IT: Value of excise duty can be included in closing stock, only if same is also included in opening stock
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[2013] 35 taxmann.com 448 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax, Allahabad
v.
Sangam Structurals Ltd.*
R.K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO. 344 OF 2009†
DECEMBER 7, 2012
Section 145A of the Income-tax Act, 1961 - Method of accounting - In certain cases [Closing stock] - Assessment year 2005-06 - Whether if value of excise duty has to be included in closing stock then value of excise duty has also to be included in opening stock - Held, yes [Paras 5 & 6][In favour of assessee]
Shambhu Chopra for the Appellant. S.K. Garg and Ashish Bansal for the Respondent.
ORDER
1. The present appeal has been filed under section 260 A of the Income Tax Act, 1961 (hereinafter referred to as the Act) against the order dated 20.03.2009 passed by the Income Tax Appellate Tribunal, Allahabad. The Commissioner of Income Tax, Allahabad has proposed the following questions said to be substantial questions of law arising out of the order passed by the Income Tax Appellate Tribunal, Allahabad.
| "1. | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in confirming the order of the CIT (A) in deleting the addition made by the A.O. Of Rs. 61,42,135/- on account of inclusion of Excise Duty in value of closing stock of raw material? | |
| 2. | Whether the A.O. Rightly included the Excise Duty in value of closing stock of raw material by invoking the provisions of section 145-A of the Act? | |
| 3. | Whether the Tribunal which is the last fact finding authority is justified in law in only relying upon the decisions referred by the assessee and in not taking into consideration the judgment relied upon by the A.O. For making the addition of Rs. 61,42,135/-? | |
| 4. | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in deleting the addition of Rs. 61,42,135/- in contravention of the provisions of section 145-A (1) (b) of the Act?" |
2. Briefly stated, the facts in brief, giving rise to the present appeal are as follows:
The appeal relates to the Assessment year 2005-06. The respondent assessee is a public limited company and is engaged in the business of manufacturing and galvanizing of towers of power supply, railways, etc. M.S. Channels, Angles, etc. The assessee filed its return of income tax on 28.10.2005 disclosing total income of Rs. 1,26,43,240/- The regular assessment proceedings were initiated and during the course of assessment proceedings, it transpired that the assessee had not included the amount of excise duty on the raw materials while valuing closing stock. The Assessing Officer, therefore, included the excise duty in the closing stock of raw materials and determined the income accordingly. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals) who vide order dated 14.08.2008 had accepted the contention of the assessee and had allowed the appeal. The Revenue feeling aggrieved preferred an appeal before the Tribunal. The Tribunal by the impugned order had dismissed the appeal.
3. We have heard Sri Shambhu Chopra, learned senior standing counsel for the Revenue and S/Sri S.K. Garg and Ashish Bansal, learned counsel, on behalf of respondent assessee.
4. Sri Chopra, learned counsel submitted that the Commissioner of Income Tax (Appeals) as also the Tribunal had erred in law in excluding the value of the excise duty while determining the closing stock of raw materials as it is well established that the excise duty forms part of the turnover and therefore it has to be included while valuing the closing stock. This principle does not admit of any doubt. But on the facts of the present case, it has no application for the simple reason that the Tribunal has found that the value of opening stock of raw material was disclosed after excluding the value of the excise duty and, therefore, the assessee was justified in not including the amount of excise duty while valuing the closing stock of raw materials.
5. The Tribunal was of the view that if the value of the excise duty has to be included in the closing stock then the value of excise duty has also to be included in the opening stock and in that event there would be no difference in the result of the value of the opening and closing stock.
6. We are in respectful agreement with the view expressed by the Tribunal and do not find any legal infirmity in the order passed by the Tribunal.
7. The appeal fails and is dismissed.
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