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Income Tax Appellate Tribunal, ‘C’ BENCH : CHENNAI
Before: SHRI GEORGE MATHAN & SHRI INTURI RAMA RAO
आदेश / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER:
This is an appeal filed by the Assessee directed against the order of the Commissioner of Income Tax (Appeals), Puducherry
ITA No.1752/2016 :- 2 -: (‘CIT(A)’ for short) dated 29.03.2016 for the Assessment Year (AY) 2012-2013. The Assessee raised the following grounds of appeal: 2.
‘’1. The Order of the Learned Commissioner of Income Tax (Appeals) and that of the Assessing Officer is contrary to the law, facts and circumstances of the case and in any case violative of the principles of equity and natural justice.
Deduction u/s 43B of the Act 2. The Learned Commissioner of Income tax (Appeals) has erred in reducing the amount of Rs. 69,89,240/-received as security deposit from a customer from the deduction eligible u/s 43B of the Income Tax Act, 1961 for the excise duty paid under protest.
3. The Learned Commissioner of Income tax (Appeals) has erred in denying the benefit of deduction for the reason that any amount received from the customer against the excise duty paid under protest will have to be set off against the deduction eligible u/s 43B.
The Learned Commissioner of Income tax (Appeals) erred in setting off the amount received from the customer of the appellant against the excise duty paid under protest when the same was only a security deposit and shown under current liabilities.
The Learned Commissioner of Income tax (Appeals) erred in not considering the decision of the Honorable High court in the appellant’s own case that the disputed excise duty payable is allowable as deduction u/s 43B as well as u/s 37 of the Act.
The Learned Commissioner of Income tax (Appeals) erred in modifying the allowability of the disputed excise duty payable u/s 43B of the act by denying to the extent received from the customer when the distributorship of the company was in place from March 2002 to March 2009 and was discontinued after that.
The Learned Commissioner of Income tax (Appeals) erred in restricting the claim of the appellant to the extent of the amount received from the customer on the ground that the ITA No.1752/2016 :- 3 -:
amount was kept as current liability and not mentioned as security deposit.
OTHERS:
For these and such other grounds as may be raised during the course of hearing’’.
The brief facts of the case are as under:
The appellant namely M/s. DXN Herbal Manufacturing India Pvt.
Ltd. is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing ayurvedic drugs.The return of income for the AY 2012-13 was filed on 28.09.2012 disclosing total loss of Rs.42,41,829/- under normal provisions of the Income Tax Act, 1961 (in short ‘’the Act’’) and book profits of �1,22,56,032/- under the provisions of Section 115JB of the Act. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Circle-1, Pondicherry.
(hereinafter called “AO”) vide order dated 30.01.2015 passed u/s. 143(3) of the Act after making disallowance of �1,67,62,544/- under the provisions of Section 43B of the Act on the ground that liability of excise duty has not been crystallized. The reasons given by the Assessing Officer for the above disallowance are twofold. (i) Payment of excise duty was shown as advance in the books of accounts (ii) No order of excise duty proving the existence of liability was filed.
ITA No.1752/2016 :- 4 -:
Being aggrieved by the above assessment order, assessee 4. preferred an appeal before the ld. Commissioner of Income Tax (Appeals). The ld. CIT(A) considering the fact that the appellant had received a sum of �1,45,67,568/- from one M/s. Roshan Commercial Private Limited, who is erstwhile distributor towards reimbursement of excise duty liability directed the Assessing Officer with the following findings.
‘’6.25 Now, I decide the quantum of addition to be made on account of reimbursements. The assessee has been paying the dispu1ted amount of excise duty and also been. getting deduction under the Income-tax Act either u/s 37 or u/s 43B of the Act in the earlier years. In the ear1ir AY 2009-10, the assessee has claimed an amount of Rs.3,30,39,169/- in the statement of income which was allowed in appeal by CIT(A)/ITAT/HC. In this year, the assessee has claimed deduction of Rs. 1,67,62,546/- towards disputed excise duty paid which is allowed in this appeal u/s 37 r.w.s 43B of the Act. The assessee has submitted that the disputed excise duty amount related to previous years is Rs.1,17,00,000/- and related to this assessment year is Rs.50,62,546/-. Therefore, the amount of Rs. 75,78,328/- received from RCPTL towards disputed excise duty liability is related to this amount of Rs.l,17,00,000/-. Therefore, I order that the amount of Rs.75,78,328/- should be added and be set off against the disputed excise duty of Rs.1,67,62,546/- as determined and allowed u/s 37 r.w.s 43B of the Act as per paragraph 6.21 and only the net amount of Rs. 9l,84,218/- shall be eligible for deduction in its computation of taxable income.
6.26 Even on this amount of Rs.91,42,218/-, if the assessée has received any amount which is related to disputed excise duty from its customers/distributors then, only the net of the amount after set off shall be eligible for deduction either u/s 37 or u/s 43B of the Act, a the case may be. It is also held that amount of Rs.69,89,240/- received from RCPL during the assessment year
ITA No.1752/2016 :- 5 -:
2011-12 shall be assessable in that assessment year for the reasons mentioned in this order.
6.27 In the result, the amount of net deletion decided in this appeal is Rs.91,84,218/- for AY2012-13 computed as under:
Disallowance of disputed excise duty made u/s 43B deleted u/s 37 r.w.s (-)1,67,62,546 43B of the Act Add: Reimbursement received from RCPL 69,89,240
Net amount of deletion (-)91,42,218 The sum and substance of the ld. CIT(A) order is that the expenditure of excise duty is allowable on payment basis u/s.43B of the Act and the amount reimbursed from the distributor is taxable. Accordingly, directed the Assessing Officer to allow the balance amount.
5. Being aggrieved by the order of the ld. CIT(A), the appellant is in appeal before us in the present appeal. It is argued that the amount received from the distributor M/s. Roshan Commercial Private Limited was only in the nature of deposit and in support of this, he filed confirmation letter from the said party and hence the amount cannot be tax as income in the hands of the assessee.
On the other hand, the ld. Sr. Departmental Representative 6. placed reliance on the orders of lower authorities.
ITA No.1752/2016 :- 6 -:
We heard the rival submissions and perused the material on 7. record. The settled legal position of law is that liability to pay tax arises by virtue of the charging section alone though quantification of the amount payable is postponed, as held by the Supreme Court in the case of Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 and then again in the case of Setu Parvati Bayi v. CWT [1968] 69 ITR 864 . Similar was the view of the Federal Court in the case of Chatturam v. CIT [1947] 15 ITR 302, which relied upon the decision of the House of Lords in Whitney v. IRC [1925] 10 TC 88 (HL), that liability to tax does not depend on assessment; that ex hypothesis has already been fixed : the assessment order only quantifies the liability which is already definitely and finally created by the charging sections [Ishwarlal Parekh v. State of Maharashtra [1968] 70 ITR 95 (SC)].
Therefore the fact that in the absence of an assessment order or absences of entries in the books of accounts is no bar to claim as deduction of excise duty of tax. The excise duty is attracted the movement the activity of manufacturing is complete. Therefore crystallization of liability is established in the year of manufacturing.
Admittedly, during the year under consideration, the goods were not manufactured. However, since the excise duty is allowable as deduction on payment basis under the provisions of Section 43B of the Act, though the liability is pertaining to earlier years, the excise duty
ITA No.1752/2016 :- 7 -: paid is allowable as deduction under the provisions of Section 43B of the Act. Similarly, the amount received towards reimbursement of excise duty from its distributor M/s. Roshan Commercial Private Limited is a trading receipt which is taxable under the provisions of Section 41 of the Act in the light of the judgment of Hon’ble Supreme Court in the case of Chowringhee Sales Bureau P. Ltd vs. CIT, 87 ITR 542. In the light of the above legal positions, we do not find any reason to interfere with the order of ld. CIT(A) and accordingly, the appeal filed by the assessee is dismissed.
In the result, the appeal filed by the assessee stands 8. dismissed.
Order pronounced on 8th day of August, 2019, at Chennai.