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Facts
The revenue appealed against the CIT(A)'s order for AY 2017-18, which deleted an adjustment made by the AO in a rectification order under Section 154 read with Section 143(3). The AO had added an excise duty refund of Rs. 549.64 Lacs to the assessee's book profits under Section 115JB. The assessee contended that the excise duty was never claimed as an expenditure in the Profit & Loss Account but was part of CENVAT credit receivable, thus the refund could not be added.
Held
The Tribunal noted that the assessee's challenge to the excise duty refund addition under normal provisions was still pending. To ensure a consistent stand, the Tribunal restored the issue of adjustment of refund of excise duty under Section 115JB, along with the challenge under normal provisions, to the CIT(A) for re-adjudication in accordance with law.
Key Issues
Whether the refund of excise duty, which was not credited to the Profit & Loss Account but included in CENVAT credit receivable, should be added back for computing book profits under Section 115JB of the Income Tax Act.
Sections Cited
154, 143(3), 115JB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: HON’BLE SHRI ABY T. VARKEY, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा*रण वष* / Assessment Year: 2017-18) Income Tax Officer M/s. Woosu Automotive Pvt. Ltd. बनाम/ Corporate Ward-3(3), #130, Narasingapuram Village, Vs. Wanaparthy Block, Chennai. Perampakkam Post, Thiruvallur-631 402. �थायीलेखासं./जीआइआरसं./PAN/TAN No. AAACW-7285-L (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri Nilay Baran Som (CIT)-Ld. DR ��थ�कीओरसे/Respondent by : Shri Shreyansh Kumar Kochar (CA) - Ld. AR सुनवाईकीतारीख/Date of Hearing : 21-01-2025 घोषणाकीतारीख /Date of Pronouncement : 03-02-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by revenue for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 13-06- 2024 in the matter of a rectification order passed by Ld. Assessing Officer [AO] u/s. 154 r.w.s 143(3) of the Act on 30-03-2022. The grounds taken by the revenue read as under:- 1. The order of the ld. CIT (A) is contrary to the facts and circumstances of the case.
2. The ld. CIT(A) erred in deleting the adjustment made by the Assessing Officer on account of refund of Excise duty while computing book profits u/s.115JB of the Act of Rs.5,49,64,786.
3. The ld. CIT(A) erred in accepting the contention of the assessee that profit and loss account was prepared by the assessee in accordance with the provisions of sub section 2 of section 115JB of the Act. 3.1. The ld. CIT (A) failed to appreciate the provisions of [Schedule III] to the 55 [Companies Act, 2013 (18 of 2013)] wherein it has been stated profit and loss account must incorporate all debits and credits.
4. The ld. CIT(A) erred in earning to the conclusion that since the refund of excise duty was not credited in profit and loss account thus AO was not empowered to make adjustments as per explanation 1 to section 115JB of the Act, "without appreciating that assessee was in violation of sub-section 2 of section 115JB of the Act.
As is evident, the sole issue that arises for our consideration is adjustment of excise duty refund while computing book profits u/s 115JB. Having heard rival submissions, the appeal is disposed-off as under.
From the facts, it emerges that an assessment was framed against the assessee u/s 143(3) on 21-12-2019 wherein the refund of excise duty for Rs.549.64 Lacs was added while computing income under normal provisions. Subsequently, Ld. AO rectified the order u/s 154 on 30-03-2022 to make certain adjustment. One of the adjustments was refund of excise duty for Rs.549.64 Lacs while computing book profits u/s 115JB. Despite notice, the assessee failed to make any effective representation during rectification proceedings.
Aggrieved by aforesaid rectification, the assessee challenged the adjustments made in rectification order before Ld. CIT(A). On the issue of refund of excise duty, it was submitted that excise duty paid on goods was not shown as expenditure in the profit & Loss Account but the same was included in the cenvat credit receivable account which was shown as ‘current assets’ in the Balance Sheet. Since the excise duty was never claimed as deduction, the refund so received could not be added u/s 115JB. As per computation mechanism, only specified additions and deletions were to be made to the profits shown in the Profit & Loss Account as enumerated in Explanation-1 to Sec.115JB of the Act. The Ld. AO made adjustment of refund of excise duty which do not fall under specified adjustments. Concurring with the same, Ld. CIT(A) directed Ld AO to exclude the same u/s 115JB. Aggrieved, the revenue is in further appeal before us.
It could be seen that the assessee is following exclusive method to accounting for excise duty in its books of accounts. Another method to account the same is inclusive method wherein excise duty components are routed through Profit & Loss Account. Whatever method is followed by the assessee, the same would not have any impact on the final profit / loss for the year. Both methods are recognized method of accounting. However, the assessee following inclusive method and the assessee following exclusive method could not be treated differently for the purpose of computation of Book Profits u/s 115JB. It could not be said that adjustment u/s 115JB would be made only for the assessee following inclusive method whereas no such adjustment could be made for assessee following exclusive method of accounting. Therefore, to say that this expenditure is not routed through Profit & Loss Account is not correct proposition since the assessee is free to follow any of the method. Nevertheless, the computational mechanism u/s 115JB under both the methods would be similar.
The Ld. AR has stated that the assessee has also challenged the addition of refund of excise duty under normal provisions before first appellate authority which is pending for adjudication. To enable the revenue to take a consistent stand in the matter, this issue of adjustment of refund of excise duty u/s 115JB also stands restored back to the file of Ld. CIT(A) for disposal of both the appeals together. The Ld. CIT(A) is directed to re-adjudicate both the appeals in accordance with law.
The appeal stand allowed for statistical purposes. Order pronounced on 3rd February, 2025