TMI Blog2007 (11) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1999-2000. Admit. 2. After hearing learned counsel for the parties, the following question of law is framed for consideration : "Whether the Income Tax Appellate Tribunal was correct in law in allowing the adjustment of Rs.54,83,272/- to the assessee in the opening stock for the previous assessment year 1998-99 (being a transitional year) under Section 145 A of the Income Tax Act, 1961 ?" 3. Filing of paper book is dispensed with. 4. In its closing stock for the previous year ending on 31 st March, 1999, the assessee had charged Modvat credit on certain inputs. While doing so, the assessee made an adjustment in the opening stock as on 1 st April, 1998. The adjustment was to the extent of Rs.54,84,272/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng aggrieved by the said order, the assessee preferred a further appeal before the Tribunal and by its order dated 9 th June, 2006, the Tribunal allowed the appeal. While doing so, the Tribunal relied upon a decision rendered by the Calcutta Bench of the Tribunal in the case of Mehra Electric Company 148 Taxman 37. The Tribunal also relied upon Circular No. 772 dated 27 th December, 1998 passed by the Central Board of Direct Taxes ("CBDT") as well as the guidance note issued by the Institute of Chartered Accountants of India. 7. Thereafter, the Tribunal held that the adjustment on account of modvat credit and excise duty can be made in the opening stock also and that the assessee did not commit any error in doing so. Therefore, the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of the stock when it comes in. When, therefore, there is under valuation at one end, the effect is to cause both a smaller debit in respect of the stock introduced into the net account and a larger sum for profits realized by the sale, change in market values being immediately reflected in the price obtained for the goods that are sold, in these circumstances to contend that there should be under valuation at one end and not at the other is to raise an argument which their Lordships cannot accept." 11. The opinion of the Privy Council was that whenever there is a change in the valuation at one end (that is on 31 st March, 1999 as in the present case) then there must necessarily be a corresponding change at the other end (tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usted to include the amount of any tax, duty, cess or fee (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 date of valuation. " 14. Learned counsel for the Revenue referred to the Guidance Note on Tax Audit under Section 44 AB of the Act issued by the Institute of Chartered Accountants of India, New Delhi. She referred to paragraphs 23.8, 23.13 and 23.14 thereof. The contention of learned counsel for the Revenue was that by changing the method of valuation, the assessee has in fact got a double benefit which is not permissible. The paragraphs cited by learned counsel for the Revenue read as follows : "23.8 Section 145A has been enacted by the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same will be reflected in the opening stock also. Question for consideration is whether the opening stock as on 1.4.1998 should be adjusted as required under Section 145A. It is now well settled that if any adjustment is required to be made by a statute, effect to the same should be given irrespective of any consequence on the computation of income for tax purposes. Section 145A starts with the non obstante clause Notwithstanding anything to the contrary contained in section 145. Therefore, to give effect to section 145A, the opening stock as on 1.4.98 will have to be increased by any tax, duty, cess or fee actually paid or incurred with reference to such stock if the same has not been added for the purpose of valuation in the account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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