DCIT, Hyderabad v. M/s SNF (India) Pvt. Ltd., Visakhapatnam

IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'B' BEFORE SHRI N.R.S.GANESAN AND SHRI CHANDRA POOJARI I.T.A.NO.284/HYD/2009 ASSESSMENT YEAR 2004-05 DY. CIT CIRCLE 3(2) HYDERABAD. .. APPELLANT VERSUS SNF (INDIA) PVT. LTD. HYDERABAD. ..RESPONDENT (PAN AAACP4070A) APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : SHRI JITENDRA JAIN O R D E R PER N.R.S.GANESAN JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT (APPEALS) IV HYDERABAD DATED 15-12-2008 AND PERT AINS TO ASST. YEAR 2004- 05. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS ADDITION ON ACCOUNT OF EXCISE DUTY PAYABLE ON THE CLOSING STOCK . 2. SMT. NIVEDITA BISWAS LEARNED DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE EXCISE DUTY PAYABLE ON CLOSING STOCK HAS T O BE ADDED TO THE CLOSING STOCK; OTHERWISE THE PROFIT AND LOSS ACCOUNT WOULD NOT REFLECT THE CORRECT FIGURE. ACCORDING TO THE LEARNED DEPARTMENTAL REPRE SENTATIVE THE NET OF SALES SHALL BE TAKEN FOR THE PURPOSE OF COMPUTING THE VAL UE OF CLOSING STOCK. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIV E IF THE EXCISE DUTY PAYABLE WAS NOT TAKEN IN THE CLOSING STOCK IT WILL NOT REFLECT THE CORRECT PROFIT OF THE ASSESSEE. 2 3. ON THE CONTRARY SHRI JITENDRA JAIN LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT DEBITED THE EXC ISE DUTY PAYABLE IN THE PROFIT AND LOSS ACCOUNT. THEREFORE IT CANNOT BE AD DED IN THE CLOSING STOCK ALSO. THE LEARNED COUNSEL FURTHER POINTED OUT THAT THE EX CISE DUTY IS PAYABLE AT THE TIME OF REMOVING THE GOODS FROM THE FACTORY. SINCE THE GOODS ARE KEPT IN THE FACTORY ITSELF THE ASSESSEE IS NOT LIABLE TO PAY E XCISE DUTY. REFERRING TO THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT IN THE CA SE OF CIT V. D AND H SECHERON ELECTRODES PVT. LTD. (2008) 173 TAXMAN 188 THE LEARNED COUNSEL SUBMITTED THAT WHEN THE GOODS DID NOT LEAVE THE PRE MISES AND THE EXCISE DUTY WAS NOT PAID THE EXCISE DUTY PAYABLE CANNOT BE ADD ED TO THE VALUE OF THE GOODS. THE LEARNED COUNSEL ALSO PLACED RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS V. CIT (20 00) 245 ITR 128 AND SUBMITTED THAT IF A BUSINESS LIABILITY HAS DEFINITE LY ARISEN IN THE ACCOUNTING YEAR THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABIL ITY MAY HAVE TO BE QUANTIFIED AND DECIDED AT A FUTURE DATE. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE THAT A RISES FOR CONSIDERATION IS ADDITION OF EXCISE DUTY PAYABLE WHILE VALUING THE C LOSING STOCK. THIS ISSUE WAS CONSIDERED BY THE MADHYA PRADESH HIGH COURT IN THE CASE OF D AND H SECHERON ELECTRODES PVT. LTD. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT. THE HIGH COURT AFTER CO NSIDERING THE PROVISIONS OF SEC. 44A OF THE INCOME-TAX ACT AND THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V. BRITISH PAINTS INDIA LTD. (1991) 188 ITR 44 FOUND THAT WHEN THE TAX DUTY OR FEE IS ACTUALLY PAID OR INCURRED BY THE ASS ESSEE TO BRING THE GOODS TO THE 3 PLACE OF ITS LOCATION THE SAID AMOUNT FORMS PART O F THE VALUE. THE EXCISE DUTY WAS NOT PAID BY THE ASSESSEE ON THE GOODS IN STOCK AS THE GOODS DID NOT LEAVE THE PREMISES. THEREFORE THE MADHYA PRADESH HIGH CO URT FOUND THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE ASSESSING OFFIC ER IN ADDING THE EXCISE DUTY TO THE PRICE OF THE RAW MATERIAL IN COMPUTING THE VALU E OF THE GOODS. IN THIS CASE ALSO NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE GOODS IN STOCK LEFT THE PREMISES. IT IS ALSO NOT THE CASE OF THE REVENU E THAT THE FINISHED GOODS WERE TAKEN OUT OF THE FACTORY PREMISES. IN THOSE CI RCUMSTANCES IN OUR OPINION THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THIS CASE. SINCE THE MADHYA PRADESH HIGH COURT HAS TAKEN INTO CONSIDERATION THE PROVISIONS OF SEC. 44A AND ALSO T HE JUDGMENT OF THE APEX COURT IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUP RA) IN OUR OPINION THE CIT (A) HAS RIGHTLY DIRECTED THE AO TO EXCLUDE THE EXCISE D UTY PAYABLE ON THE BASIS OF THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT. THER EFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCO RDINGLY THE SAME IS CONFIRMED. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 29-1-10. SD SD (CHANDRA POOJARI) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD 29TH JANUARY 2010. RRRAO. 4 COPY OF THE ORDER FORWARDED TO:- 1. SNF (INDIA) PVT. LTD. H.NO.C-20 PANCHAVAI TOWNSHI P AKKIREDDYPALEM BHPV POST VISAKHAPATNAM 530 012. 2. DCIT CIRCLE 3(2) HYDERABAD. 3. CIT III HYDERABAD. 4. CIT (A) IV HYDERABAD. 5. DR ITAT HYDERABAD.