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M/s. G.H. Industries Versus ACIT, Circle 3, Ahmedabad

2016 (3) TMI 115 - ITAT AHMEDABAD

Addition with respect to unutilized balance of MODVAT credits - inclusion of excise duty to the value of closing stock - Scope of section 145A - Held that:- Merely because the Central Government has not notified in the Official Gazette “accounting standards” to be followed by any class of assessees or in respect of any class of income, it cannot be stated that the Accounting Standards prescribed by the Institute of Chartered Accountants of India or the Accounting Standards reflected in the “guid .....

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credit is called for in the present case - Decided in favour of assessee - ITA No. 2613/Ahd/2011 - Dated:- 12-2-2016 - Shri Anil Chaturvedi, A. M. And Shri S. S. Godara, J.M. For the Appellant : Shri P. M. Mehta with Shri G. M. Thakor, A.R. For the Respondent : Shri Keyur Patel, Sr. D.R. ORDER Per Anil Chaturvedi, Accountant Member This appeal filed by Assessee is against the order of CIT(A)-6, Ahmedabad, dated 01.09.2011 for the assessment year 2008-09. 2. The relevant facts as culled out from .....

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essing Officer, Assessee carried the matter before the ld. CIT(A) who vide order dated 01.09.2011 dismissed the appeal of the assessee. Aggrieved by the order of ld. CIT(A), Assessee is now in appeal before us and has raised the grounds which were later concised and the concised grounds read as under: 1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in treating Ground No. 1 of the appellant's appeal challenging the validity of the .....

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account of unutilized balance of MODVAT credits as at the end of the year on 31.3.2008 made by the learned Assessing Officer on the ground that in terms of the provisions of Section 145A of the Income-tax Act, 1961, it was required to be added to the value of the closing stock as at 31.3.2008 which the appellant not having done, the profit as per its Profit and Loss Account had been understated to that extent. 3. In law and in the facts and circumstances of the appellant's case, the learned .....

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various grounds but the solitary issue which is to be decided is ground no.2 which is with respect to the addition with respect to unutilized balance of MODVAT credits. 4.1 During the course of assessment proceedings on perusing the Balance Sheet, Assessing Officer noticed that assessee had shown receivable of ₹ 54,16,674/- with respect to MODVAT credits. He also noticed that the said amount has not been included as part of closing stock. He was of the view that as per the provisions of Se .....

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of MODVAT credit to the total income of the assessee. 5. Aggrieved by the order of Assessing Officer, Assessee carried the matter before the ld. CIT(A) who upheld the action of A.O. by holding as under: 3.3 I have considered the facts of the case, assessment order and appellant's submission. As per provisions of section 145A, the assessee is required to add excise duty, tax, cess etc in the raw material, in goods in process and finished goods. If the assessee is following exclusive method of .....

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chemicals Ltd and the decision of honourable Gujarat High Court in the case of unique industries are distinguishable on facts. As per the provisions of section 145A, the appellant is required to include the excise duty In the closing stock. In view of the above, the addition on account of excise duty and other taxes paid on raw material and other inputs are to be added to the value of closing stock of raw material, semifinished and finished goods. The method of accounting is not relevant after .....

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could not be invoked. Since jurisdictional High Court in this case clearly distinguished the issue since section 145A was not applicable to assessment year 1997-98. The consistency and method of accounting relevant in that year will not be applicable after enactment of specific provision for inclusion of taxes, excise duty and cess. Accordingly it is clear that the jurisdictional high court decision does not support appellant's view for this assessment year. Appellant relied upon the decisi .....

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of tax and duty which were not included in last year's closing stock. Therefore even by applying Delhi High Court decision, tax and duty cannot be added to the opening stock without disturbing the closing stock of last year. The decisions of tribunals relied upon by the assessing officer and quoted in para-3.1 above, it is clear that the adjustment on account of section 145A will result in addition in first year. However in subsequent years the effect of inclusion method will be tax neutral. .....

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. Aggrieved by the order of ld. CIT(A), Assessee is now in appeal before us. 6.1 Before us, ld. A.R. reiterated the submissions made before the Assessing Officer and ld. CIT(A) and further submitted that assessee is consistently following the method of accounting under which the entire amount of excise duty incurred during year for which assessee is entitled to get MODVAT credit is debited to MODVAT credit receivable account. He submitted that if the assessee includes the excise amount to the va .....

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5/Ahd/2011 and also placed on record a copy of the aforesaid decision. He, therefore, submitted that in the present case no addition was called for. Ld. D.R. on the other hand supported the order of Assessing Officer and ld. CIT(A). 7. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to inclusion of excise duty to the value of closing stock. We find that identical issue was decided by the Co-ordinate Bench of Tribunal in case o .....

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aid submission of the Assessee has not controverted by Revenue by placing any contrary material on record. We further find that on similar issue, the Co-ordinate Bench of Tribunal in the case of Asiatic Industries (supra) had decided the issue in favour of the Assessee by holding as under:- 8. We have heard the rival submission and perused the material on record. We find that the issue in the present appeal is with respect to inclusion of Excise duty and VAT to the value of closing stock, in a c .....

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at there is submission of the assessee before the authorities below that while the entire amount of excise duty realized on sales was included in the sale amount but out of entire amount of excise duty paid on purchases, only that portion of such excise duty paid which was utilized by way of MOD VAT, had been included in the value of purchases and the balance amount of Modvat credit which could not be utilized in the present year was shown in the balance sheet as an amount receivable and this po .....

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excise duty receivable in the value of closing stock, the same is also required to be included in the value of purchases and it will have no impacts on the profits of the assessee. Therefore, we do not find any reason to interfere in the order of Ld. CIT(A). 9. We further find that in the case of Bloom Dekor Ltd. (supra) similar issue was decided by the Co-ordinate Bench of Tribunal in favour of the Assessee by holding as under:- 4. On perusing the financial statements Assessing Officer noticed .....

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n finished goods not cleared from factory at ₹ 47.38 lacs and custom duty on stock lying at port at 46.51 lacs aggregating to ₹ 93,89,000/- and added it to the value of inventory. Aggrieved by the action of the Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee and relying on the decision of Ahmedabad Tribunal in the case of ITA 1358/Ahd/2009 allowed the appeal of the assessee by holding as under:- The appellant also .....

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R 369 (Guj.), wherein following was held: "Held, dismissing the appeal, that Tribunal was justified in excluding the excise duty at the time of valuation of the closing stock of finished goods at the end of the accounting period because: (a) No deduct ion for the liability had been claimed by the assessee.The excise duty payable on the finished goods lying in the closing stock at the end of the relevant accounting period had been paid in the subsequent year before_the due date of filing of .....

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ideration. Such duty of Central excise if added to enhance the value of closing stock would result in enhanced opening stock on the first day of the next accounting period, namely, April 1, 1997. So the next year's profits would get depressed accordingly, over a period of time the whole exercise would even out, in other words, be revenue natural. At the same time while disturbing the value of the closing stock the assessing authority could not change the method of accounting regularly employ .....

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d to be deleted. The grounds raised by the appellant are thus allowed. 5. Aggrieved by the order of the Assessing Officer Revenue is now in appeal before us. 6. Before us, learned D.R. relied on the order of the Assessing Officer. 7. We have heard the learned D.R. and perused the material on record. CIT(A) while deleting the addition has held that the issue is squarely covered by the decision of jurisdictional Tribunal and accordingly relying on the aforesaid decision deleted the addition. Nothi .....

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its deletion. Thus this ground of Assessee is allowed. 10. We further find that on the issue of Guidance Notes and Accounting Standards issued by the Institute of Chartered Accountant of India, the High Court of Telengana and Andhra Pradesh High Court in the case of CIT vs. Pacts Securities and Financial Services Ltd. (2015) 374 ITR 681 (T & A.P) at para 13 has noted that the merely because the Central Government has not notified in the Official Gazette accounting standards to be followed by .....

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