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2013 (11) TMI 939 - AT - Income TaxMethod of accounting u/s 145A - account for purchase, sale and stock - inclusive of duty or exclusive of duty - Deduction u/s 43B - Held that:- the assessee values its inventories as well as its revenue at inclusive of duties, also excluding the credits (as e.g. modvat) in relation thereto. As such, the total actual cost, as incurred, and revenue, as accrued, stands factored into the valuation of the trading parameters, as required by section 145A. However, the assessee, on being questioned in its respect, states of following exclusive method, i.e., just the opposite, claiming that the same nevertheless would have no impact on the quantum of trading income. Why did the assessee state so when its accounts state otherwise, and which in any case, being the mandate of law, has to be observed, if only in the computation of income under the Act? Further, even otherwise; it claiming the difference in method of valuation as of no moment, i.e., of both the inclusive and exclusive methods leading to the same result and, thus, inconsequential, it could demonstrate the same by working out the valuation on both - net and gross - basis. The assessee, however, and inexplicably, does not do so. The fallacy in the A.O.'s working, as it would appear to us, is that while he includes the incidence of duty on the opening and closing stock of goods, he does not do so qua purchases and sales. It is only where the cost is incurred that the same would stand to form part of the operating statement, and qualify for being recognised as a part of cost of goods unsold as at the year-end, i.e., the closing stock by definition. It is this adding of the tax/duty cost to the value of the closing stock without making a corresponding allowance for the same in the trading account that would lead to a distorted picture and a profit figure inconsistent with the actual profit earned/accrued. Section 145A does not purport to yield a notional, but only actual profit, by prescribing inclusion of all cost elements, including tax and duty, where and to the extent attracted/ incurred, in the valuation process. This is, thus, akin to an accounting policy, statutorily prescribed, for uniform application by all assessees. - matter remanded back for re-computation. Deduction u/s 43B - Held that:- if section 43B is considered to have an overriding effect, it would again be to no moment. This is as where the duty is paid during the relevant year (or by the due date of furnishing the return of income) the mandate of section 43B is satisfied; the same tax/duty would stand to be allowed. And where not paid by that date, it cannot be said to have been 'incurred' due to the overriding effect of section 43B (r.w.s 43(2)). That being the case, neither would it stand to be reckoned as cost nor, consequently, liable for inclusion in the valuation of the purchases, irrespective of the method of accounting being followed. - matter remanded back for verification of facts. - Decided in favor of assessee.
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