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TMI Blog2013 (11) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Excise duty payable on the closing stock. Hence, the AO may not be correct in holding that the liability to pay excise duty would arise only in the succeeding year upon sale of the closing stock. - Therefore both the views as that of assessee as well as AO ultimately will result in the same figure - Decided in favour of assessee. - I.T.A. No. 355/Coch/2013 - - - Dated:- 22-11-2013 - Shri N. R. S. Ganesan, JM And B. R. Baskaran, AM,JJ. For the Petitioner : Shri A. S. Narayanamoorthy, CA For the Respondent : Smt. Latha V. Kumar, Jr. DR ORDER Per B. R. Baskaran, Accountant Member: The appeal filed by the assessee is directed against the order dated 11-03-2013 passed by the Ld. CIT(A), Kozhikode and it relates to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding central excise duty as per the provisions of sec. 145A of the I.T. Act. Since the assessee has not paid the amount of excise duty that was included in the Closing stock value, it has provided for the same by debiting in the profit and loss account in order to nullify the effect of including the excise duty amount in the value of closing stock. It was further submitted that the assessee has been following the very same system consistently and it is in accordance with the Accounting Standard-2 issued by ICAI. The assessee further submitted that the above said excise duty has been paid during April, 2004 prior to the date of filing of the return of income and hence, the same is allowable u/s. 43B of the Act. However, the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly followed by the assessee. Moreover, 43B allows the claim of excise duty if it has been paid before filing of return. The confusion has arisen because Assessing Officer misconstrued this figure of Rs.70,99,758/- as excise duty paid whereas the assessee is claiming that this is a provision made towards the excise duty. However, I have to support the contention made by the Assessing Officer because in the P L account after showing sale net of excise duty this amount is appearing in manufacturing expenses contained in schedule M to the balance sheet as excise duty and no where it is mentioned as a provision. Neither can I find this amount in the schedule pertaining to payable in the balance sheet as on 31.03.2004. During the appellate proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the assessee has valued the finished stock by including the amount of excise duty. Since the assessee is liable to pay the said excise duty subsequently upon selling the closing stock, the assessee has provided for the same by debiting the same in the profit and loss account which is in accordance with the Accounting Standard-2 issued by ICAI. He further submitted that the assessee has been following this system consistently over the years and in all the earlier years, this method of accounting has been accepted by the department. He submitted that the excise duty liability accrues as and when the product is manufactured. Hence, the AO was not correct in law in observing that the liability to pay excise duty accrues only on its sale. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing stock. We notice that the assessee has disclosed this fact in the Significant Accounting policies given in Schedule R of the Annual Report. It reads as under:- " Finished Goods:- .............Excise duty on goods manufactured but not sold is provided for and also included in the value of closing stock." According to the assessee, it is following the said system of accounting consistently over the years and the said system has been accepted by the department in the earlier years. 9. We notice that the Ld CIT(A) has rejected the contentions of the assessee only for the reason that the Excise duty amount of Rs.70,99,758/- included in "Manufacturing expenses" has not been shown as "Provision" in the Balance Sheet. In this regard, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view taken by the AO is taken as correct, then the AO is required to make due adjustment in the value of closing stock also by eliminating the amount of Excise duty included therein and in that case, the net result will be the same as that adopted by the assessee. There should not be any dispute that the cost value of closing stock is arrived on the basis of amounts debited to the Profit and loss account. Accordingly, the assessee has debited corresponding amount of Excise duty included in the cost value of closing stock in "manufacturing expenses" by making a provision there of. The said provision credit is included in "Outstanding liabilities" in Schedule H of the Balance sheet. Hence, in our view, there is no reason to disallow the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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