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2015 (5) TMI 180 - AT - Income TaxDisallowance of unutilized MODVAT/CENVAT Credit - unutilized MODVAT/CENVAT credit was required to be included in the total income of the assessee - Failure to substantiate the reason for not doing do - Held that:- Assessing Officer had taken debit balance entry of MODVAT/CENVAT credit, as credit balance. Assessee is debiting its purchases and crediting sales, inclusive of MODVAT and is also following the method of valuing its closing stock with the MODVAT amount. Balance appearing in the MODVAT receivable under account was on account of fact that while excise duty on purchases of input (yarn) was 12%, which was available to assessee for set off against payment of excise duty on cloth manufactured by it, rate of excise duty on cloth manufactured was only 4%. - CIT(A) was justified in holding that debit balance appearing in MODVAT receivable account is amount which the assessee has already debited in books of account alongwith purchases and since it has opted out of scheme of excise duty payment on manufactured cloth from the MODVAT account, assessee has not been able to set off the above receivable account against any payment of excise duty under the MODVAT scheme. The purchases which have been debited in the P & L account alongwith MODVAT account and appearing in the closing stock are also with MODVAT account. Thus, no adjustment u/s. 145 was required to be made. Accordingly, CIT(A) was justified in deleting addition of ₹ 14,32,533 - MODVAT credit was an irreversible credit available to manufacturers upon purchase of duty-paid raw material. It would not amount to income which was liable to be taxed under Income Tax Act, 1961 - Following decision of CIT vs. Indo Nippon Chemicals Co. Ltd. [2003 (1) TMI 8 - SUPREME Court] - Decided against Revenue.
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