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TMI Blog2012 (10) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of Sec. 145A of the Act. 4. The provision of Section 145A of the IT Act came to be incorporated by the Finance Act w.e.f. 1.4.1999. For the assessment year is concerned, Section 145A of the I.T. Act, reads as follows: "145A. Method of accounting in certain cases.- Notwithstanding anything to the contrary contained in section 145.- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be- (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incorrect by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation.- For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment; (b) interest received by an assessee on compensation or on enhanced compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realised on the year's trading............." In the words of Singleton L.J. In Patrick (Inspector of Taxes) v. Broadstone Mills Ltd. [1954] 25 ITR 377 (Cal.) at 395. ".......... (1) One cannot arrive at the profits of the year without taking into account the value of the stock one has at the beginning of, and at the end of, the accounting year. (2) The figures for stock are just as important as any other figures. Values may have to be estimated when market price is taken, but any departure from accuracy is reflected in the trading account. (3) Stock should be taken either at cost price or at market price, whichever is the lower........." 18. Lord Herschell in Russel v. Town and County Bank Ltd. [1888] 13 App. Cas. 418 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his statutory power, as he has done in the instant case, for determining what, in his opinion, is the correct taxable income.' 7. It is submitted that the ratio laid down by the Supreme Court in the said decision was prior to incorporation of Section 145A of the Act. The assessees were bound to comply with the observations of law made by the Supreme Court. However, after incorporation of Section 145A of the Act, it has now become mandatory that in the closing stock, the excise duty paid should be reflected to show correct valuation of the closing stock. 8. The provisions of Section 145-A of the Act postulates the valuation for purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head "profits and gains of business or profession". The provision further declares that in accordance with the method of accounting employed by the assessee, he should include the amount of tax, duty, cess or fee 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 above provision makes it clear that for showing valuation of the goods, it is necessary in the case of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;incurred' in S.145A(b) must be construed to mean the liability actually incurred by the assessee. 10. Where the excisable goods are manufactured and are lying in stock on the last day of the accounting year, whether the manufacturer has incurred liability to pay excise duty on the manufactured goods is the question. 11. The apex Court in the case of CCE v. Polyset Corporation & Anr. 1999 (115) ELT 41 (SC) has held that the durability of excisable goods is determined with reference to the date of manufacture and the rate of excise duty payable has to be determined with reference to the date of clearance of the goods. Therefore, though the date of manufacture is the relevant date for dutiability, the relevant date for the duty liability is the date on which the goods are cleared. In other words, in respect of excisable goods manufactured and lying in stock, the excise duty liability would get crystalised on the date of clearance of goods and not on the date of manufacture. Therefore, till the date of clearance of the excisable goods the excise duty payable on the said goods does not get crystalised and consequently the assessee cannot be said to have incurred the excise dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, which involves common issues even if in one of the assessment years the tax effect is more than Rs. 10 lakhs, irrespective of the fact that in respect of other assessment years which is part of the common order, the tax effect is less than Rs. 10 lakhs, the revenue is entitled to file appeal even in respect such assessment years where the tax effect is less than Rs. 10 lakhs. However, in case where there is no common order and an order is passed only in respect of an assessment, year and the tax effect therein is less than Rs. 10 lakhs, the revenue cannot file the appeal. 18. On thorough scrutiny of para 5 of the Circular No. 3/2011, we find that there appears to be a glaring discrimination offending the sprit of Article 14 of the Constitution. In the case of a common order passed in respect of one or more assessment year/years, if the tax effect is less than Rs. 10 lakhs, the assessee is not entitled to benefit of exemption and the revenue is not debarred from filing an appeal, even though the tax effect in respect of one or more assessment years is less than Rs. 10 lakhs. In other words, the revenue can file an appeal against all the assessment orders which is a part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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