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2009 (5) TMI 594 - AT - Income TaxDisallowance - custom duty and investment allowance reserve - Since the assessee did not pay the customs duty and did not get the imported goods released from the customs authority from the port, entries were made in its accounts debiting customs duty account and showing it correspondingly in the closing stock on hand - Supreme Court in the landmark judgment in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971 -TMI - 6262 - SUPREME Court) have held that an assessee following the mercantile system of accounting was entitled to claim as and by way of deduction/allowance from its profits taxi statutory liabilities though disputed in appeals - Since the profits are not reduced at all by the customs duty liability/expenditure, the AO clearly erred in taking the aid of s. 43B and adding the balance customs duty of Rs. 1,24,97,664 - Both the lower tax authorities have failed to note the very essential words of s. 43B which says that "notwithstanding anything contained in any other provisions of this Act, a deduction otherwise allowable under this Act in respect of........" These qualifying words are very important to bring into play the provisions of s. 43B particularly to make additions/disallowances - Decided in favor of the assessee
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