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TMI Blog2009 (2) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned counsel for the assessee was directed to furnish a trading account by following the inclusive method and also taking into account the Modvat credit availed in respect of the opening stock in the year under appeal. He has furnished such an account. So, however, we are unable to find any credit taken by the assessee, any such account in respect of Modvat credit element pertaining to the opening stock. The issue has been considered by the Tribunal in the case of Cyanamid Agro Ltd. v. Addl. CIT [2009] 31 SOT 286 (Mum.), the relevant portion of which is reproduced hereunder: "11. Third ground of appeal for the assessment year 1999-2000 is as under: On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in confirming that Modvat of Rs. 8,41,790 was liable to be added to the value of the closing stock of this assessment. He ought not to have done so. 12. This issue is stated to be covered in favour of the assessee by the decision of the Tribunal in the case of Dy. CIT v. Cyanamid India Ltd. ( supra ). In para 6 of the order the Tribunal while rejecting the ground of appeal raised against the decision of the CIT(A) in allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) ought to have allowed deduction of Modvat of Rs. 1,46,30,473 which was added to the value of closing stock of the earlier assessment and thus had become part of the value of opening stock of this assessment. 16. Though the above ground of appeal has become infructuous in the light of the said addition having been deleted by the CIT(A) in the assessment year 1998-99 against which the Revenue is not in appeal yet it has been argued before us that while giving effect to provisions of section 145A, the benefit in regard to the opening stock has also got to be allowed. We are, therefore, dealing with grounds of appeal Nos. 3 and 4 together. 17. The learned counsel for the assessee has invited our attention to the decision of the Mumbai Bench of the Tribunal in the case of Hawkins Cookers Ltd. v. ITO in ITA No. 505/2004 = (2008-TIOL-480-ITAT-MUM) for the assessment year 1999-2000. In this case, the issue relating to the addition in respect of Modvat credit has been considered vide para Nos. 6 to 7.3 which are reproduced hereunder: 6. Now we take the second aspect of the matter. The learned AR submitted that effect of the section 145A to opening stock is also to be g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to ensure that the value of opening and closing stock reflect the correct value, a new section 145A is inserted. This section provides that the valuation of purchase, sale and inventory shall be made in accordance with the method of accounting regularly employed by the assessee and such valuation shall be further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called), actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. 7.2 The CBDT has clarified that with a view to put an end to this point of litigation, both the opening and closing stock should reflect the correct value and that is why section 145A was inserted in the statute book. It is further stated that the valuation shall be further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called), actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. The Delhi High Court in the case of CIT v. Mahavir Aluminium Ltd., 168 Taxman 27 (Delhi) = (2007-TIOL-742-HC-DEL-IT) has held that corresponding adjustment mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod. As per section 145A, gross method is required to be followed. For the sake of clarity, the net and gross method may be explained. The assessee makes purchases in respect of the inputs and pays the cost including excise duty and other taxes. The assessee is entitled to credit in respect of the excise duty suffered in respect of the inputs as and when these are put to use in the manufacturing of articles and things. Following the net method most of the tax payers debit the purchases net off Modvat credit. For example, if purchases have been made at Rs. 110 per unit which credit is available to the assessee on utilisation of the inputs, the assessee debits the purchases at Rs. 100 only and the Modvat credit is not reflected in the income, as the same is already excluded, while debiting the purchases. On the other hand, in the gross method, the assessee is required to debit the purchases including the element of taxes even in respect of which Modvat credit is available. The assessee has also to credit the sales as well as the inventories inclusives of element of taxes. In this method, if the assessee does not credit the Modvat credit availed or accrued on the utilisation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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