HELD THAT - Assessee was correct in submitting that the excise duty in case of unsold stocks held by them at the end of previous year is not treated as expenses in the accounts, but has been separately claimed and allowed in the income tax assessments. While computing the total income for Assessment Year 1986- 1987, appellant had claimed the deduction in respect of excise duty being the differential excise duty attributable to opening and closing stock of the finished goods held by them during the previous year ended 29th December 1985. Excise duty paid and included in the closing stock has to be claimed separately as a deduction otherwise appellant would not be claiming the entire excise duty paid in the year of its payment. Section 43B of the Act, which came to be introduced from Assessment Year 1984- 1985 onwards, provides that the excise duty would be deductible only on the payment basis in the year in which it is actually paid. Therefore, while computing the total income for Assessment Year 1986-1987, assessee had claimed a deduction of excise duty actually paid in the year 1985 and included in closing stock less excise duty paid and included in closing stock of 1984 already claimed. Therefore, in our view, the Tribunal was not correct in coming to a conclusion that this amount would amount to double deduction.

Summary

Issues involved:
The judgment involves the interpretation of Section 43B of the Income Tax Act, 1961 regarding the deduction of excise duty claimed by the appellant, which was disallowed by the Income Tax Appellate Tribunal (ITAT) on the grounds of potential double deduction.

INCOME TAX APPEAL (IT) NO. 148 OF 2003:

1. The appeal was admitted on 23rd September 2004, and three substantial questions of law were framed.

2. The Court considered question (b) which questioned whether the appellant was entitled to the deduction of Rs. 60,99,426/- representing the excise duty claimed under Section 43B of the Income Tax Act, 1961.

3. The ITAT found that the Assessing Officer had already allowed Rs. 60,99,426/- as part of a larger amount, leading to a potential double deduction issue. The Tribunal relied on a judgment of the Calcutta High Court, which was later reversed by the Apex Court in favor of the assessee.

4. The key consideration was whether the AO had already allowed the excise duty amount in question.

5. The appellant argued that the excise duty for unsold stocks was separately claimed and allowed in income tax assessments, not treated as expenses. The appellant provided detailed payment information to support their claim.

6. The appellant claimed the excise duty deduction based on the actual payments made in previous years, in accordance with Section 43B of the Act. The Tribunal's conclusion of potential double deduction was deemed incorrect.

7. The Court allowed the appeal and answered question (b) in the affirmative, in favor of the appellant.

8. The appeal was disposed of.

INCOME TAX APPEAL (IT) NO. 103 OF 2003:

1. The findings from Income Tax Appeal (IT) No. 148 of 2003 were applied to this appeal, leading to a similar outcome where the appeal was allowed, and question (b) was answered in the affirmative.

2. The appeal was disposed of accordingly.