2011 (1) TMI 323 - HC - Income Tax

Disallowance - Rule 6D of the Income-tax Rules, 1962 - Deposit of Duty in PLA - Department contended that it is payment of advance not duty and therefore should not be allowed to deducted u/s 43B - Held that - The procedure envisaged for payment of excise duty envisages such duty to be deposited in advance with the treasury before the goods are removed from the factory premises. The duty, thus, already stands deposited in the accounts of the assessee maintained with the treasury and the amount, thus, stands paid to the State. - Deduction allowed.

Summary

Issues:
1. Disallowance calculation under rule 6D of the Income-tax Rules, 1962
2. Exclusion of excise and customs duties from closing stock value
3. Claiming deduction for excise duty paid in advance as business expenditure

Analysis:

1. The first issue pertains to the calculation of disallowance under rule 6D of the Income-tax Rules, 1962. The Tribunal directed the Income-tax Officer to calculate the disallowance with reference to total journeys undertaken in a year, rather than each journey by an employee or director. The Court ruled in favor of the Department, stating that the addition made in subsequent years had been accepted by the assessee.

2. The second issue involves the exclusion of excise and customs duties paid from the value of closing stock. Referring to the judgment in Berger Paints India Ltd. v. CIT [2004] 266 ITR 99 (SC), the Court decided in favor of the assessee. It was ordered accordingly.

3. The final issue concerns the deduction of excise duty paid in advance as business expenditure. The Department opposed the deduction, arguing that excise duty should only be claimed when goods are removed from the factory premises. However, the Court disagreed, emphasizing that the payment of duty to the concerned Department fulfills the purpose of section 43B of the Income-tax Act. As the duty was deposited in advance with the treasury before goods were removed, it was considered paid to the State. Consequently, the Court ruled in favor of the assessee on this issue.

In conclusion, the Court disposed of the appeal, with judgments rendered in favor of the Department on the first issue, and in favor of the assessee on the second and third issues.