2015 (9) TMI 1054 - HC - Income Tax

Duty paid by the assessee in advance under protest - whether Tribunal was right in holding that the duty paid by the assessee in advance under protest by treating the payment as loan and advance in the balance sheet without debiting the payment in the profit and loss account is allowable as a deduction under Sections 37 and 43B ? - Held that - As rightly pointed out by the Tribunal the assessee has actually paid the said amount as excise duty in the relevant previous year for enabling them to move the goods out of their factory. This payment was made pursuant to an order passed by this Court. The fact that the assessee has taken up the matter on appeal to the Supreme Court on their litigation with the Department of Central Excise, would not make the payment a non payment. The heading, under which, the assessee has incurred expenditure is only a duty payment. Therefore, the Tribunal was right in holding that the assessee satisfied both the statutory provisions of Sections 37 and 43B. What the Assessing Officer has recorded is that no order or demand of excise duty served upon the assessee was produced. But, the Assessing Officer has recorded the fact that even in the order of the High Court, it was mentioned that the goods moved out of the factory after payment. The point that was raised by the Assessing Officer was that there was no demand on the part of the Department. The crystallization of demand may not really be a ground to suspect the actual payment. In any case, it is a question of fact. Hence, we are of the considered view that the question of law raised by the Department does not arise for consideration. - Decided against revenue.

Summary

Issues:
1. Allowability of excise duty paid under protest as a deduction under Sections 37 and 43B.

Analysis:
The case involved the question of whether excise duty paid under protest by treating the payment as a loan and advance in the balance sheet without debiting it in the profit and loss account is allowable as a deduction under Sections 37 and 43B. The assessee, engaged in the sale of ayurvedic products, filed a revised return of income for the assessment year 2009-10, claiming a deduction of a substantial amount as excise duty paid under Section 43B. The excise duty payment was made pursuant to a conditional order by the High Court in a litigation with the Department of Central Excise, where the liability had not yet crystallized. The Assessing Officer initially rejected the claim, stating that the amount was not reflected in the profit and loss account. However, the Commissioner (Appeals) allowed the claim, considering the payment as a business expenditure incurred and paid during the year.

The Revenue challenged the decision before the Tribunal, arguing that since the assessee did not reflect the expenditure in the books of accounts but showed it as an advance receivable in the balance sheet, the deduction should not have been allowed. The Tribunal, in its order, noted that the assessee had indeed made the payment as excise duty in the relevant previous year to move goods out of their factory, as per the Court's order. The Tribunal held that the payment satisfied both Sections 37 and 43B requirements, emphasizing that the heading under which the expenditure was incurred was solely for duty payment.

The Revenue further contended that the assessee failed to produce any excise duty order or demand notice to prove the liability. However, the Court held that the fact of payment was crucial, and the actual payment was not disputed. The Assessing Officer's concern about the lack of a demand from the Department was deemed insufficient to question the payment's validity. The Court concluded that the Department's raised question of law did not warrant consideration, as the actual payment was established. Consequently, the tax case appeal was dismissed, affirming the Tribunal's decision to allow the deduction of excise duty paid under protest as a business expenditure under Sections 37 and 43B.