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Income Tax Appellate Tribunal, “D” BENCH: 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.
Brief facts of the case are that the assessee is engaged in manufacture and sale of tobacco products, consumer goods, hotel business etc. The assessee filed its return of income on 27.11.2006 declaring total income of Rs.3041,42,53,870/- but subsequently filed revised return on 19.03.2008 declaring total income of Rs.3040,47,74,966/-. Consequently, assessment was completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) on 31.12.2009 at a total income of Rs.3126,11,87,690/-. Subsequently, the AO was of the opinion that the assessee’s claim of double deduction in respect of excise duty on closing stock resulted in under assessment of income of Rs.276,12,87,066/- . Accordingly, notice u/s. 148 of the Act was issued on 01.03.2013 and later on notices u/s. 143(2) and 142(1) of the Act were issued on 11.09.2013 and 06.02.2014 along with the reasons recorded for proceedings u/s. 147 was issued. Before the AO, on behalf of the assessee a detailed submission vide letter dated 03.03.2014 was submitted and it was reproduced by the AO in his assessment order. The explanation submitted by the assessee was not found tenable by the AO, and, therefore, he observed that since the deduction of excise duty on closing stock was already allowed in the P&L account, further deduction of the excise duty on closing stock in the computation of income u/s. 43B of the Act is not allowable and accordingly, he added back the amount of Rs.276.13 crores to the income of the assessee. On appeal, the Ld. CIT(A) while deleting the addition has held as under:
“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.
We have heard rival submissions and gone through facts and circumstances of the case. We find that the excise duty paid on closing stock amounting to Rs.276,12,87,066/- was claimed in the revised return by the assessee. The PWC certificate confirmed the payment before the return filing date along with detail justification. Since there was no charge in the audited P&L Account in respect of the said excise duty on closing stock for the FY ended on 31.03.2006, a separate deduction u/s. 43B of the Act was claimed for Rs.276,12,87,066/- and the said amount was added back in the following year i.e. AY 2007-
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.
The Cross Objection filed by the assessee is dismissed as not pressed.
In the result, both the appeal of revenue and CO of assessee are dismissed. Order is pronounced in the open court on 10th January, 2018 Sd/- Sd/- (M. Balaganesh) (Aby. T. Varkey) Accountant Member Judicial Member Dated :10th January, 2018 Jd.(Sr.P.S.) Copy of the order forwarded to: Appellant – JCIT(OSD), Circle-8(1), Kolkata 1. Respondent – M/s. ITC Limited, 37, Chowringhee Road, Kolkata-71. 2 The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,
Sr. Pvt. Secretary