Commissioner Of Income Tax Chennai v. Dynavision Ltd.,Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 24.03.2015CORAMTHE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MR. JUSTICE R.KARUPPIAH Commissioner of Income Tax Chennai... Appellant/ Appellant- Vs - Dynavision Ltd.,Chennai. .. Respondent/ Respondent Appeal filed under Section 260A of the Income Tax Act againstthe order dated 24.01.2002 passed by the Income Tax AppellateTribunal, 'C' Bench, Chennai, made in ITA No.1534(Mds)/93 for theassessment year 1988-89. against the order of the Commissioner of Income Tax (Appeals) IMadras dated 19.1.1993 in Appeal Nos.280-282/90-91& 87/91-92 whichwere filed against the order of the Assistant Commissioner centralCircle (II) (1) Madras-34 dated 22.3.1991 and made in P.A.No.47-041-CT-0595.For Appellant: Mr. T.Ravikumar Standing CounselJUDGMENT (DELIVERED BY R.SUDHAKAR, J.) This Tax Case (Appeals) is filed by the Revenue as againstthe order of the Income Tax Appellate Tribunal relating to theassessment year 1988-89 raising the following substantial questionof law:"Whether in the facts and circumstances ofthe case, the Tribunal was justified in law in holdingthat excise duty paid/payable will not form part ofclosing stock?" 2. The brief facts of the case are as follows:The assessee is engaged in the business of manufacture and sale https://hcservices.ecourts.gov.in/hcservices/ of television sets. For the assessment year 1988-89, the AssessingOfficer, while computing the assessment under Section 143(3) foundthat the assessee had not included in the closing stock the elementof excise duty. Accordingly, the he added the said sum to theincome of the assessee on the ground of undervaluation of closingstock. Aggrieved by the same, the assessee preferred an appealbefore Commissioner of Income Tax (Appeals), who allowed the appealby directing the Assessing Officer to allow the relief. Aggrievedby the said order, the Revenue preferred an appeal before theTribunal. The Tribunal by following the decision in respect ofassessee's own case pertaining to the previous assessment yeardismissed the appeal. As against the same, the Revenue is beforeus. 3. Learned Standing Counsel appearing for the Revenue fairlyconceded before this Court that the issue involved in the presentcase in respect of the very same assessee has been decided againstthe Revenue in the decision reported in [2012] 348 ITR 380 (SC)(Commissioner of Income-Tax V. Dynavision Ltd.), wherein on asimilar question of law raised, the Supreme Court held as follows: " 3. At the outset, it may be stated, that, it is 3. Learned Standing Counsel appearing for the Revenue fairlyconceded before this Court that the issue involved in the presentcase in respect of the very same assessee has been decided againstthe Revenue in the decision reported in [2012] 348 ITR 380 (SC)(Commissioner of Income-Tax V. Dynavision Ltd.), wherein on asimilar question of law raised, the Supreme Court held as follows: " 3. At the outset, it may be stated, that, it is not in dispute that the assessee has been followingconsistently the method of valuation of closing stockwhich is "cost or market price, whichever is lower."Moreover, the Assessing Officer conceded before theCommissioner of Income-tax (Appeals) that he revalued theclosing stock without making any adjustment to theopening stock (see page 50 of the paper book). Lastly,though under section 3 of the Central Excise Act, 1944,the levy of excise duty is on the manufacture of thefinished product the same is quantified and collected onthe value (i.e. selling price). Before concluding, we mayrely on the judgment of this court in the case ofChainrup Sampatram v. CIT reported in [1953] 24 ITR 481(SC) in which it has been held that, "valuation of unsoldstock at the close of the accounting period was anecessary part of the process of determining the tradingresults of that period. It cannot be regarded as sourceof profits. That, the true purpose of crediting the valueof unsold stock is to balance the cost of the goodsentered on the other side of the account at the time ofthe purchase, so that on cancelling out of the entriesrelating to the same stock from both sides of the accountwould leave only the transactions in which actual salesin the course of the year has taken place and therebyshowing the profit or loss actually realized on theyear's trading. The entry for stock which appears in thetrading account is intended to cancel the charge for thegoods bought which have remained unsold which should represent the cost of the goods". (see also : para. 8 ofthe judgment of this court in the case of CIT v.Hindustan Zinc Ltd. reported in [2007] 291 ITR 391 (SC). 4. For the above reasons, we hold, that, the addition ofRs. 16,39,000 to the income of the assessee on the groundof undervaluation of the closing stock was wrong and thatthe order of the Commissioner of Income-tax (Appeals) isaccordingly upheld. Consequently, this civil appeal filedby the Department is dismissed with no order as tocosts." 4. In view of the above, following the above-said decision ofthe Supreme Court in respect of the very same assessee for theassessment year 1987-88, the question of law is answered against theRevenue and in favour of the assessee. This Tax Case (Appeal)stands dismissed. No costs. sl Sd/- Asst.Registrar (CS III) /true copy/ Sub Asst. Registrar To 1. The Assistant Registrar Income Tax Appellate Tribunal, 'C' Bench, Rajaji Bhavan III Floor, Besant Nagar, Chennai.90 2. The Commissioner of Income Tax (Appeals) - I, Madras. 3. The Assistant Commissioner, Central Circle II(1), Madras - 34. 1 cc to Mr.T. Ravikumar, Advocate, Sr. 16373 T.C.A. NO. 148 OF 2015 UG (CO)kk 11/3