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Income Tax Appellate Tribunal, BENCH “C”,MUMBAI
Before: SHRI B.R.BASKARAN & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
This appeal u/s 253 of the Income-tax Act (‘Act’) is directed by Revenue against the order of Ld. Commissioner of Income-tax-22 (for short ‘the CIT(A)-22), Mumbai dated 10.12.2014 for Assessment Year (AY) 2010-11. The Revenue has raised the following Grounds of appeal: 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s.145A of the Act by the A.O.". 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding in not applying principles laid down by the Hon'ble ITAT in the case of M/s. Hawkins Cooker Ltd. and not considering the guidelines of ICAI that the adjustment made u/s.145A in cases where exclusive method is followed will be revenue neutral". 3(i) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.l0,00,00,000/- made by the A.O. on account of customs duty expense." 3(ii) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in admitting and not remanding the additional evidence 2 M/s Classic Marble Co. Pvt. Ltd. furnished by the assessee to the A.O. and thereby violated the provisions of Rule 46A of I.T. Rules." 4. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal.
Brief facts of the case are that the assessee filed its return of income for relevant AY on 27.09.2011 declaring total income of Rs. Nil. The assessment u/s 143(3) of the Act was completed on 13.03.2013. In the assessment order, the Assessing Officer (AO) made the disallowance u/s 145A of Rs. 3,80,91,536/- and further disallowance on account of custom duty expenses of Rs. 10 Crore. On appeal by the assessee, ld. CIT(A) deleted both the addition/disallowance. Thus, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us.
We have heard the ld. DR for Revenue and the ld AR for assessee and perused the material available on record. The ld. DR for the Revenue argued that assessee has not given any details of challan of various Excise duty paid on raw-materials and was filed only before the ld. CIT(A). The ld. CIT(A) admitted the additional evidence without seeking any remand report from the AO. On the other hand the ld. AR of the assessee argued that the Revenue has basically raised two grounds of appeal
, first ground of appeal in respect of addition made u/s 145A and other the disallowance on account of custom duty expenses and both the grounds of appeal are covered in favour of assessee. The ld. AR of the assessee further argued that all the details and evidence including challans were submitted before the AO as well.
4. We have considered the rival contentions of the parties and gone through the orders of authorities below. First and the Second Ground of appeal relates to deleting the addition made u/s 145A of the Act. We have seen that the Co-ordinate bench of this Tribunal in M/s Classic Marble Co. Ltd. vs. DCIT in dated 21.09.2016 relating to AY 2009-10 considered the almost identical issue and made the following order: "
Rival contentions have been heard and record perused. We have also deliberated on the judicial pronouncements referred by AO and CIT(A) in his order as well as cited by ld. AR and DR during the course of hearing before us, in the context of factual matrix of the case. From the record we found that assessee used to pay custom duty on import of raw marbles blocks, which is based on its weight. The custom duty paid on these blocks include a component of CENVAT, which assessee is entitled to take a credit for set-off, 3 M/s Classic Marble Co. Pvt. Ltd. under "inverted duty structure". The CIT(A) has categorically recorded a finding to the effect that excise duty paid on final product was less than the taxes paid on the raw materials, the assessee was always left with huge balances in CENVAT Credit Receivable Account. However, the AO has made addition on the assumption that input is equal to output through rate of Excise Duty on the opening stock/purchases of raw material should be equal to the rate of Excise Duty on value of consumption of raw materials/closing stock of raw materials. Since the duty paid by the assessee on raw materials is much more than the duty payable on final products, the hypothetical equation drawn by the AO was not applicable to the facts of the present case. The categorical finding has also been recorded by the CIT(A) to the effect that because of "inverted duty structure" huge balance has been accumulated in the CENVAT Credit Receivable Account, hence, the assessee's case is exception to the general rule. The CIT(A) is also dealt with the decision of the Tribunal in the case of Hawkins Cooker Ltd. and after calling the facts and figures of the assessee, came to the conclusion it that formula laid down in the case of Hawkins Cooker Ltd., is not applicable to the facts of this case. The CIT(A) also taken into consideration increase in case of opening stock on inclusion of excise duty on which MODVAT credit is available/availed and also increase in purchase of raw materials, increase in sales of finished goods on inclusion of excise duty. The excise duty paid on sale of finished goods, as a result of inclusion in sales, were also taken into account. After giving detailed finding at para 3.3 to 3.12, the CIT(A) deleted the addition. The detailed finding recorded by CIT(A) after observing that assessee has been consistently following the same method of adjustment u/s.145A over the years has not been controverted by Id. DR by brining any positive material on record. The detailed working so arrived at by CIT(A) and the findings given there on are as per material on record, thus, do not require any interference on our part. Accordingly, we upheld the order of the CIT(A) for deleting the addition made by the AO u/s. 145A of the I.T. Act.” Thus, considering the decision of the coordinate bench, we find that that the Ground No.1 &2 of appeal raised by the revenue are covered against the revenue thus keeping in view the above discussed legal position, these Grounds of Appeal
raised by Revenue are dismissed.
5. Ground No.3 relates to deleting the disallowance of Rs. 10 Crore on account of Custom duty expenses. The ld. DR for the Revenue relied upon the order of AO and prayed that the order of ld. CIT(A) be set-aside and order of AO may be restored. On the other hand, ld. AR of the assessee argued that this ground of appeal is also covered in favour of assessee by the decision of special bench in DCIT vs. Glaxo Smith Healthcare Ltd. (2007) 16 SOT 134 (CHD.) (SB).
6. We have considered the rival contention of the parties and seen that this issue is also covered in favour of assessee by the decision of special bench wherein on the similar fact, the special bench held as under:
4 M/s Classic Marble Co. Pvt. Ltd. “In the case in hand, admittedly, the amount of customs duty of Rs. 3,56,451 was paid by the assessee in March, 1987, and, therefore, in terms of section 43B it is deductible only in the year in which it "is actually paid, i.e., for the assessment year 1987-88, irrespective of the year in which the assessee incurred the liability on the basis" of the" method of accounting regularly adopted by him and, therefore, in view of the clear provisions of law, the deduction cannot be allowed in the assessment year 1988-89. In our view, both the learned Income-tax Appellate Tribunal as well as the Commissioner of Income-tax (Appeals) fell in error in holding that since the assessee-firm debited the cost of goods imported including the duty, paid on delivery of goods in the trading account in April, 1987, and before the actual delivery of the goods, the value of the goods and customs duty paid thereon was shown in the balance-sheet as document in hands, therefore, the deduction should be allowed in the assessment year 1988-89, is contrary to the prescription of law. Section 43B in clear terms provides that the deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess or fee, shall be allowed only in computing the income referred to in section 28 of that previous year in which it was actually paid, irrespective of the previous year in which the liability was incurred for the payment of such sum as per the method of accounting regularly employed by the assessee. For the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty; cess, fee, etc., the year of payment is relevant and is only to be taken into account. The year in which the assessee incurred the liability to pay such tax, duty, etc., has no relevance and cannot be linked with the matter of giving benefit of deduction u/s 43B of the Act. In this view of the matter, the appeal deserves to be allowed.”
In view of the decision of the Special Bench this ground of appeal
is also covered against the revenue. Thus, we do not find any reason to interfere in the finding of ld. CIT(A).
8. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on this 25th November, 2016. Sd/- Sd/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 25/11/2016 S.K.PS Copy of the Order forwarded to :