2019 (10) TMI 1199 - AT - Income Tax

Deduction eligible u/s 43B - excise duty paid under protest - security deposit from a customer - HELD THAT - The settled legal position of law is that liability to pay tax arises by virtue of the charging section alone though quantification of the amount payable is postponed, as held in the case of Kesoram Industries amp; Cotton Mills Ltd. v. CWT 1965 (11) TMI 41 - SUPREME COURT and then again in the case of Setu Parvati Bayi v. CWT 1967 (12) TMI 4 - SUPREME COURT . Similar was the view in the case of Chatturam v. CIT 1947 (4) TMI 8 - FEDERAL COURT that liability to tax does not depend on assessment; that ex hypothesis has already been fixed the assessment order only quantifies the liability which is already definitely and finally created by the charging sections Ishwarlal Parekh v. State of Maharashtra 1968 (5) TMI 1 - SUPREME COURT Therefore the fact that in the absence of an assessment order or absences of entries in the books of accounts is no bar to claim as deduction of excise duty of tax. The excise duty is attracted the movement the activity of manufacturing is complete. Therefore crystallization of liability is established in the year of manufacturing. Admittedly, during the year under consideration, the goods were not manufactured. However, since the excise duty is allowable as deduction on payment basis under the provisions of Section 43B of the Act, though the liability is pertaining to earlier years, the excise duty paid is allowable as deduction under the provisions of Section 43B of the Act. Similarly, the amount received towards reimbursement of excise duty from its distributor M/s. Roshan Commercial Private Limited is a trading receipt which is taxable under the provisions of Section 41 of the Act in the light of the judgment of Hon ble Supreme Court in the case of Chowringhee Sales Bureau P. Ltd vs. CIT, 1972 (10) TMI 4 - SUPREME COURT - Decided against assessee.

Summary

Issues Involved:
Appeal against order of CIT(A) for AY 2012-2013 regarding deduction u/s 43B of the Income Tax Act, 1961 for excise duty paid under protest.

Analysis:

Issue 1: Deduction u/s 43B of the Act
The appellant contested the order of CIT(A) and the Assessing Officer, claiming it was contrary to law, facts, and equity, specifically regarding the deduction u/s 43B for excise duty paid under protest. The appellant argued that the security deposit received from a customer should not reduce the deduction eligible u/s 43B.

Issue 2: Allowability of Disputed Excise Duty
The CIT(A) considered the appellant's claim for deduction of disputed excise duty paid, involving reimbursements from a distributor. The CIT(A) directed the Assessing Officer to set off the amount received from the distributor against the excise duty paid, allowing only the net amount for deduction under the provisions of Section 37 r.w.s 43B of the Act.

Issue 3: Nature of Amount Received from Distributor
The appellant contended that the amount received from the distributor was a deposit, not taxable income. However, the legal position established liability for excise duty on payment basis under Section 43B, and the amount received from the distributor was deemed a trading receipt taxable under Section 41 of the Act.

Judgment Summary:
The ITAT Chennai dismissed the appellant's appeal, upholding the order of the CIT(A) regarding the deduction u/s 43B for excise duty paid under protest. The Tribunal affirmed the legal position that excise duty is allowable on a payment basis under Section 43B, and the amount received from the distributor constituted a taxable trading receipt under Section 41. The appeal was thus dismissed, and the order pronounced on August 8, 2019, at Chennai.