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TMI Blog1987 (3) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... lity on the basis of Collector of Central Excise's order dated 12-6-1980 that excise duty on polyester film manufactured by the assessee was payable @ 30% as against 1% paid by assessee. Income-tax Officer in asst. year 1977-78 had rejected the said claim on the ground that the liability had arisen much after the close of the relevant account year and that the assessee had not made provision for the said duty in its books of account and that assessee was disputing the said demand. 3. CIT(A), however, following ITAT, Bombay Bench 'C's order in Garware Synthetic P. Ltd. for asst. year 1974-75 and Raza Buland Sugar Co. Ltd. v. CIT [1980] 122 ITR 817 (All.), held that when a competent authority passed an order quantifying the statutory liability, even if the order is passed during the assessment proceedings, the quantified amount is allowable as a deduction and therefore the passing of the order by Central Excise Collector after the end of the account year was no bar to the deduction of the assessee's claim nor the fact that the assessee had not made any entries in its account books in view of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC). 4. Similarly, in assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years closing on 30-9-1976 for asst. year 1977-78 and account year closing on 30-9-1977 for asst. year 1978-79. 7. When similar matter had come up before Bombay High Court in CIT v. Central Provinces Manganese Ore Co. Ltd. [1978] 112 ITR 734, Bombay High Court held that the liability was allowable when the demand notice was served on the assessee and it was immaterial that the assessee was objecting to the demand. Bombay High Court understood Kedarnath Jute Mfg. Co. Ltd.'s case as laying down that when a demand for payment of additional export duty was made, assessee was entitled to claim the deduction in that year. 8. The learned counsel for the assesses, however, urged that statutory liability to pay excise duty arose as soon as excisable goods were manufactured, relying on Supreme Court's decision in Kirloskar Bros. v. Union of India (sic) (PB 67-72) where Supreme Court held that liability for excise duty would arise no sooner the manufacture or the production was completed and it was immaterial as to what machinery would be devised by the Govt. for recovery of the tax and that the point of recovery or any restriction on removal will not be the determining factor for grant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was received by the assessee. 11. In view of the aforesaid discussion, we hold that the additional excise duty levied as a result of Collector of Customs' order dated 12-6-1980 was not allowable in assessment years 1977-78 and 1978-79. We accordingly vacate CIT(A)'s orders allowing deduction of Rs. 6,03,392 for assessment year 1977-78 and Rs. 32,22,558 for assessment year 1978-79. Grounds 2-3 - Asst. year 1977-78 : 12. ITO disallowed legal charges of Rs. 16,500 and consultancy charges of Rs. 10,350 for valuation of property belonging to Garware Plastics Ltd. which company had amalgamated with the assessee-company. ITO held vide para 10 that both these items were capital expenditure relating to the framework of the assessee-company. 13. CIT(A) (vide para 10) accepted the assessee's contention that the said expenditure was for expansion of assessee's business and there was no benefit of enduring nature. 14. Supreme Court in Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34 at page 44 approved the Full Bench decision of Lahore High Court in Benarsidas Jagannath, In re [1947] 15 ITR 185 where it was held that " Outlay is deemed to be capital when it is made for the initiatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, we vacate the CIT(A)'s order and restore that of ITO disallowing Rs. 16,500 and Rs. 10,350. 19. In the result, Revenue's appeal for asst. year 1977-78 is allowed. 20. In asst. year 1978-79, the first ground is regarding the addition of Rs. 32,000 which was received on 22-12-1971 as a deposit from M/s. Cema Pvt. Ltd. for supply of plastic moulds by the assessee-company. As the mould manufactured by the assessee-company was not lifted by the said depositor, ITO treated the said amount as part of assessee's income in asst. year 1978-79 (account year ending 30-9-1977). As per assessee's account books, the said credit in the account of the aforesaid creditor is carried forward till 1-7-1985. On these facts, the crucial question is how does the Revenue treat this amount as assessee's income for asst. year 1978-79. The limitation period of three years had expired much earlier. ITO (vide para 9), however, assessed the said amount in asst. year 1978-79 because the creditor had not claimed the amount after six years. 21. While we see some merit in the Revenue's contention based on CIT v. Batliboi & Co. (P.) Ltd. [1984] 149 ITR 604 (Bom.), the fact remains that the assessee had not tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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