C.I.T,NEW DELHI vs. M/S MARUTI UDYOG LTD

C.A. No.-007272-007272 - 2009Supreme Court28 October 20092 pages
For Respondent: MEERA MATHUR
AI SummaryAllowed

What did the Supreme Court hold?

The Supreme Court directed the High Court to decide two specific questions of law under Section 260A of the Income Tax Act, 1961, which had arisen for determination but were not formulated by the High Court. These questions concerned whether unutilized MODVAT credit adjusted in the assessment year should be treated as actual payment of excise duty under Section 43B, and whether customs duty paid and allowed as a deduction under Section 43B could be added to the value of closing stock. The Supreme Court affirmed the Tribunal's view that depreciation on account of enhanced cost due to foreign exchange rate fluctuation was admissible for deduction under Section 37, referencing its judgment in CIT v. Woodward Governor India P. Ltd. The Court also stated that the issue of whether interest and miscellaneous income is taxable under the head 'Income from Other Sources' under Section 56 did not need examination in this case, as the Department had failed to make submissions on this point before the Tribunal. The Civil Appeal was allowed.

What were the facts?

The Commissioner of Income Tax, New Delhi (the Revenue) filed a Civil Appeal before the Supreme Court of India arising out of an order of the Income Tax Appellate Tribunal (ITAT). The assessee is M/s Maruti Udyog Ltd. The Revenue's grievance was that the High Court, while admitting the appeal and framing questions of law under Section 260A of the Income Tax Act, 1961, had not formulated two specific questions for decision. These questions pertained to the treatment of unutilized MODVAT credit adjusted in the assessment year and the addition of customs duty paid and allowed as a deduction under Section 43B to the value of closing stock. The Supreme Court noted that the Tribunal had correctly held depreciation on enhanced cost due to foreign exchange fluctuation to be admissible under Section 37, citing its own judgment in CIT v. Woodward Governor India P. Ltd. The Court also noted that the issue of interest and miscellaneous income being taxable under Section 56 was not required to be examined as the Revenue had not made submissions on this point before the Tribunal.

What were the issues?

1. Whether the Tribunal was right in law in holding that unutilized MODVAT credit of earlier years adjusted in the assessment year in question should be treated as actual payment of excise duty under Section 43B of the Income Tax Act, 1961. 2. Whether the Tribunal was right in law in holding that customs duty paid and allowed as a deduction under Section 43B cannot be added to the value of the closing stock. Assessee's Contentions: The judgment does not record any specific contentions made by the assessee before the Supreme Court. However, the issues framed indicate that the assessee likely argued that unutilized MODVAT credit should be treated as actual payment of excise duty and that customs duty allowed as a deduction under Section 43B should not be added to closing stock. Revenue's Contentions: The Revenue contended that the High Court had failed to formulate two specific questions of law for decision under Section 260A, which arose for determination. These questions related to the treatment of unutilized MODVAT credit and customs duty in relation to Section 43B and closing stock valuation. The Revenue also succeeded on the point that the High Court should decide these questions.

Which sections of the Income-tax Act were involved?

Section 43B,Section 37,Section 56,Section 260A

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Cause title — parties, addresses and appearances
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No.7272 of 2009 (arising out of SLP (C) No. 5677/09) The Commissioner of Income Tax, New Delhi …Appellant(s) versus M/s Maruti Udyog Ltd. … Respondent

O R D E R By consent, the matter is taken up and disposed of.

Delay condoned.

Leave granted.

Though the High Court has admitted the appeal and though it has framed questions of law, it is the grievance of the Department that the following questions have also arisen for determination by the High Court and they have not been formulated for decision under Section 260A of the Income Tax Act, 1961. The said questions are as follows: “(i)

Whether the Tribunal was right in law in holding that unutilized MODVAT credit of earlier years adjusted in the assessment year in question should be treated as actual payment of excise duty under Section 43B of the Income Tax Act, 1961. ...2/- (ii)

Whether the Tribunal was right in law in holding that customs duty paid and allowed as a deduction under Section 43B cannot be added to the value of the closing stock.”

To this extent, the Department succ

The order continues below.

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