JCIT, (OSD), CIR-8(1), KOLKATA, KOLKATA vs. M/S ITC LTD., KOLKATA

ORDER Per Shri A.T.Varkey, JM

This appeal preferred by the revenue and the Cross Objection preferred by the assessee are against the order of Ld. CIT(A)-3, Kolkata dated 28.01.2016 for AY 2006-07. 2. The sole issue of revenue’s appeal is against the action of ld. CIT(A) in deleting the addition of Rs.276,12,87,066/- in respect of excise duty on closing stock.

“I have perused the AO's order for re-assessment and the Appellant's submission and the case laws that have been relied upon. The appellant Company has been following this practice of debiting profit and loss account by excise duty on sales. It, thus, passes a contra-entry to reverse the effect of excise duty component in opening and closing stock. Since both opening and closing stock were valued taking the component of excise duty, there is no net effect i.e. charge to the profit and loss account in respect of Excise Duty on closing stock . In the previous year, i.e. AY 2005-06 too, the issue had been reopened by the AO and my Ld. Predecessor CIT(A) had allowed the claim of the assessee on the basis of the following arguments:- "Since the closing stock is (mostly) cleared in the subsequent year prior to due date of filing of return of income, it claims deduction for excise duty on the clearance out of 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 IT Act, 1961. It is noted, that this issue was examined by Kolkata bench of Tribunal in in the case of DCIT Cir-I, Kolkata Vs. Exide Industries Ltd A. Y. 2006-07, in which addition for similar ground had been made. In its order dated 19.04.2013, the tribunal had, following its own order in the earlier assessment years, deleted the disallowance with the following observation:

We have heard the rival contentions and carefully perused the material available on record. On careful perusal of facts and circumstances of the case leading to disallowance u/s 43B of the Act by hypothetical holding a view that the claim of the assessee becomes double deduction has not been interpreted correctly by the AO for the impugned assessment year even when the matter has been adjudicated upon and deliberated by the Tribunal in assessee's own case for the immediately preceding assessment years beginning from 1996-97. We have also perused the computation made as contradictory in the order of AO who has misinterpreted the finding of the Tribunal in his own manner in so far he has discussed the decision of the ITAT Kolkata 8ench at page 4 of his order which required consideration was for the valuation of stock settles the issue as per the requirement of law whether could be challenged under the same law of claiming deduction for disallowance u/s. 43B of the Act as well. In so far as the Ld. DR has not been able to point out any specific defect in the accounting therein when on the judicial citations as relied upon and were before the Tribunal as well as the Hon'ble High Court the matter was actually clarified in so far as the valuation of stock is not part of the claim of excise duty remaining unpaid. Therefore, it was misapplication of facts and figures in the mind of the AO to have discovered double deduction for the purpose of disallowance u/s.43B of the Act.

Appeal filed by the department against the said order was dismissed by the Hon'ble Calcutta High Court in CIT, Kolkata-I Vs. Exide Industries Ltd vide order dated 20.01.2014. Thus, the issue is now covered in favour of the appellant by the order of jurisdictional bench of Hon'ble Tribunal, confirmed by Hon'ble High Court. In view of the same, the addition made by the A.O. by way of disallowance of excise duty payment amounting to Rs. 270,06,83,951/- is deleted." The relevant Para of the order of the jurisdictional High Court in the case of CIT Vs. Exide Industry (ITA No. 158/20I3) vide order dated 20.01.2014 is as under.- "The Ld. Advocate for the appellant fairly submitted all the points urged by the revenue in this appeal are now covered by the judgment of the Supreme Court or of the Tribunal itself. In view of this matter, there is nothing for us to examine.” The Appellant’s case is squarely covered by the Exide Industry’s case. Therefore, following the jurisdictional High Court’s order which in turn had followed the order of the Apex Court, the addition made by the AO by way of disallowance of excise duty payment to Rs.276,12,87,066/- is deleted.” Aggrieved, revenue is now in appeal before us.

ITC Ltd., AY 2006-07 08. We note that the deduction claimed in the earlier year i.e. AY 2005-06 of Rs.270,06,83,951/- was added back in the relevant assessment year under consideration i.e. AY 2006-07. This treatment is inconsonance with the ratio decidendi of the Hon’ble Supreme Court decision in Berger Paints India Ltd. Vs. CIT 266 ITR 99 (SC). We note that similar issues arose in subsequent year in assessee’s own case for AYs. 2009-10, 2008-09 and 2007-08 and the Tribunal held that the treatment carried out by the assessee in respect of the excise duty as legally tenable. We note that in identical case the decision of the Coodinate Bench of the Tribunal in the case of Exide Industries Ltd., AY 2006-07 was upheld by the Hon’ble jurisdictional High Court in vide order dated 20.01.2014 and the Ld. CIT(A) has relied on the Tribunal’s order in ordering deletion of the addition made by the AO. Therefore, we do not find any infirmity in the order passed by Ld. CIT(A) and we uphold the same. Therefore, appeal of revenue is dismissed.

Sr. Pvt. Secretary