9911796707
TMI Blog2001 (9) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, the Tribunal was right in law in rejecting the assessee's claim for deduction of the excise and customs duties of Rs.98,25,833 paid in the year of account and debited in the profit and loss account, on the ground that the crediting of the profit and loss account by the value of the closing stock, which included the aforesaid duties, did not have the effect of wiping out the debit to the profit and loss account?" The applicant-assessee is a resident company engaged in the manufacture and sale of paints. The reference relates to the assessment year 1984-85 cor responding to the previous year ended on December 31, 1983. During this year, the assessee has paid Rs.5,85,87,181 by way of excise duty and cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly allowed double deduction of this amount. After hearing the assessee, the Commissioner of Income-tax has directed the Assessing Officer to enhance the total income of the assessee by Rs. 98,25,833. In appeal before the Tribunal, the Tribunal has also confirmed the view taken by the Commissioner of Income-tax in an order under section 263 of the Act. Heard learned counsel for the parties. The facts are not in dispute that there was an excise duty liability in the year under consideration to the tune of Rs.5,85,87,181 which includes Rs.98,25,833. That liability has been discharged by making the payment of that excise duty by the assessee and that the total amount has been debited in the profit and loss account maintained by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be stated that by adding a portion of the expenses that are debited in the profit and loss account to the value of the closing stock the deduction claimed in respect of those expenses in the profit and loss account is reduced. If this logic is extended, it would lead to some absurd situation. For example, the sale proceeds can be broken up to identify the different elements that go to make up the same. Part of the sale proceeds represents recovery of the cost of the goods themselves. Then there is the margin of profit. A portion of the expenses is also recovered. It will, therefore, be possible to contend that the cost of the goods having been credited to the profit and loss account as part of the sale proceeds, the debit to their prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated February 17, 1987, written to the Assessing Officer. The following sentence in the said letter, at page 3 thereof is clinching: 'If this is not done it would mean that, we would be debited full benefit of the actual payment of the duties in terms of section 43B inasmuch as, whereas there is a debit of Rs.5,85,87,181 in the profit and loss account, there is a credit in the profit and loss account of Rs.98,25,833 representing part of the above duty included in the dosing stock.' 10. The position that emerges is that there is a debit of Rs.5,85,87,181 in the profit and loss account which included Rs. 98,25,833 again ... statement of income filed on November 6, 1986, along with the covering letter dated November 4, 1986. The Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. While valuing the closing stock of unsold finished goods the excise duty liability which has been discharged cannot be ignored and that forms part of the closing stock on the assets side, i. e., the value of finished goods which are not sold includes the excise duty which has been paid. Therefore, even section 43B also does not come in the way as the actual payment against the excise duty liability has been made. That excise duty liability cannot be allowed further on showing that amount of excise duty liability that will result in double deduction. It is also pertinent to note that the assessee in the original return has not claimed this double deduction and only during the course of assessment by letter dated November 4, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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