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Asstt. Commissioner of Income Tax-16(2), Matru Mandir, Tardeo Road, Mumbai-400007 Vs. M/s Schwabe Incoat 1/204, 2nd floor, Navjivan Society, Lamington Road, Mumbai-400008
May, 26th 2014
                     ,                  ""          
       IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI

     BEFORE S/SHRI P.M.JAGTAP (AM) AND DR. S. T. M.PAVALAN (JM)

                      ./I.T.A.No.1297/Mum/2013
                    (   / Assessment Year: 2009-10)

     Asstt. Commissioner of Income   /       M/s Schwabe Incoat
     Tax-16(2),                      Vs.     1/204, 2nd floor,
     Matru Mandir,                           Navjivan Society,
     Tardeo Road,                            Lamington Road,
     Mumbai-400007                           Mumbai-400008
     ( /Appellant)                           (  / Respondent)
           . /   . /PAN/GIR No. :                     AACFS1443F


             / Appellant by              :   Shri A Jaikaran
                /Respondent by               Shri Deepak Tralshawala


                  / Date of Hearing
                                                  : 8.5.2014
              /Date of Pronouncement : 22.5.2014

                                   / O R D E R

PER P.M.JAGTAP,AM:

        This appeal is preferred by the Revenue against the order of ld. CIT(A)-
27, Mumbai dated 30.11.2012 whereby he deleted the addition made by AO on
account of excise duty/modvat credit by invoking the provisions of section 145A
of the Income Tax Act, 1961 (the Act).


2.      The assessee in the present case is a partnership firm which is engaged in

the business of manufacturing of     PVDC Coating on PVC film. The return of

income for the year under consideration was filed by it on 11.9.2009 declaring

total income of Rs.39,54,100/-. During the course of assessment proceedings, it

was noticed by the AO that the assessee has followed exclusive method of

accounting for recording its purchase and sales as well as for valuing the opening

and closing sock.   He also noted that there was a difference      of Rs.23,11,296/-

between modvat credit claimed by the assessee and              expenses   claimed on
                                       2
                                                         I.T.A.No.1297/Mum/2013





account of excise duty.   According to him, this difference amount represented

the modvat credit pertaining to the goods lying in the closing stock and as per

the provisions of section 145A of the Act, the same was liable to be included in

the valuation of closing stock shown by the assessee. Accordingly, the value of

closing stock of the assessee was enhanced by the AO to that extent and an

addition of      Rs.23,11,296/- was made to the total income of the assessee.

The AO also found that the assessee has claimed expenditure of Rs.76,01,770/-

on account of excise duty under the head "duties and taxes".    According to the

AO, since exclusive method of accounting was followed by the assessee whereby

purchases and sales were recorded on net of excise duty, the expenditure

claimed by the assessee on account of excise duty paid amounted to double

deduction. He, therefore, disallowed the expenditure claimed by the assessee on

excise duty and added the sum of Rs.76,01,770/- to the total income of the

assessee.


3.    Against the order passed by the AO u/s 143(3) of the Act, the appeal was

preferred by the assessee before the ld. CIT(A) disputing the addition made by

the AO on account of excise duty/modvat credit. During the course of appellant

proceedings before the ld. CIT(A), the detailed working was filed by the assessee

showing that even if exclusive method is followed for accounting the opening

and closing stock as well as purchases and sales, the net profit would be the

same as that worked out by following the inclusive method of accounting.          It

was submitted that even if adjustments as envisaged u/s 145A of the Act are

made, the same would be revenue neutral warranting no addition to the total

income of the assessee as made by the AO.     The ld. CIT(A) found merits in the

submissions of the assessee and deleted the addition made by AO on excise
                                         3
                                                           I.T.A.No.1297/Mum/2013


duty/modvat. Aggrieved by the order of ld. CIT(A), the revenue has preferred

this appeal before the Tribunal.


4.    We have heard the arguments of both the sides and also perused the

material on record.   As per the provisions of section 145A, the valuation of

purchases and sales of goods and inventory for the purpose of determining the

income chargeable under the head "profit or gain from business or profession"

is required to be made in accordance with the method of accounting regularly

employed    by the assessee and further adjustment is required to be made to

include the amount of any tax, duty, cess       actually paid as   incurred by the

assessee to bring the goods to the place of its location and condition as on the

date of valuation.    We are therefore of the view that when the assessee is

following exclusive method of accounting for the valuation of purchase and sale

of goods as well as inventory, the further adjustment is required to be made to

include the amount of excise duty in such valuation as per the provisions of

section 145A of the Act.           At the time of hearing before us, the ld.

Representatives of both the sides have not disputed this position.         The ld.

counsel for the assessee has submitted that detailed working was filed by the

assessee before the ld. CIT(A) to show that the adjustments required to be

made as per the provisions of section        145A of the Act are revenue neutral

having no effect on the final profit of the assessee and after taking into

consideration the said working, the ld. CIT(A) deleted the addition made by

the AO by invoking the provisions of section 145A of the Act.       The ld. DR, on

the other hand, has submitted that working furnished by the assessee before

the ld CIT(A) for the first time in support of its claim by the assessee has been

relied upon by the ld. CIT(A) to give relief to the assessee without giving an
                                           4
                                                             I.T.A.No.1297/Mum/2013





opportunity to AO to verify the same. He has pointed out that there is also

nothing in the impugned order of ld. CIT(A) to show that the said working has

been verified by him.      Keeping in view this submission of      the ld.   DR, we

consider it fair and proper to restore this issue to the file of the AO for the

limited purpose to verity the working furnishing by the assessee before the ld.

CIT(A) to show that the adjustments required to be made u/s 145A of the Act

are revenue neutral having no effect on its final profit. The issue is accordingly

restored to the fie of AO for this limited purpose.


5.     In the result,     the   appeal   of the revenue    is treated as allowed for

statistical purposes.

      Order pronounced in the open court on 22nd       May, 2014

                                                22nd    May, 2014    

        Sd                                                   sd
(DR. S. T. M.PAVALAN)                              (P.M.JAGTAP)
     / JUDICIAL MEMBER                             / ACCOUNTANT MEMBER

  Mumbai:
                  on this 22nd      day of May, 2014

. ../ SRL , Sr. PS


        /Copy of the Order forwarded to :
1.  / The Appellant /Applicant
2.  / The Respondent.
3.     () / The CIT(A)-
4.      / CIT
5.      ,     ,         /
     DR, ITAT, Mumbai
6.     / Guard file.
                                                                / BY ORDER,
              True copy
                                                         (Asstt. Registrar)
                                             ,  /ITAT, Mumbai

 
 
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