TMI Blog2013 (3) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... sing stock. The A.O. has observed that as per the provisions of section 145A the taxes/duty/cess related to stock are required to be included in the value of the closing stock. - HELD THAT :- A.O. is directed to verify the accounting policy adopted by the assessee in respect of Modvat/Cenvat incentives and if it is according to the law, then not to disturb the method of accounting of the assessee in this regard. Decision in the cases of - ASSISTANT COMMISSIONER OF INCOME-TAX VERSUS. NARMADA CHEMATUR PETROCHEMICALS LTD. [ 2010 (8) TMI 263 - GUJARAT HIGH COURT] and COMMISSIONER OF INCOME-TAX VERSUS UNIQUE INDUSTRIES [ 2008 (5) TMI 238 - GUJARAT HIGH COURT] , relied upon. Depreciation on New Commercial Vehicle under Clause VI-A of the Appendix - Assessee has claimed excess depreciation on the new commercial vehicle purchased. The AO s objection was that those vehicles were not registered by the RTO Commercial Vehicle , also vehicle used by the appellant is a private vehicle not used for the purpose of hire. HELD THAT : - The vehicle purchased by the appellant fulfills all the conditions prescribed in the Income Tax Act and the related Motor Vehicle Act and falls within the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the records it is observed that the assessee has incurred interest expense of ₹ 273116/-. In view of the above mentioned facts the proportionate disallowance of interest expenses of ₹ 273116/- for which the assessee could not give any proof that the same is not used for Capital WIP, need to be made u/s.36(1)(iii) of the Act. The total funds available with the assessee company in the form of share capital, reserve and surplus and secured/unsecured loans amounts to ₹ 2646739432/-. The assessee has pad interest of ₹ 273116/- for which the assessee could not prove that no part of it was used for capital WIP of 143839345/-. Accordingly proportionate interest disallowable is being worked out as under:- Interest to be disallowed = Interest expenses claimed X capital WIP Total funds with the assessee company Interest to be disallowed = Rs.273116/- x ₹ 143839345/- Rs.2646739432/- Rs.14843/- In view of the above mentioned discussion the proportionate interest u/s.36(1)(iii) is disallowed at ₹ 14843/-, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Excise Duty Payable in the subsequent year, and therefore the same cannot be treated as income. The details of the CENVAT credit utilized is give in Schedule-8 to the the Tax Audit Report. It may also be noted that the cost of Raw material debited to profit and loss account does not include excise duty paid on purchases and therefore the question of inclusion of unutilized excise duty in the closing stock does not arise. This principle is settled by Supreme court in the case of Chainroop Sampatram. Further the unutilized balance of cenvat credit cannot be included in the closing stock is also taken by Gujarat HC in case of Narmada Chematur Private Limited. 4.2. However, the AO was not convinced; although he has noted that as per the Auditor s Report u/s.44AB, the assessee had followed exclusive method of accounting . The AO has opined that the unutilized credit of taxes., i.e. MODVAT/CENVAT is nothing but a kind of a subsidy or an incentive given by the Government. The AO had made a detailed discussion in respect of the amendment provisions of section 145A of IT Act. Finally, he has computed the disallowance as under:- 5.7. In view of above factual and legal positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not permit such method of accounting through which an inventory is valued without taking into account the duty/cess. He has placed reliance on few decisions; namely, CIT vs. British Paints India Ltd. (1991)188 ITR 44(SC), Chainrup Sampatram vs. CIT(1953) 24 ITR 481 (SC) and CIT vs. J.K.Synthetics Ltd. (1983) 143 ITR 271(All.) for the legal proposition that if the Valuation of the closing stock is done by excluding the expenses, then such rejection of method by the AO is correct u/s.145 of the IT Act. 6.1. From the side of the Assessee, ld.AR Mr. A.C. Shah appeared and first of all placed reliance on a decision of ITAT B Bench Ahmedabad pronounced in the case of Udaikumar Chhabildas Patel vs. Jt.CIT/ACIT bearing ITA Nos.3304/Ahd/2010 2585/Ahd/2011 dated 28/09/2012. He has also placed reliance on decision of ACIT vs. Narmada Chematur Petrochemicals Ltd. (2010) 327 ITR 369 (Guj.). 7. We have heard both the sides at some length. This is purely a legal question and presently stood covered by few decisions. In the case of Narmada Chematur Petrochemicals Ltd. 327 ITR 369 (Guj.), the Hon ble Court has observed that unless and until the amount of the Duty is not entered o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us, ld.AR has in subtle manner expressed that only for the purpose of verification of this fact the matter can go back to the AO but only after ascertaining the correct position of law. As far as the legal aspect of this issue is concerned, we have already discussed few case laws hereinabove and, therefore, it is expected from the AO to follow the same only after ascertaining the method of accounting adopted by the assessee in respect of the Duties in question. With these directions, we hereby restore this ground for a fresh adjudication as directed, hence to be treated as allowed but for statistical purposes. 7.1. In the result, on the same lines we deem it proper to restore this ground back to the stage of the A.O. to verify the facts as also the accounting policy adopted by the assessee in respect of Modvat/Cenvat incentives and if find according to the law laid down, then not to disturb the method of accounting of the assessee in this regard. We direct accordingly. This ground may be treated as allowed but for statistical purposes only. 8. Ground No.3 reads as under:- 3) The Ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad erred in law and on facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimbursed during Financial Year 2007-08. The Oriental Containers Ltd. objected to nonITA acceptance and threatened to discontinue the business relations vide their letter dated 21/05/2008. The appellant company, therefore, had to accept the claim paid during the current previous year and, therefore, should be allowed. The submission of the appellant is supported by documentary evidence and should therefore be accepted. It is not a commission for sake, but it is a reimbursement of certain expenses. The party to whom it has been paid is established and the other payments made to that party have been allowed as deduction. The deduction of ₹ 3,00,000/- is, therefore, directed to be allowed to the appellant company. In view of the above discussion, out of the disallowance of ₹ 3,93,379/-, a disallowance of ₹ 1,12,500/- is upheld and rest is directed to be deleted. The ground of appeal is accordingly partly allowed. 9. Having heard the submissions of both the sides, we have noted that the payment made to Oriental Containers Ltd. was duly explained and substantiated. It was a case of reimbursement of certain expenses and not the payment of commission. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and the facts, I am inclined to accept the submission made by the appellant. The Clause VI-A of the Appendix i.e. the table of rates of which depreciation is admissible prescribes the depreciation @ 50% for new commercial vehicle which is acquired on or after 01/01/2009 but before 01/04/2009 and is put to use before 01/04/2009 for the purpose of business or profession. Further paragraph 6 of the note below the table defines commercial vehicles which includes Light Motor Vehicles as per the Motor Vehicle Acts, the specifications for which are reproduced in the preceding paragraph. Therefore, it is clear that the appellant is etitled for depreciation @ 50% which was given as an incentive for a short period between 01/01/2009 to 01/04/2009 but the period was later on extended upto 01/10/2009. The vehicle purchased by the appellant fulfills all the conditions prescribed in the Income Tax Act and the related Motor Vehicle Act and falls within the definition of Commercial Vehicle. The Act has nowhere prescribed that a commercial vehicle should be a vehicle which is used for the purpose of hire. It only prescribes that the vehicle should be used for the purpose of business or professio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
