DCIT, CIR-5(1), KOLKATA, KOLKATA vs. M/S KESORAM INDUSTRIES LTD., KOLKATA

ORDER Per Shri A.T.Varkey, JM This appeal preferred by revenue is against the order of Ld. CIT(A)-17, Kolkata dated 06.01.2016 for AY 2003-04.

Kesoram Industries Ltd.,AY- 2003-04

“3. The second issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the addition made towards Excise Duty on Closing Stock of finished goods amounting to Rs.5,40,34,736/- in the facts and circumstances of the case.” 4. So, we note that the issue is identical and the Tribunal has upheld the order of Ld. CIT(A) vide para 3.4 of its order by holding as under:

“3.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that this addition had been made without appreciating the accounting treatment and the tax treatment given by the assessee in the computation of total income. We find that the addition made is without any basis and without appreciating the facts and requirements of law. We find that the Ld. CIT(A) had duly appreciated the same and hence we do not find any infirmity in the order of the Ld. CIT(A) in this regard. Accordingly, the Ground no. 2 raised by the revenue is dismissed.”

We note that the Ld. CIT(A) has deleted the addition by holding as under:

“3.2. Further, the assessee has claimed that the issue under consideration is covered by the order of Ld. CIT(Appeals)-VI in Appeal No. 119/13-14/CIT(A)-VI/Range-5/Kol dtd. 17.03.2014. A copy of the said order has been filed by the A/R along with the written submission. The operative para of the said order is reproduced as follows: "It is seen that the appellant is consistently following the aforesaid method of accounting for excise duty on stock and claim of deduction thereof over the years. It credits sales net of excise duty to its trading account and includes excise duty in valuation of stock (opening and closing) in accordance with section 145A of the I T. Act, 1961. Since the closing stock is cleared in the subsequent year prior to due date of filing of return of income, it claims deduction for excise duty on the same as per proviso of section 43B of the IT. Act, 1961. As and when it files return of income for the subsequent year, it adds back excise duty on opening stock as the same had already been claimed as deduction in the return of the preceding year in form of excise duty on (the then) closing stock. I do not see as to how the same can be called claiming deduction doubly. In fact, the entire exercise is revenue neutral over the period of a few years. Even for a single year, the method appears to be in conformity with well accepted principle of accounting as well as the provision of section 145A and section 43B of the Income Tax Act, 1961. The issue came up for consideration before tribunal in the case of DCIT Circle-I, Kolkata vs. Exide Industries Ltd. where the assessee was following a similar system of accounting. In its decision in the said appeal, it has been held by Hon'ble tribunal that the accounting system being followed by the assessee did not amount to claiming double deduction. While delivering this decision, Hon'ble tribunal also referred to the decision of Supreme Court in the case of Berger, Paints (I) Ltd. 266 FIR 99. The ratio squarely applies on the appellant's case. Moreover, though the appellant has been following the same system consistently, no such addition has been made in the earlier years and the department has also accepted the same. Further, in the scrutiny assessment of the subsequent year i. e. A. Y. 2010-11 which was also completed around same time as the impugned order, no addition on the issue of excise duty on closing stock is stated to be made. Thus, the assessing officer has in the preceding as well as subsequent year accepted the system followed by the Kesoram Industries Ltd.,AY- 2003-04 appellant. Therefore, following the principle of consistency and taking into consideration the decision of Apex Court in the case of CIT vs. Radhasoami Satsang [193 ITR 321 (SC)], I am of the view that there was hardly any justification for disturbing the consistent and well-founded system of accounting followed by the appellant. Even otherwise, in view of the ratio given by jurisdictional bench of Hon'ble tribunal in the case of Exide Industries Ltd. (supra), it is to be held that there is no infirmity in the appellant's treatment of excise duty and the same does not result in double deduction. The addition of Rs.5,40,34,736/- is, therefore, deleted. " 3.3 Respectfully following the above order of Ld. CIT(Appeals)-Vl, Kolkata for A.Yr 2007-08 in the case of the assessee and the order of the Supreme Court in Berger Paints 266 ITR 99, the addition made in this case of Rs.5,66,83,746/- is hereby deleted.”

Sd/- Sd/- (P. M. Jagtap) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 7th March, 2018 Jd.(Sr.P.S.) Copy of the order forwarded to: