9911796707
TMI Blog2008 (9) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... 767. Before the CIT(A), it was submitted by the assessee that the assessee has followed a method of accounting, there is in fact, no impact on the profit and loss account of the company on giving effect of section 145A. The assessee produced the working before the CIT(A) which is as under :- Particulars Amt. (Rs.) Amt. (Rs.) Net profit as per Profit & Loss Account 7,18,98,566 Add: Excise Duty on Closing Stock (As per provisions of section 145A) Finished goods 2,11,32,299 Raw material 3,25,63,272 5,36,95,571 12,55,94,137 Less: (a) Excise Duty deemed to be paid under section 43B for finished goods as the same has been debited in RG 23A (2,11,32,299) (b) Amount of Excise Duty on Purchases (remained in Closing Stock) not debited to Profit & Loss Account now debited (3,25,63,272) (c) Excise Duty to be included in opening stock (as per provisions of section 145A) (5,22,41,804) (10,59,37,375) Add: (a) Excise Duty on opening finished goods stock (as the same is being recovered from the &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparing the return of income. These adjustments are as follows : (a)Any tax, duty, cess or fee actually paid or incurred on inputs should be added to the cost of inputs (raw materials, stores etc.); if not already added in the books of account. (b)Any tax, duty, cess or fee actually paid or incurred on sale of goods should be added to the sales, if not already added in the books of account. (c)Any tax, duty, cess or fee actually paid or incurred on the inventory (finished goods, work-in-progress, raw materials etc.) should be added to the inventories, if not already added while valuing the inventory in the accounts. 3.3 The Institute of Chartered Accountants of India on insertion of section 145A issued guidance Note on Tax Audit under section 44AB of the Act explaining the statutory requirements to give the effect of section 145A which are as under:- "23.9 The statutory required under section 145A can be explained by the following example: Particulars Qty. Rate Rate of excluding excise excise duty duty Opening stock 10 10 2 Raw material purchased 90 10 2 Other manufacturing cost 80 10 - Finished good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; closing stock of raw material (d) Raw 80 10 800 material consumed (e) To 80 10 800 manufacturing cost (f) To excise duty 0 on finished goods sold (g) To gross 300 profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; finished goods. (r) To gross profit 300 Total 2140 Total 2140 23.11 It may be pointed out that the 'inclusive method' is not permitted by AS2 which is made mandatory from accounting year beginning on or after 1-4-1999. Further, in the Guidance Note on Accounting for MODVAT the second method (inclusive method) has been withdrawn with effect from accounting year commencing from 1-4-1999. In view of the above, the adjustments under section 145A will have to be made in all cases where 'exclusive method' is followed. 23.15 When the exclusive method is followed in the accounts, the adjustments to be made under section 145A can be explained by the following illustrations which is required to be reported under clause 12(b). Sl. No. Particulars (Rs.) (Rs.) Increase Decrease in profit in profit 1. Increase in cost of opening stock on 20 inclusion of excise duty on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 740 Rs. Rs. Rs. Less: (1) Excise duty on opening stock of raw material (Rs. 2 per unit for 10 units) 20 (2) Excise duty on purchase of raw materials (Rs. 2 per unit for 90 units) 180 (3) Excise duty on sales (paid or incurred as per section 145A) 180 380 (-)380 60 Less: Deduction under section 43B on the assumption that the amount is paid on or before due date of filing return of income in respect of excise duty payable on finished goods. 60 Profit 300" 3.4 From above illustration we noticed that if an assessee has followed the above procedure as laid down by The Institute of Chartered Accountants of India and tax auditor reported this aspect in clause 12(b) in Form 3CD of tax audit report, in such case the point remained to examine is allowably of amount of excise duty which has been adjusted in closing stock of finished goods. No doubt the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts to payment of excise duty and accordingly the assessee is entitled to deduction under section 43B. The above presumption is based on legal fiction created by section 145A of the Act. However, to avoid double deduction the assessee should ensure that there will be no double adjustment of MODVAT account firstly at the time of giving effect to section 145A and secondly at the time of final exercise option for adjustment of MODVAT account. In this regard burden is on the assessee. 3.6 In the case under consideration, the contention of the assessee is that the assessee has given effect to section 145A in accordance with above discussion. The learned AR in support of that filed a chart and demo-nstrated accordingly. Such detailed working is also given in tax audit report as required in clause 12(b) of Form 3CD. But above submissions of Ld. AR and deduction under section 43B in accordance with above discussion are subject to verification, therefore, we send the matter back to the file of the Assessing Officer for limited purpose to verify the facts of the case of assessee in the light of above discussion and calculate the amount of addition, if any, accordingly. 4. In the result ..... X X X X Extracts X X X X X X X X Extracts X X X X
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