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TMI Blog1986 (11) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... his order, upheld the ITO's action following the aforesaid decision. 3. The Bombay High Court subsequently in Kamani Engg. Corpn. Ltd. v. CIT [1984] 150 ITR 586 has followed the aforesaid decision and has held that profit on sale of import entitlements was neither capital receipt nor receipt of a casual and non-recurring nature and was assessable as the assessee's business income. 4. At the time of hearing before us, the learned counsel for the assessee urged that before the Bombay High Court the matter had not been properly argued that import entitlements were capital assets and, therefore, profit on sale of import entitlements was capital gain as had been held in K. N. Daftary v. CIT [1977] 106 ITR 998 (Cal.) and Addl. CIT v. K. S. Sheik Mohideen [1978] 115 ITR 243 (Mad.) 5. We have carefully considered the assessee's submissions but we are unable to accept them. In K. N. Daftary's case, the Calcutta High Court was not called upon to examine whether the import entitlements were capital assets and profit thereon constituted a capital gain and the only controversy before the High Court on a reference by the assessee was that as there was no cost of acquisition of the import e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in Law of Income-tax, Seventh Edn., vol. 2, p. 1115 under section 28 under the heading "All 'trading receipts' that are realised must be taken into account." 10. Similar view has been expressed by Chaturvedi and Pithisaria in Income-tax Law, Third edn., Vol. I, pp. 820-230 under the heading "Import entitlements.' 11. The Tribunal Special Bench, Delhi in Indo Asian Switchgear (P.) Ltd. v. IAC [1985] 12 ITD 65, has exhaustively discussed the case law on this point and has held that profit on. 12. In view of the above discussion, we uphold the orders of lower authorities assessing Rs. 3,14,069 being premium on sale of import entitlements. Ground No. 2: 13. The IAC (Assessment) had disallowed secret commission of Rs. 11,800 out of commission of Rs. 6,28,361 on the ground that the said amount was not supported by vouchers. He followed Goodlas Nerolac Paints Ltd. v. CIT [1982] 137 ITR 58 (Bom.). 14. The Commissioner (Appeals) upheld the IAC (Assessment)'s action by relying on McDowell Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) where it was held that colourable devices are not part of tax planning. The commissioner (Appeals) held that in the absence of verification, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid loans had been invested in the Bhiwandi unit or in the head office. 17. At the hearing before us, the learned counsel for the assessee urged that though the assessee had not kept separate accounts for Bhiwandi unit, yet a balance sheet of sorts had been prepared to give a rough idea of the capital and their surplus of the said unit according to which the capital employed in fixed assets was of Rs. 36,126,979 of the said unit (PB. 30). 18. We have carefully considered the assessee's submissions. We, however, do not find any good reason for interfering with the orders of lower authorities. The allocation of capital employed between the head office and the Bhiwandi unit by the IAC (Assessment) appears to be quite reasonable and does not need any interference, which accordingly confirmed. Ground No. 4: 19. The assessee claimed excise duty of Rs. 69,15,971 out of which Rs. 15,85,279 was a provision made as per Schedule XI of balance sheet. Item 12 of the notes to balance sheet mentioned that the assessee-company had paid central excise duty on the basis of assessable values representing their manufacturing cost together with manufacturing profits, while as per Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is independent of the assessment. 22. The assessee also relied on CIT v. Century Enka Ltd. [1981] 130 ITR 267 (Cal.) where it was held that in the case of an assessee following mercantile system of accounting, provision in accounts for excise duty leviable on products manufactured and utilised by the assessee itself is allowable, though no demand notice is issued for excise duty but a letter from the Excise Department had been received stating that excise duty was payable. 23. Reliance was also placed on CIT v. V. Krishnan [1980] 121 ITR 859 (Mad.) where it was held that liability to sales tax can be allowed in the year of transaction or in the year in which it is paid but it cannot be claimed in the year in which demand is raised. 24. The assessee also relied on the Tribunal Bombay Bench B's order in Swan Mills Ltd. [It Appeal No. 2545 (Bom.) of 1985, dated 21-3-1986] for the assessment year 1981-82 where in paragraph 61 it was held that the assessee was entitled to deduction of excise duty. The said judgment, however, went by the facts of that case. 25. Considering the aforesaid decisions in the light of the facts of the instant case, we find that the IAC (Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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