9911796707
TMI Blog2015 (12) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Income Tax Act, 1922, is not applicable in the context of section 43B disallowances, under the Income Tax Act, 1961. 3) The appellant craves leave to add/alter/amend/delete any of the grounds of appeal. 3. The issue raised in the present appeal is against the disallowance of Rs. 14,47,211/- made under section 43B of the Act on account of VAT collected but not claimed as expenditure. 4. Briefly, in the facts of the present case, the assessee was dealing in food products i.e. Balaji Wafers and Farsan. The assessee was carrying on the business as sole proprietor of M/s. Kheradiya Marketing, Near Maharana Pratap Chowk, Nandurbar. During the year under consideration, the gross turnover of the assessee was Rs. 8.43 crores, on which gross profit of Rs. 26,55,364/- was declared by the assessee. From the perusal of audit report in Form No.3CD submitted by the statutory auditor, the Assessing Officer noted that as per column 21(b) of the audit report, the assessee had paid sum of Rs. 8,21,505/- out of the total dues of VAT tax of Rs. 22,68,716/-. The VAT tax re mained to be paid into government account till the date of report was Rs. 14,47,211/-. On query, it was explained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Chowringhee Sales Bureau (P) Ltd. Vs. CIT (supra) was not applicable. 9. The learned Departmental Representative for the Revenue in reply, pointed out that in view of the provisions of section 145A of the Act and the Circular No.772 of CBDT, any tax, duties, cess or fees, that has been paid is to be included in the valuation of goods. It was further pointed out by the learned Departmental Representative for the Revenue that all the decisions relied upon by the learned Authorized Representative for the assessee were before the amendment which was w.e.f. 01.04.1999. Further the learned Departmental Representative for the Revenue pointed out that the judgment of the Hon'ble Delhi High Court in CIT Vs. Noble and Hewitt (I) P. Ltd. (supra) is in relation to collection of service tax, which is not includable in the valuation of goods. However, VAT has to be routed through Profit & Loss Account since the assessee has charged VAT of Rs. 22,00,000/ -, against which the payment of Rs. 8,00,000/- only, provisions of section 145A r.w.s. 43B of the Act were squarely applicable. 10. The learned Authorized Representative for the assessee pointed out that the provisions of section 43B of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness or profession, it has been provided that the said valuation would be in accordance with the method of accounting regularly employed by the assessee i.e. either mercantile or cash. Further, adjustment is to be made to include the amount of any tax, duties, cess or fees, by whatever name called, actually paid or incurred by the assessee to bring the goods to the place of its location and condition, as on the valuation date. In other words, where any expenditure is actually paid or incurred by the assessee by way of any tax, duties, cess or fees, by whatever name called, then adjustment is to be made both in the valuation of purchase and sale of goods and also in the valuation of inventory to include the aforesaid amounts while determining the income chargeable under head profits and gains of business or profession. 13. In the facts of the present case, the assessee was dealing in food products and had purchased goods on which VAT tax was applicable. The VAT is value added tax to be paid on a transaction of purchase and sale of goods. The assessee for the year under consideration was due to pay VAT of Rs. 22,68,716/-, against which it had paid sum of Rs. 8,21,505/- and the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 43B of the Act was to curb the practice of claiming the deduction on account of statutory liabilities on the ground that they were maintaining the accounts on mercantile or accrual basis. However, the liability was not discharged and in order to curb excessive claim of the statutory liabilities, section 43B of the Act was introduced. Further, reference was made to the Circular No.772 dated 23.12.1998 issued by CBDT, wherein, it was clarified that whether the value of closing of inputs, work-in-progress and finished goods must necessarily include the element for which MVAT credit was available. The CBDT referred to the new section 145A of the Act, which was inserted by the Finance (No.2) Act, 1998 and it was pointed out that the said section provides the valuation of purchases, sale and inventory to be made in accordance with method of accounting regularly employed by the assessee and further adjustment to include the amount of any tax, duties, cess or fees, by whatever name called, actually paid or incurred by the assessee to bring the goods to the place of its location and condition, on the date of valuation. The said amendment was to take effect from 01.04.1999 and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , irrespective of previous year to which the said liability relates and this is also irrespective of method of accounting regularly employed by the assessee. In view of the cumulative provisions of sections 145A and 43B of the Act, the assessee is entitled to claim the deduction on account of such tax, duties, cess or fees, by whatever name called and the same is to be allowed only on payments and once the payment has not been made in the year to which the said liability relates, then the said amount is to be added back as income of the assessee for the relevant year. 18. The Hon'ble Delhi High Court in CIT Vs. Noble and Hewitt (I) P. Ltd. (supra) while deciding the issue of question of service tax had observed that where the assessee was maintaining its accounts on mercantile system of accounting and had collected service tax during the assessment year 1999- 2000, out of which part of the amount was deposited but the balance was not deposited with the concerned authorities, where the assessee had not claimed any deduction in respect of the said amount or where the assessee had not debited the amount to the Profit & Loss Account as an expenditure, then even where the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further placed reliance on the decisions of Hon'ble Gauhati High Court and the Pune Bench of Tribunal in India Carbon Ltd. Vs. ACIT & Anr. ( supra) and Hindustan Commercial Corp. Vs. ITO (supra), respectively, which relate to assessment years prior to assessment year 1999-2000. Hence, the said ratios are not applicable to the facts of the present case, in view of the amended provisions of section 145A of the Act. In the facts of the present case, admittedly, the assessee had collected VAT amount of Rs. 22,68,716/- and had paid Rs.Rs.8,21,505/- against the said amount due during the accounting period, the balance amount of Rs. 14,47,211/- was not paid by the assessee before the close of year or before the date of audit report. However, under the provisions of section 43B of the Act, in case the said amount is paid by the assessee before the due date of filing the return of income as prescribed under section 139(1) of the Act, the assessee is entitled to the claim of deduction under section 43B of the Act. The necessary details in this regard are not available on record. Accordingly, we direct the Assessing Officer to verify whether the assessee has deposited the said amount before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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