BHARAT INSULATION COMPANY (I) LTD,MUMBAI vs. ASST CIT CEN CIR 31, MUMBAI

The assessee was engaged in the business of production of Winding Wire and Enameled Wire. During the year the assessee filed its return of income at Rs.23,165/- through e-filing.

The case of the assessee was selected for scrutiny and the ld. Assessing Officer (A.O.) assessed income at Rs.12,38,870/-by disallowing , inter alia, service tax of Rs.2,05,177/- and insurance claim of Rs.4,13,147 to the income of the assessee as prior expenses on the basis of tax audit report clause 22(b)(i) filed by the assessee by rejecting the plea of the assessee that the write offs relates to the instant year. The brief facts of the case are that the assessee wrote off service tax of Rs.2,05,177/-- and insurance claim not paid by the insurance companies of Rs.4,13,147/- against income during the year on the ground that these relates to the current year as the same were crystallized during the year though these pertain into earlier years.

The ld. CIT(A) confirmed the disallowance on account of service tax and insurance claim by holding that the assesee could not offer any valid explanation for such writing off during the year. The ld AR vehemently submitted that the service tax of Rs.2,05,177/- was written off, as credit of service tax was not available against such payment to the appellant. The ld. Counsel, however, submitted that the various

The ld. Counsel also pointed out that the assessee is required to incur many expenses which were liable for service tax and which are not directly connected to the manufacturer activity and therefore not allowed to be set off against the central excise duty and, thus, the same was written off during the previous year under consideration. In other words the as per the CENVAT input credit rules lays down as to when the credit of service tax can be availed and also the where the set off is not available . The ld counsel further submitted that service tax credit is only allowed when the expenses were incurred which are directly connected to manufacturing and not otherwise. As against the short insurance claim of Rs.4,13,147/-, the learned officer submitted that out of total claim of Rs.40,97,649/- made on 31st May, 2006, only Rs.36,84,503 was either received from Insurance Company or written off in the earlier years which means that Rs.4,13,147/- was also claimed from the insurance company but not admitted and therefore was ultimately written off in the instant year. It was also argued that the service tax of Rs.2,05,177/- and insurance claim of Rs.4,13,147/- were rightly claimed by the assessee as written off against the profit. The ld. counsel placed reliance on the decisions of Delhi High Court in the case of Commissioner of Income Tax Vs M/s. Excel Fashion Pvt Ltd (2007) 201 Taxman 216(Del) and finally prayed the additions sustained by CIT (A) may pleased to be deleted.

The ld. DR heavily relied on the order of the authorities below.

""यथ" / The Respondent 3. आयकर आयु"त(अपील) / The CIT(A) 4. आयकर आयु"त / CIT - concerned

"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard File आदेशानुसार/ BY ORDER,