Commissioner Of Income Tax Tamil Nadu-I, Chennai v. M/S.the Enfield India Ltd., 115, Anna Salai, Chennai-15

In the High Court of Judicature at Madras Dated: 8.02.2006 Coram The Honourable Mr.JUSTICE P.D.DINAKARANandThe Honourable Mr.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Ref) No.134 of 2000 Commissioner of Income Tax Tamil Nadu-I, Chennai .. Applicant Vs. M/s.The Enfield India Ltd.,115, Anna Salai, Chennai-15..Respondent Reference under Section 256(1) of the Income Tax Act 1961 by theIncome Tax Appellate Tribunal, `A’ Bench, Chennai in R.A. No.186/Mds/97 inI.T.A. No.163/Mds/89 for the assessment year 1985-86 against IT AppealNo.6/88-89, dated 31.10.1988 on the file of the Commissioner of Income tax(Appeals) V, Chennai 34 against STGIR No.6-E/85-86/PA.No.47-004-CR/6890dated 22.2.1988 on the file of the Inspecting Asst. Commissioner of IncomeTax (Assessment) Range I, Madras. For Applicant::Mrs. Pushya Sitaraman, Senior Standing CounselFor Respondent ::Not Ready in notice.J U D G M E N T P.D.DINAKARAN,J.) At the instance of the Revenue, the Income-tax Appellate Tribunal hasstated a case and referred the following question of law for ourconsideration: "Whether on the facts and in the circumstances of the case, theAppellate Tribunal is right in law in holding that the element ofexcise duty and customs duty on the closing stock paid by theassessee should be excluded in terms of Sec.43B of the Income-taxAct?". 2.1. The assessment year involved is 1985-86. The assessee is acompany engaged in the business of manufacture and sale of two wheelersand Agro Engineers. The assessee claimed Rs.19,14,678/- andRs.42,52,538/- being excise duty and customs duty payments included in thevalue of the closing stock. The claim was disallowed by the assessingofficer. Hence, the assessee went on appeal before the Commissioner ofIncome Tax(Appeals), who, relying on the decision of the Gujarat HighCourt in LAKHANPAL NATIONAL LTD., VS. COMMISSIONER OF INCOME TAX (162 ITR240) held that the deduction claimed under Section 43B of the Act isadmissible and allowed the appeal. On appeal by the Revenue, theappellate Tribunal following the decision of the Special Bench of theTribunal in the case of INDIAN COMMUNICATION NETWORK P.LTD V. IAC (206 ITR96)(AT), confirmed the order of the Commissioner of Income Tax (Appeals).It is against the order of the Income-tax Appellate Tribunal, at theinstance of the Revenue, the Income-tax Appellate Tribunal has stated acase and referred the question of law referred to above. 3. Heard the learned Senior standing counsel Mrs.Pushya Sitaraman, forthe applicant, who, in her fairness states that the issue involved in theabove question of law is answered against the Revenue by the Supreme Courtin the decision rendered in BERGER PAINTS INDIA LTD., VS. COMMISSIONER OFINCOME TAX (266 ITR 99). 4. In the instant case the assessee included the excise duty andcustoms duty actually paid in the accounting year on the closing stockmanufactured but not sold. In computing its profits for the purpose ofincome-tax the assessee did not deduct the full amount of the duty paid inthe accounting year but deducted only such part of the duty paid asrelated to the goods sold and added the balance of the duty relating tothe closing stock to the value of the closing stock at the end of theyear. The assessee claimed that the amount paid towards excise andcustoms duty on the closing stock should be excluded in terms of Section43B of the Income tax Act. 5. The supreme Court in the decision referred to above has held thatthe entire amount of excise duty/customs duty paid by the assessee in aparticular accounting year is allowable under Section 43B of the Income-tax Act, 1961, as a deduction in respect of that year, irrespective of theamount of excise duty/customs duty included in the valuation of theassessee's closing stock at the end of the accounting year as relatingthereto. 5. The supreme Court in the decision referred to above has held thatthe entire amount of excise duty/customs duty paid by the assessee in aparticular accounting year is allowable under Section 43B of the Income-tax Act, 1961, as a deduction in respect of that year, irrespective of theamount of excise duty/customs duty included in the valuation of theassessee's closing stock at the end of the accounting year as relatingthereto. 6. In view of the above conclusion, we hold that the AppellateTribunal was justified in excluding the excise and customs duty paid onthe closing stock. Accordingly, we answer the question of law referred tous in the affirmative, against the Revenue and in favour of the assessee. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. msk To 1.The Assistant Registrar,Income Tax Appellate Tribunal Madras Bench "A”, Rajaji Bhavan, III Floor, Besat Nagar, Chennai 40.(with records) (5 copies) 2.The Secretary, Central Board of Direct Taxes, New Delhi(3 copies) 3.The Commissioner of Income Tax (Appeals),Tamil Nadu-I, Chennai.Tamil Nadu-I, Chennai. 4.The Inspecting Assistant Commissioner ofIncome-tax(Assessment) Range I, Madras. 5. The Commissioner of Income Tax, Tamil Nadu I, Chennai. + 1 CC to Mrs.Pushya Sitaraman, Advocate SR NO 5770 gm(co)gp/2.3. T.C.(R)No.134of 2000 8.2.2006 https://hcservices.ecourts.gov.in/hcservices/