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2011 (6) TMI 172 - AT - Income TaxAddition - Unutilised modvat credit in the closing stock u/s 145A - The said section provides for adjustment on account of tax duty to cess, fee actually paid by the assessee in the valuation of inventory on the date of valuation - The assessee had been following exclusive method of accounting as per which the modvat debits/credits were not rooted through trading account - The Assessing Officer worked out the adjustment on account of excise duty by following inclusive method and thus came to the conclusion that addition of ₹ 1,97,310 was required to be made to total income - The difference found by Assessing Officer was on account of modvat adjustment to opening stock which has not been made by the Assessing Officer - In view of the judgment of Hon'ble Delhi High Court in the case of Mahavir Aluminium Ltd.[[2008] 297 ITR 77/168 Taxman 27.] which has also been affirmed by the Hon'ble Bombay High Court in Mahalaxmi Glass Works Ltd. [2009] 318 ITR 116], adjustment on account of unutilized modvat credit u/s 145A is also required to be made in opening stock - In this case after making adjustment to opening stock, there is no addition required to be made - Decided in favour of assessee. disallowed under the provisions of section 40(a)(i) - the assessee placing reliance on the judgment of Hon'ble Punjab and Haryana High Court in the case of Ess Ess Kay Engg. (supra) has argued that once the expenditure was disallowed by Assessing Officer under section 40(a)(i) the assessee had passed the test of allowability of claim as revenue expenditure and no disallowance can be made as capital expenditure - The Assessing Officer in this case disallowed the claim u/s 40(a)(i) and held that alternatively it was also disallowable as capital expenditure - Thus once the Assessing Officer held that the expenditure was capital in nature and also held that even if revenue in nature it had to be disallowed u/s 40(a)(i), the Appellate Authorities are required to consider both aspects and give a clear finding as to the real treatment of expenditure - In this case, CIT(A) has not considered the capital nature of the expenditure - The other aspect also, as pointed out earlier has not been examined properly - Since the issue has not been examined properly we set aside the order of the CIT(A) and restore the issue back to him for passing fresh order after necessary examination in the light of the observation made above and after allowing opportunity of hearing to the assessee. Deduction u/s 80HHE - Export of design and drawings - Since, deduction u/s 80HHE is allowed in respect of export of computer software which has been defined in the Explanation (b) to section 80HHE which includes any customized electronic data or any product or service of similar nature as may be notified by the Board - It is thus clear that computer software also includes customized electronic data - Further CBDT have also issued notification No. SO 1031(E) dated 13-10-1999 in which information technology enabled products or services have been identified u/s 10A/10B/80HHE which includes engineering and design - In the present case the assessee had exported design and drawing in electronic media - Therefore, considering the definition of the term computer software and Board notification it has to be treated as export of computer software and claim of deduction has to be allowed u/s 80HHE - Decided in favour of assessee.
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