2012 (11) TMI 190 - SC - Income Tax

Valuing of closing stock - exclusion or inclusion of excise duty - Held that - As decided in Asstt. CIT v. Narmada Chematur Petrochemicals Ltd 2010 (8) TMI 263 - GUJARAT HIGH COURT Excise duty not includible in valuation of closing stock of finished goods at end of accounting period. Excise duty payable estimated on finished goods held in factory are neither included in expenditure nor valued in such stocks but are accounted for on clearance of goods from factory this accounting treatment however has no impact on the profit for the year as decided in CIT v. Shri Ram Honda Power Equipment Ltd. 2012 (10) TMI 150 - SUPREME COURT - in favour of assessee.

Summary

Issues:
1. Valuation of closing stock including excise duty for Assessment Year 1995-1996.

Analysis:
The Supreme Court, comprising S.H. Kapadia and Madan B. Lokur, JJ., heard arguments from both sides and granted leave in the civil appeal filed by the Department. The appeal pertained to the valuation of closing stock for the Assessment Year 1995-1996. The Court noted that the assessee Company had been following the net method for valuing the closing stock, which included excise duty at the time of goods removal. Referring to the precedent set by the case of CIT v. Shri Ram Honda Power Equipment Ltd., the Court dismissed the Department's appeal with no order as to costs.

In a separate judgment by Ms. H.N. Devani, J., it was highlighted that the Assessment Year in question was 1995-96. The Court had previously formulated a question regarding the exclusion of excise duty when valuing closing stock at the end of the accounting period. The judgment noted that the issue had already been settled by a decision on the same day in the case of Asstt. CIT v. Narmada Chematur Petrochemicals Ltd. Therefore, based on the reasoning provided in Tax Appeal No. 852 of 2007, this appeal was also dismissed.