2013 (10) TMI 18

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..... aterial consumed during the year is allowable u/s. 37(1) as claimed by the respondent before A.O.? (ii) Whether the assessee is entitled to MODVAT credit on account of excess of excise duty/additional customs duty, paid by it on purchase of raw material, over the duty payable on finished goods, in the year of accrual i.e. when the raw material is purchased or in the year of receipt, when the assessee is maintaining accounts on mercantile system of accounting?" 2. The assessment order records that there was accumulation of unutilised input MODVAT credit of Rs.3.95 crores. The assessee had claimed this as a deduction in the computation of income. This claim was made in the revised return. Assessee premised that they had paid excise duty and .....

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..... d and the addition should be confirmed. 4. Income Tax Appellate Tribunal by the impugned order accepted the appeal of the assessee. It was noted that during the relevant previous year the respondent-assessee had consumed raw material of Rs. 146.03 crores, which included MODVAT amount of Rs.24.02 crores. Out of this, the assessee had utilised MODVAT credit of Rs.19.46 crores and the balance Rs.3.95 crores was claimed as a deduction under Section 37(1) of the Act as it was forming part of raw material. The Assessing Officer held that credit in respect of MODVAT had accrued and was still available and, therefore, deduction under Section 37(1) was rejected. It was noticed that the refund received from the excise department of Rs.7.16 crores wa .....

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..... ecause they had adopted "gross method" which included the MODVAT credit at the time of purchase and "net method" at the time of valuation of stock in trade. This practice was depreciated. This decision was followed by the Supreme Court in Commissioner of Income Tax versus Shriram Honda Power Equipment Limited, (2013) 352 ITR 481 and in the case of the respondent-assessee in Civil Appeal No. 6449/2012. 6. The facts stated by Commissioner of Income Tax (Appeals) create some doubt and suspicion whether net method was followed by the assessee, but the Assessing Officer has not commented adversely about the same in the assessment order. Findings of the Commissioner of Income Tax (Appeals) are tentative and not firm. In the income tax appeal and .....

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