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Issues Involved:
1. Assessability of the refund of central excise under Section 41(1) of the Income-tax Act, 1961. 2. Determination of the correct assessment year for the refund. 3. Whether any deduction or allowance had been made in any year in respect of the excise duty. Detailed Analysis: 1. Assessability of the Refund of Central Excise under Section 41(1) of the Income-tax Act, 1961: The main dispute revolves around the assessability of Rs. 98,607 received as a refund of central excise. The assessee contended that this amount should not be taxable under Section 41(1) of the Income-tax Act, 1961, as it had not been claimed or allowed as a deduction in any prior year. The Assessing Officer, however, held that the amount collected as excise duty from customers constituted a trading receipt and was allowed as a deduction in computing the income of the assessee during the relevant assessment years. The CIT(A) also recorded that the assessability of the excise refund was not disputed, but the year of assessment was. 2. Determination of the Correct Assessment Year for the Refund: The assessee argued that the refund granted had not become final as of the close of the accounting year because a notice had been issued for recalling the order of the Appellate Collector. The proceedings were dropped on 1st February 1985, relevant to the assessment year 1986-87. The assessee's accounting period ended on 4th November 1983. The learned D.R. contended that the amount is assessable in the year of receipt, citing the Gujarat High Court decision in CIT v. Rashmi Trading, which held that the amount of remission or cessation of liability is assessable in the year of receipt. 3. Whether Any Deduction or Allowance Had Been Made in Any Year in Respect of the Excise Duty: The assessee contended that no deduction or allowance had been made in any year in respect of the excise duty. The Assessing Officer held that it was not necessary for the assessee to claim the deduction or make entries in the books of accounts, as the deduction on account of excise duty collected from customers was allowed in the respective assessment years. The learned D.R. argued that since the amount collected from customers is a trading receipt, the burden was on the assessee to establish that no deduction in respect of this sum was claimed or allowed. The Tribunal considered the rival contentions and noted that Section 41 uses the words "obtained whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure." The Tribunal held that the amount of remission is assessable in the year of receipt. Since the refund was received by the assessee during the year in appeal and the refund order was never canceled, the amount is assessable in the year of receipt. Remittance to CIT(A): The Tribunal found that neither the assessee nor the department had provided sufficient evidence to conclude whether any deduction or allowance had been made in any year. Therefore, the Tribunal remitted the issue to the CIT(A) to ascertain whether the assessee had been granted any allowance or deduction in any year in respect of the excise duty refund. If it is found that the amount has been allowed as a deduction, then the refund is assessable in the year of receipt. If no deduction or allowance has been allowed, the refund received would not be assessable under Section 41. Other Disallowances: The Tribunal also directed the CIT(A) to consider disallowances in respect of telephone expenses, car expenses, car depreciation, fees paid to counsel, and income from house property afresh. Consequential relief in respect of interest charged under Section 217 may also be allowed. Conclusion: The appeal of the assessee is partly allowed, with the main issue remitted to the CIT(A) for further consideration.
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