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TMI Blog2016 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... lause(a) of section 43B of the Act was at any time claimed by way of deduction in any previous year prior to 1983. In fact, the raw material were imported and the goods were manufactured in the year 1983, and they were cleared also in the year 1983. Therefore, their liability accrued in the year 1983, and they also paid the sum in the year 1983. In that view of the matter, the Explanation to section 43B of the Act is also not attracted in the present case. The first limb of argument that Section 145A was not on the statute book at the relevant point of time and therefore this Court may take a different view by not holding that the matter is covered by the decision of the Apex Court in case of Berger Paints [2004 (2) TMI 4 - SUPREME Court ] may require consideration of the effect of Section 43B vis-à-vis Section 145A and to find out as to whether by insertion of Section 145A on the statute book, the effect of the allowable deduction under Section 43B is diluted or nullified or not. The language of Section 43B begins with the word “Notwithstanding anything contained in any other provisions of this Act” meaning thereby a non- abstente clause to have an overriding effect over any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch excise duty was debited to the profit and loss account and claimed as an expenditure ? 2. The relevant facts are that, the respondent filed the return of income as on 1.11.2004 declaring the total income of ₹ 48,60,54,400/-. The scrutiny was made under Section 143(2) of the Income Tax Act (hereinafter referred to as `Act ). The Assessing Officer, after considering the material on record allowed the deduction under Section 43-B of the Act of ₹ 82,35,034/- towards Excise duty pertaining to closing stock. The assessment order was passed on 29.12.2006 under Section 143(3) of the Act. 3. The matter was taken up in purported exercise of power under Section 263 of the Act by the Commissioner on the alleged ground that in view of the deduction of excise duty of ₹ 82,35,034/-, the total income is reduced and there is short levy of tax of ₹ 29,54,319/-. After considering the submissions made on behalf of the assessee, the Commissioner vide order dated 27.1.2009 did not accept the submission made on behalf of the assessee and the relevant discussion is at paragraphs 5, 6 and 7 of the order which read as under: 5. Now I will deal with the assessee s conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f proceedings u/s 263 that the assessee is claiming deduction for the sum of ₹ 82,35,034/- in both the assessment years, the assessee has filed letter before the A.O. requesting for exclusion of excise duty of ₹ 82,35,034/- from the opening stock as on 01.04.2004 (during the course of scrutiny assessment for A.Y. 2005-2006). Further, the assessee has not quantified the amount of excise duty included in the valuation of opening stock of finished goods and has not offered the same for taxation in the assessment year 2004-05. In view of the above discussion, I hold that in the assessment year 2004-05 the assessee is not entitled for deduction of excise duty amounting to ₹ 82,35,034/- from the net profit as per P L account for the purposes of computation of profits and gains from business and profession. 6. The assessment order dated 29.12.2006 passed u/s 143(3) of the I.T.Act, 1961 for A.Y. 2004-05 by the ACIT, C-12(2), Bangalore is therefore erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the I.T.Act, 1961 in as much as the total income has been short computed by a sum of ₹ 82,35,034/- resulting in short levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt. However, no double taxation is to be given in adjustment in opening stock and closing stock. In the instant case, the assessee has already filed a letter for the subsequent year that the sum of ₹ 82,35,034/- should be reduced from the opening stock. Moreover, the assessee has paid excise duty before the due date and the excise duty so paid is allowable u/s 43B of the IT Act. 10. The Hon ble Bombay High Court in the case of CIT v Mahalakshmi Glass 2009-TIOL- 233-HC -Mumbai has held that if adjustment is to be made in the closing stock then the adjustment is also required to be made in the opening stock. IT is now well settled law that if the AO makes an adjustment in the valuation of the closing stock then the adjustment is also required to be made in the opening stock. However, such adjustment is not necessary in case the assessee changes the method of valuation of the stock during a year and consistently follows the changed method in subsequent year. The learned CIT has directed the AO to make the addition only on account of adjustment of the closing stock and such a direction is not in accordance with the provisions of law. Since the Cenvat credit is treated as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch loan [or advances],][or] [(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee,] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : [Provided that nothing contained in this section shall apply in relation to any sum [***] which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.[***]] Explanation [1].-For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in computing the income of the previous year in which the sum is actually paid by him.] [ Explanation 3C.-For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (d) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid.] [ Explanation 3D.-For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (e) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance shall not be deemed to have been actually paid.] [ Explanation 4.-For the purposes of this section,- (a) public financial institutions shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); [(aa) scheduled bank shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (5) of section 11;] (b) State financial corporation means a financial corporation e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come under section 28 of that previous year in which such sum is actually paid by the assessee. The intention is made more specific by providing that it would be so irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by the assessee. This clearly makes out that even if the mercantile method accounting is employed and the liability to pay might have accrued which would give the assessee a right to obtain deduction, in view of the specific language of the section, the assessee would not be entitled to get deduction merely on accrual of the liability to pay the tax or duty, but would be so entitled to get deduction only on actual payment of tax or duty. The Legislature has also taken care by providing an Explanation that the assessee shall not be entitled to any deduction under section 43B of the Act in respect of such sum in computing the income of the previous year in which such sum is clearly paid by him in case a deduction in respect of any such sum was allowable in the previous year. It is, therefore, clear that the assessee shall not be entitled to get the benefit twice, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intend claiming double benefit for the same amount. The argument of Mr. S. N. Shelat that section 43B of the Act does not enlarge the scope of deduction is correct in as much as it speaks about the deduction otherwise allowable under this Act, but argument is not that the sum which is paid by way of import duty or liability to pay excise duty is not the sum given under the permissible deductions. Under the mercantile method of accounting, as stated earlier, the moment the liability is incurred, it would be an admissible deduction. What section 43B of the Act states is that irrespective of the fact that the liability is already incurred, that would be an admissible deduction only when the actual amount in that regard is paid. Therefore, it is clear that in the year 1983, when the goods including the raw material were imported and the finished goods lying at various depots were manufactured in the year 1983 (including the one under the closing stock), the liability to pay import duty and excise duty on the said goods was incurred by the petitioner-assessee. When that is so, it is also clear that the deduction of the said excise duty and import duty even on the closing stock was allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sly observed at paragraph.13 inter alia, relevant of which reads as under: The judgment of the Gujarat High Court in Lakhanpal National Ltd. 's case was relied upon and followed by the Bombay High Court in CIT v. Bharat Petroleum Corporation Ltd. (supra) as well as by the Madras High Court in Chemicals and Plastics India Ltd. v. CIT (supra). The Special Bench of the Tribunal also relied upon the judgment of the Gujarat High Court in Lakhanpal National Ltd. 's case The Revenue has attempted to distinguish the judgment of the Gujarat High Court on the facile ground that the judgment of the Gujarat High Court was one rendered in connection with a provisional assessment under Section 141A and not in a regular assessment. In our view, this distinction is hardly acceptable. in any event a reading of the Gujarat High Court's judgment shows that the judgment is not based merely on the adjustments permissible under Section 141 A. as is contended by the Revenue, but that the judgment proceeds on an analysis of Section 43B and makes a finding that the entire amount of excise duty/customs duty paid by the assessee in a particular accounting year was an allowable deduction in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Hence in our view, the Revenue could not have been allowed to challenge the principle laid down in Lakhanpal National Ltd. 's case, which was followed by the Inspecting Assistant Commissioner in the case of the assessee in the three assessment years in question. We are. therefore, of the view that the Commissioner, the Income Tax Appellate Tribunal and the Calcutta High Court erred in permitting the Revenue to raise a contention contrary to what was laid down by the Gujarat High Court in Lakhanpal National Ltd. 's case. This decision has been subsequently followed by thedecisions of the Bombay High Court in CIT v. Bharat Petroleum Corporation Ltd. (supra) and the Madras High Court in Chemicals and Plastics India Ltd. v. CIT (supra) as well as the decision of the Special Bench in Indian Communication Network Pvt. Ltd. v. IAC (supra), which have all remained unchallenged. 13. We are therefore of the view that CIT, the Tribunal and the Calcutta High Court erred in permitting the Revenue to raise the contention contrary to what was laid by the Gujarat High Court in Lakhanpal Nationals Ltd., case. 14. Thereafter, the Judgment of Calcutta High Court was set aside an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te book at the relevant point of time and therefore this Court may take a different view by not holding that the matter is covered by the decision of the Apex Court in case of Berger Paints referred supra may require consideration of the effect of Section 43B vis- -vis Section 145A and to find out as to whether by insertion of Section 145A on the statute book, the effect of the allowable deduction under Section 43B is diluted or nullified or not. The language of Section 43B begins with the word Notwithstanding anything contained in any other provisions of this Act meaning thereby a non- abstente clause to have an overriding effect over any other provisions of the Act. 20. Further, if language used under Section 145A is considered, the language is Notwithstanding anything to the contrary contained in Section 145 meaning thereby by diluting the effect of Section 145, the additional provision is made under Section 145A. We are not required to examine the confrontation of the situation under Section 145 vis- -vis Section 145A and therefore, we need address ourselves in the present matter as to what is the scope and ambit of Section 145 and Section 145A. But, even if the contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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