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TMI Blog2017 (3) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... ame was allowed to be adjusted against fulfillment of export obligations. During the year, the assessee provided for customs duty liability to the tune of Rs. 1,73,35,28,049/- and claimed the same as deduction u/s 43B of the Act. The same was originally allowed by the Assessing Officer and the assessment was completed u/s. 143(3) of the Act. The Assessing Officer subsequently took the view that the deduction u/s. 43B of the Act in respect of customs duty liability can be allowed only when the customs duty is actually paid before the due date of filing of the return of income. Since the assessee has adjusted customs duty liability against export obligation, i.e., since the assessee did not actually pay the same, the Assessing Officer took the view that the deduction u/s 43B was wrongly allowed to the assessee and hence he reopened the assessment. The assessee had adjusted the customs duty liability against the export obligations as under:- a) Export obligations completed up to 31.3.2003 - Rs. 97,36,26,554/- b) Export obligations completed from 1.4.2003 to 31.10.2003 - Rs. 75,99,01,495/- c) Total - Rs. 1,73,35,28,049/- 3. In the reopened assessment the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, upto 30.9.2004 assessee fulfilled export obligations with respect to Customs duty amounting to Rs. 40,41,81,896/-. The assessee-company adjusted the said amount of Rs. 40,41,81,896/- against the Provision for Customs duty outstanding on 31.3.2004 and claimed it as a deduction u/s 43B of the Act. The Assessing Officer has disagreed with the assessee on the ground that there was no actual payment of Customs duty and, therefore, the said amount was not deductible in terms of Sec. 43B of the Act. According to the Assessing Officer, provision of Sec. 43B of the Act categorically states that the deductions thereof are to be allowed only on the basis of actual payment only. The assessee carried the matter in appeal before CIT(A) contending that the action of Assessing Officer was erroneous inasmuch as assesseecompany had fulfilled its export obligations before the due date of filing of return of income thereby complying with the conditions laid down in Sec. 43B of the Act to claim the deduction of Rs. 40,41,81,196/- comprised in the liability for Customs duty outstanding as on 31.3.2004. The CIT(A) has since affirmed the disallowance made by the Assessing Officer. In coming to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of that previous year in which the said sum is actually paid. It is a non-obstante clause prescribing that notwithstanding anything contained in any other provisions of this Act, "a deduction otherwise allowable" under the Act in respect of the sums prescribed therein shall be allowed only in computing the income from profit and gains of business of that previous year in which such sum is actually paid irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed. In the instant, the case made out by CIT(A) is that Sec. 43B of the Act is not applicable in the present case for the reason that the amount of Rs. 40,41,81,196/- is not a deduction otherwise allowable under this Act. According to the CIT(A), the liability for the impugned Customs duty does not arise because assessee has obtained clearance of the imported material without payment of Customs duty, and that the ultimate liability may or may not arise inasmuch as on a future date, if the assessee is able to meet the export obligations, the charge of Customs duty would not arise. For this reason, according to the CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Customs duty as on 31.3.2004, in terms of the first proviso to Sec. 43B of the Act, assessee claimed a deduction. 32. The first question to be decided is as to whether the Provision of Customs duty of Rs. 40,75,50,184/- created by the assessee as on 31.3.2004 is a liability which has arisen so as to fall within the expression "a deduction otherwise allowable under this Act" in Sec. 43B of the Act. For the said purpose, the learned representative for the assessee referred to Sec. 12 of Customs Act, 1962 to emphasise on the timing of crystallisation of charge of Customs duty. The Customs duty is levied on goods imported into or exported from India. Sec. 143A of the Customs Act, 1962, which is relevant for the present purpose reads as under :- "SECTION 143A : Duty deferment. - (1) When any material is imported under an import licence belonging to the category of Advance Licence granted under the Imports and Exports (Control) Act, 1947 (18 of 1947), subject to an obligation to export the goods as are specified in the said Licence within the period specified therein, the Assistant Commissioner of Customs or Deputy Commissioner of Customs may, notwithstanding anything contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the clearance obtained by the assessee of its imported raw material without payment of Customs duty leviable after complying with the conditions, as imposed by the competent authorities, does not imply that the charge of Customs duty does not arise. Rather, the charge of Customs duty gets crystallised and is fastened to the imported goods once they are brought into India from a place outside India. Therefore, having regard to the said legal position under the Customs Act, 1962, it is wrong on the part of the CIT(A) to say that the liability of Customs duty in the context of the import of raw material, i.e., crude oil against the Advance licence benefit does not arise; rather, it is a case where though the charge of duty arises, but the goods have been permitted clearance without payment of duty subject to the conditions prescribed under the Customs Act, 1962. Ostensibly, the CIT(A) has obliterated the difference between arising of the liability of Customs duty and its payment. Before us, the learned representative for the assessee had justifiably placed reliance on the judgments of the Hon'ble Supreme Court in the case of Metal Box Company of India Ltd., 73 ITR 53 (SC) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled export obligations amounting to Rs. 40,41,81,896/- out of the total Provision for Customs duty outstanding as on 31.3.2004 and, therefore, claimed it as a deduction u/s 43B of the Act. The stand of the Assessing Officer was that the provisions of Sec. 43B of the Act envisaged deduction of sum which is actually paid, whereas in the instant case there was no actual payment of duty. In other words, the discharge of obligation to export the finished products as per the terms of the Advance licence benefit undertaken by the assessee has not been understood to be a sum actually paid for the purpose of Sec. 43B of the Act. In this context, the assessee relied upon the decision of the Ahmedabad Bench of the Tribunal in the case of Pratibha Syntex Ltd. (supra) where it has been held that if the liability for payment of Customs duty in relation to imports of raw material is liquidated by performing an act, it would tantamount to payment thereof and deduction u/s 43B of the Act ought to be granted for the Customs duty liability in the year of export as it went to reduce the Customs duty liability. 36. Before us, the ld. DR appearing for the Revenue has emphasised on the stand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been assessed and, therefore, disallowance of Customs duty in the year of making import was unjustified and would result in double addition. At this stage, it has also been pointed out that the liability for payment of Customs duty, claimed as debit to the Profit & Loss Account, is neutralised by the inclusion of the same in the closing stock, and if the view of CIT(A) is adopted that there was no liability for payment of Custom duty in the first year of import, then the closing stock will have to be reduced by the corresponding duty included therein. It is pointed out that the inclusion of the Customs duty in the valuation of closing stock is undoubtedly on the footing that such a definite liability exists. Before us, reliance has been placed on the judgment of the Hon'ble Bombay High Court in the case of Nagri Mills Co. Ltd., 33 ITR 681 (Bom.) for the proposition that where a debit/credit in one year is off-set by a credit/debit in the subsequent year, the Assessing Officer would not be justified in disturbing what the assessee has done, particularly in the case of corporate assessees', where tax is attracted at a uniform rate. At the time of hearing, the aforesaid factual m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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