2015 (6) TMI 357 - AT - Income Tax

Disallowance of employer s contribution to P.F. of employees - payment beyond the time prescribed under the provision of I.T. Act, 1961 as well as Provident Fund Act - Held that - It has been clearly established that the payment of Provident Fund contribution was made before the due date of filing of the return of income, therefore, the same is allowable under section 43B of the Act - Decided in favour of assesse. Valuation of closing stock - AO observed that since excise duty has been incurred on the manufacturing of the goods, the same should have been included in the closing stock as per provisions of section 145A(a) - Held that - As per sub-clause (ii) of clause (a) of section 145A of the Act, excise duty actually paid or incurred by the assessee is to be included in the valuation of closing stock. Excise duty always incurred on manufacturing of goods, though it is to be paid at the time of movement of the goods outside the factory. But since liability of payment of excise duty has been incurred on the production of the goods, the same is to be included in the closing stock. It is totally irrelevant whether the same was claimed to be expenditure in the profit and loss account by the assessee. As per provisions of section 43B of the Act, the expenditure on account of excise duty can only be allowed if it is paid before the due date of filing of the return of income. Therefore, we find no force in the arguments of the ld. counsel for the assessee that this amount of excise duty cannot be included in the valuation of closing stock, as it was not claimed as expenditure in the impugned assessment year. Therefore, we are of the view that the Assessing Officer has correctly included the excise duty in the valuation of closing stock - Decided against assesse.

Issues:
1. Disallowance of employer's contribution to P.P. of employees
2. Deletion of additions for disallowance U/s 43B for purchase tax
3. Deletion of addition of Excise Duty to the value of closing stock
4. Deletion of additions on account of the valuation of free sugar
5. Overall cancellation of the order of Ld. CIT(A)

Analysis:

1. Employer's Contribution Disallowance:
The Revenue appealed against the order disallowing the employer's contribution to Provident Fund. The Assessing Officer disallowed the payment citing non-compliance with the due date. However, the CIT(A) found evidence that the payments were made before the due date and hence allowable under section 43B of the Income-tax Act, 1961. The Tribunal upheld the CIT(A)'s decision, emphasizing the timely payment before the due date.

2. Deletion of Purchase Tax Additions:
The Assessing Officer disallowed the purchase tax payment for lack of evidence of timely payment. The CIT(A) accepted evidence showing payments made before the due date, thus allowing the deduction under section 43B. The Tribunal confirmed the CIT(A)'s decision, as payments were indeed made before the due date.

3. Excise Duty Addition to Closing Stock:
The AO added excise duty to the closing stock valuation under section 145A of the Act. The CIT(A) deleted the addition, citing judgments supporting the non-inclusion of excise duty. However, the Tribunal disagreed, stating that excise duty should be included in the closing stock valuation as per section 145A. The CIT(A)'s decision was set aside, and the AO's order was restored.

4. Valuation of Free Sugar:
The AO added the valuation of free sugar to the closing stock, affecting G.P. & N.P. The CIT(A) deleted the addition without considering the AO's opinion. The Tribunal set aside the CIT(A)'s decision, emphasizing the need to include the valuation of free sugar in the closing stock.

5. Overall Decision:
The Tribunal partly allowed the Revenue's appeal, reinstating the AO's orders on issues related to excise duty inclusion in closing stock valuation and valuation of free sugar. The general nature of the fifth ground did not require independent adjudication.

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