THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. ARVIND LIMITED

By this Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act, 1961”), the appellant Revenue has challenged the order dated 30th September, 2021 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘B’ (for short “the Tribunal”) in ITA No.249/Ahd/2016 for the Assessment Year A.Y. 2010-11. The substantial question of law proposed in this Tax Appeal is as under : “Whether on facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the disallowance of Rs.6,51,16,385/- made on account of excise duty adjusted against securities premium account contrary to the provisions of Section 43B of the Act, which allow deduction of any tax, duty cess or fee only when such sum is actually paid by the assessee?”

During the assessment proceedings, the excise duty which was adjusted against securities premium account amounting to Rs.3,67,71,030/- and Rs.2,83,45,355/- was sought to be disallowed under Section 43B of the Act, 1961. On query, the assessee explained that such claim was not charged to the Profit & Loss account and it has been set off against the share premium account as per the claim of capital reduction sanctioned by the High Court of Gujarat vide order dated 15th February, 2013 and that being an item of Section 43B of the Act, 1961 has been claimed on payment basis.

However, the Assessing Officer was of the view that the assessee got credit of CENVAT credit but, actually, it has not made any payment during the year and therefore, the claim made by the assessee under Section 43B of the Act, 1961 was to be disallowed.

The Assessing

Being aggrieved, the assessee preferred appeal before the CIT(Appeals), who allowed the appeal of the assessee.

The Revenue preferred an appeal before the Appellate Tribunal. The Appellate Tribunal, however, dismissed the appeal filed by the Revenue, holding as under :

In view of the concurrent findings arrived at by the CIT (Appeals) and the Tribunal, we are of the opinion that there is no legal infirmity in the impugned orders of the Tribunal as the Tribunal has come to the finding of fact considering the elaborate discussion made by the CIT in its order holding that the assessee was required to pay the excise duty of Rs.6,51,16,385/- on the ground that in earlier assessment year it had wrongly taken CENVAT credit pertaining to input used for generation of electricity which was sold to outside parties and the same was settled by utilizing CENVAT credit during the year under consideration by following exclusive method of accounting as purchases and sales in the P & L Account are reflected at net of excise duties. The Tribunal has found that the CENVAT credit receivable is shown in the Balance Sheet under the head loans and advances as the excise authority held that CENVAT credit on fuel used for generation of electricity supplied to the outside entities is not available, the assessee adjusted the CENVAT credit receivable against the CENVAT credit payable/excise duty by exercising option to set off CENVAT credit against excise liability, which amounts to payment of excise duty, and therefore, the assessee is rightly entitled to deduction under Section 43B of the Act, 1961, which provides that unless the taxes or duties are paid actually before the due date of return, the same would not be available as deduction. The Tribunal, therefore, relying upon the record of CENVAT credit in RG 23 registered as per the excise law and adjustment of CENVAT credit, which is one mode of payment of excise duty under Excise Rule, has rightly held that there was payment of excise duty and therefore, the assessee was entitled to deduction under Section 43B of the Act, 1961. 9. In view of above finding of facts arrived at by the CIT (Appeals) as well as the Tribunal, there is no legal infirmity in the impugned order and therefore, no question of law, much less any substantial question of law, proposed otherwise, arises from the impugned order. The present Tax Appeal accordingly stands dismissed. (A.J.DESAI, J) (BHARGAV D. KARIA, J) Dolly