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TMI Blog1987 (3) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 1977-78. For assessment year 1978-79, the account year ended on 30-9-1977. Grounds 1 & 4 : Asst. Year 1977-78 : Ground 2 : Asst. Year 1978-79 : Allowability of Central Excise liability of Rs. 6,03,392 in asst. year 1977-78 and Rs. 32,22,558 in asst. year 1978-79 : Assessee-company had claimed the aforesaid liability on the basis of Collector of Central Excise's order dated 12-6-1980 that excise duty on polyester film manufactured by the assessee was payable @ 30% as against 1% paid by assessee. Income-tax Officer in asst. year 1977-78 had rejected the said claim on the ground that the liability had arisen much after the close of the relevant account year and that the assessee had not made provision for the said duty in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed classification claiming manufactured goods to be non-excisable (PB 27). However, on 11-11-1976, assessee by a further classification, claimed that 1% duty was payable. (PB. 28) Asst. Collector, by order dated 8-12-1977 (PB 29), accepted the assessee's claim. Thereafter, Collector of Central Excise, by notice dated 30-11-1978 (PB 30), sought to set aside under section 35A(2) Asst. Collector's aforesaid order by directing that the polyester film be classified under item No. 15A(2) of Central Excise Tariff, under which 30 % basic excise duty was payable. After hearing the assessee, Collector passed order on 12-6-1987 annulling the Asst. Collector's order dated 8-12-1977 and holding that polyester film manufactured by assessee was liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was entitled to claim the deduction in that year. 8. The learned counsel for the assesses, however, urged that statutory liability to pay excise duty arose as soon as excisable goods were manufactured, relying on Supreme Court's decision in Kirloskar Bros. v. Union of India (sic) (PB 67-72) where Supreme Court held that liability for excise duty would arise no sooner the manufacture or the production was completed and it was immaterial as to what machinery would be devised by the Govt. for recovery of the tax and that the point of recovery or any restriction on removal will not be the determining factor for grant of exemption in respect of goods manufactured during the duty free period. 9. Applying the ratio of the aforesaid Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ore Co. Ltd.'s case. Under Sales-tax Act when similar problems have arisen, namely, extra demand is raised by the Sales-tax authorities, it has been held that the liability arises only on the completion of the sales-tax assessment-Banwari Lal Madan Mohan v. CIT [1978] 113 ITR 562 (All.)---where it was held that quantification of sales-tax liability took place in the financial year in which sales-tax appellate order was passed (assessment year 1962-63) which related to assessment years 1954-55 to 1957-58. Allahabad High Court had followed its earlier decision in CIT v. Banwari Lal Madan Mohan [1977] 110 ITR 868. Gauhati High Court in CIT v. Nathnial Tolaram [1973] 88 ITR 234 held that sales-tax in respect of earlier years was allowable in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basic alterations in the profit-earning structure of the company or the very structure of the company that could be considered to be bringing into existence an asset of an enduring nature, then the expenditure was capital expenditure, as it altered the framework of the structure under which the assessee was carrying on business. 16. Counsel for the assessee, however, relied on four Madras decisions, namely, Addl. CIT v. W.A. Beardsell & Co. (P.) Ltd. [1981] 130 ITR 159 where it was held that amalgamation expenses related to the carrying on or conduct of the business and was therefore an integral part of profit-earning process. Similar view was taken in CIT v. Kisenchand Chellaram (India) (P.) Ltd. [1981] 130 ITR 385 (Mad.) where fee paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue's appeal for asst. year 1977-78 is allowed. 20. In asst. year 1978-79, the first ground is regarding the addition of Rs. 32,000 which was received on 22-12-1971 as a deposit from M/s. Cema Pvt. Ltd. for supply of plastic moulds by the assessee-company. As the mould manufactured by the assessee-company was not lifted by the said depositor, ITO treated the said amount as part of assessee's income in asst. year 1978-79 (account year ending 30-9-1977). As per assessee's account books, the said credit in the account of the aforesaid creditor is carried forward till 1-7-1985. On these facts, the crucial question is how does the Revenue treat this amount as assessee's income for asst. year 1978-79. The limitation period of three years had e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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