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2011 (6) TMI 563 - AT - Income TaxWhether for the purpose of computing deduction u/s. 80-HHC excise duty, sales collected, sale of scrap and interest has to be considered as part of total turnover - in the case of Sudarshan Chemical Industries Ltd. Sudarshan Chemical Industries Ltd. (2000 - TMI - 15014 - BOMBAY High Court - Income Tax), appeal of the assessees which relates to inclusion of excise duty, sales tax payable and interest in the total turnover of the assessee is decided in favour of the assessee and against the revenue. Addition in valuation of closing stock on account of MODVAT excise duty credit - main controversy between the assessee and the A.O. relates to the amount to be attributed to purchase and closing stock of raw material. The assessee has debited the cost of purchases net of excise duty and consequently the closing stock inventory is also valued on – Held that:- two possible methods of valuation of stock. The first would be the "gross method" in which the stock is valued at cost price inclusive of the excise duty element. If this method is adopted, then the unconsumed stock also must necessarily be valued in the same manner. The other method is the 'net method' in which the raw material purchased is valued at the actual cost, that is the actual purchase price and, on this, Modvat credit would be available. If this method is to be adopted, then uniformly the same method must be adopted while valuing the unconsumed stock at the end of the year. Whichever method one adopts, the result would be the same, following the judgment of the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. (2003 - TMI - 6119 - SUPREME Court) , order of the CIT(A) upheld and appeal of the Revenue dismissed. Addition on account of excise duty payable on finished goods not included in the valuation of closing stock - though the assessee has debited the excise duty on unsold closing stock in its profit and loss account, but has not taken the same in the valuation of the closing stock – Held that:- in the case of Food Specialities Ltd. (1990 - TMI - 63941 - ITAT DELHI-C) was relied upon to adjudicate upon the question whether excise duty formed part of the cost of manufacture/production and was hence, includible in the figure of closing stock to the extent the goods remained unsold after having been cleared from the bonded warehouse and the Hon'ble Special Bench decided in favour of the assessee, appeal of the Revenue is dismissed. Whether Interest charged on late payment of tax by department is not a business expenditure – Held that:- assessee is assessable in respect of the gross interest of Rs 45,90,876/- received from the Income-tax Department and not merely on the net interest of Rs. 44,53,655/- remaining after the set off of the interest of Rs. 1,37,225/- paid to the Income-tax Department. The interest payment has also not been held to be deductible from interest received in order to arrive at the assessable income in respect of interest received from the Income-tax Department. In this manner, as per the majority view, the Ground of Appeal of the Revenue is allowed, appeals of the assessee as well as of the Revenue are partly allowed.
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