M/s. Maruti Interior Products P. Ltd., RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(3), RAJKOT-GUJARAT

CO 1/RJT/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8393 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR IJ
• Assessee Lawyers: RAJESH M UPADHYAY J A
• Keywords: Business expenditure; Cost of acquisition
• Section: 43B; 143(3); 11

Judgement Text

A T, IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. .. O, UR . . , BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO .650 /RJT/20 1 2 . I I / ASSESSMENT YEAR 200 4 - 05 INCOME TAX OFFICER WARD 1(3), AAYAKAR BHAVAN, 7 TH FLOOR, RACE COURSE RING ROAD, RAJKOT. ( ) / APPELLANT) VS. M/S MARUTI INTERIOR PRODUCTS P LTD., PLOT NO.13, SURVEY NO.236, AT SHAPAR (VERAVAL) TAL - KOTDASANGANI, DIST. RAJKOT PAN: AACCMO762A E) / RESPONDENT CO NO.1/RAJ/2013 IN I T A NO .650/RJT/2012. I I / ASSESSMENT YEAR 200 4 - 05 M/S MARUTI INTERIOR PRO DUCTS P LTD., ( ) / CROSS - OBJECTOR ) VS. INCOME TAX OFFICER WARD 1(3), E) / RESPONDENT U J / REVENUE BY SHRI AVINASH KUMAR IJ / ASSESSEE BY SHRI RAJESH M UPADHYAY J A /DATE OF HEARING 14.2. 201 3 J A / DATE OF PRONOUNCEMENT 28. 2.2013 / ORDER .. O, UR / T. K. SHARMA, J. M. THESE TWO APPEALS BY THE REVENUE AND CROSS - OBJECTION BY THE ASSESSEE ARE AGAINST THE ORDER DATED 18.10.2012 OF CIT(A) - RAJKOT FOR THE ASSESS MENT YEAR 2004 - 05. THE APPEAL AND CROSS - OBJECTION WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.650/RJT/2012. AND CO - 1/R/2013 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND T RADING OF S S KITCHEN BASKETS. FOR THE YEAR UNDER CONSIDERATION, IT FILED RETURN OF INCOME ON 13.10.20 0 4 DECLARING TOTAL INCOME AT RS.1,01,670/ - . THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1 9 61 ON 12.12.20 0 6 AT A TOTAL I NCOME OF RS.24,32,979/ - . IN THIS ASSESSMENT ORDER, THE AO DISALLOWED THE PAYMENT OF EXCISE DUTY AMOUNTING TO RS.23,29,874/ - . THE BIFURCATION OF EXCISE DUTY IS AS UNDER : (A) AMOUNT OF EXCISE DUTY ACTUALLY PAID RS.15,49,148/ - (B) MODVAT CREDIT ADJUST ED AGAINST THE LIABILITY RS.7,80,727/ - RS.23,29,874/ - . 3. BEFORE THE AO, THE ASSESSEE EXPLAINED THAT COMPANY SHOWN NET PURCHASES I. E. TOTAL PURCHASE LESS MODVAT ADD BACK THE SAME TO THE EXPENSES OF EXCISE U NDER P ROTEST SO THE ACTUAL AMOUNT PAID UNDER PROTEST IS RS.15,49,148 PLUS MODVAT CREDIT ADJUSTED RS.7,80,727/ - AGGREGATING TO RS.23,29,874/ - DEBITED TO THE PROFIT AND LOSS A CCOUNT UNDER MANUFACTURING EXPENSES ACCOUNT. THE AO DISALLOWED THE SAME FOR THE DETAILED REASONS GIVEN IN THE ASSESSMENT ORDER AS UNDER : 1. FROM THE VERSION OF T HE ASSESSE, ITS UNIT IS NOT EXCISABLE UNDER THE E XCISE ACT AND IT HAD PAID THE AMOUNT IN QU ESTION UNDER THE PROTEST. THE VERY FACT SUGGEST THAT THE LIABILITY OF PAYMENT UNDER THE EXCISE HAVE NOT BEEN CRYSTALIZED AN D AS PER THE PROVISION OF THE INCOME TAX ACT, UNLESS AND UNTIL ANY EXPENDITURE IS NOT CRYSTALIZED , IT CANNOT NOT BE PART TAKE THE C HARACTER OF OUTGOING EXPENDI TU RE AND CAN BE DEBITED TO P&L ACCOUNT. 2. AS PER THE OBSERVATION OF VARIOUS HIGH COURT S THE EXPENDITURE IS WHAT IS PAID OUT OR AWAY AND IS SOMETHING WHICH IS GONE IRRETRIEVABLY (INDIAN MOLASSES CO. P LTD V/S CIT ITA NO.650/RJT/2012. AND CO - 1/R/2013 3 (1959) 3 ITR 66 (SC). THE HO N BLE SUPREME COURT IN THE CASE OF CIT V/.S NATIONAL BANK LTD 62 ITR 638 HAD HELD THAT A MERE LIABILITY TO SATISFY AN OBLIGATION BY AN ASSESSEE IS UNDOUBTEDLY NOT EXPENDITURE, IT IS ONLY WHEN THE SATISFIED HIS OBLIGATION BY DELIVE RY OF CASH OR PROPERTY OR BY SETTLEMENT OF ACCOUNT THAT THERE IS AN EXPENDITURE. A MERE FORBEARANCE TO REALIZE A CLAIM IS NOT EXPENDITURE. 3. THE ASSESSEE IN HIS ACCOUNT DEBITED RS.23,29,874/ - AS PAYMENT OF EXCISE DUTY UNDER PROTEST. BY THIS SUBMISSIO N THE ASSESSEE PLEADED THAT THE AMOUNT OF RS.15,49,148/ - BE CONSIDERED FOR DISALLOWANCE ON ACCOUNT OF PAYMENT UNDER PROTEST AND NOT THE AMOUNT OF RS.23,29,874/ - . THE SUBMISSION SO MADE BY THE ASSESSE IS ALSO NOT ACCEPTABLE ON THE GROUND THAT ONCE IT IS ESTABLISHED THAT THE UNIT OF THE ASSESSEE IS NOT ENTITLED FOR EXCISE DUTY THE ASSESSEE WILL BE ENTITLED FOR REFUND FOR ENTIRE AMOUNT OF RS.23,29,874/ - IRRESPECTIVE OF THE MODE THROUGH WHICH IT HAS BEEN PAID OR DEPOSITED. IN THIS SITUATION , THE ARGUMEN T OF THE ASSESSEE DOES NOT SURVIVE ON ANY LEGAL FOOTING AS WELL AS IN TERM OF PRINCIPLES OF ACCOUNTANCY AS APPLICABLE UNDER THE INCOME TAX ACT . ACCORDINGLY, THE ENTIRE AMOUNT OF RS.23,29,874/ - DEBITED ON PAYMENT OF EXCISE DUTY UNDER PROTEST IS DISALLOWE D AND ADDED BACK TO THE TOTAL INCOME. IT IS NOW WELL SETTLED LAW THAT THE WAY IN WHICH THE ENTRY IS MADE BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS IS NOT DETERMINATIVE OF THE QUESTION WHETHER THE ASSESSEE HAS EARNED ANY PROFIT OR SUFFER ANY LOSS. THE AS SESSEE MAY BY MAKING ENTRIES WHICH ARE NOT IN CONFORMITY WITH THE PROPER ACCOUNTANCY PRINCIPLE, CONCEAL PROFIT OR SO LOSS AND THE ENTRIES MADE BY HIM CANNOT BE THEREFORE BE REGARDED AS CONCLUSIVE ONE WAY OR THE OTHER . WHAT IS NECESSARY TO BE CONSIDERED I S THE TRUE NATURE OF THE TRANSACTION AND WHETHER IN FACT IT HAS RESULTED IN PROFIT OR LOSS TO THE ASSESSEE (SATLEJ COTTON MILLS LTD. V/S CIT (1979) 116 ITR 1 (SC). THE MODE OR SYSTEM OF BOOK KEEPING CANNOT OVERRIDE THE SUBSTANTIAL CHARACTER OF TRANSACTION (ASHOK VINIYOGA LTD. V/ S CIT (1972) 84 ITR 264 (SC). FOR INSTANT, A TRADING RECEIPT WILL REMAIN A TRADING RECEIPT EVEN IF IT IS NOT SHOWN AS TREADING RECEIPT SHOWN IN THE BOOKS OF ACCOUNT KEPT BY ASSESSEE AND THEREFORE IT DOES NOT PREVENT THE ASSESSING A UTHORITY FROM TREATING IT AS SUCH. (CHOWRINGHEE SALES BUREA PVT.LTD. V/S CIT 87 ITR 542(SC). MERELY DEBITING THE EXPENDITURE UNDER THE HEAD PROTEST WILL NOT ALTER THE CHARACTER OF THE EXPENDITURE I . E. THE EXPENDITURE WHICH CAN NOT BE ALLOWED AND AT THE MOST CAN BE AN ITEM OF BALANCE SHEET UNDER THE HEAD MISC. ASSETS. 4 . APART FROM THE ABOVE, IN THE ASSESSMENT ORDER, THE AO DISALLOWED AN EXPENDITURE ON TRAVELING EXPENSES AMOUNTING TO ITA NO.650/RJT/2012. AND CO - 1/R/2013 4 RS.1,03,105/ - IN RESPECT OF DIRECTOR SHRI LUNAGARIA PARESH PARS HOTTAM FOR THE TRIP AT CHINA. THIS DISALLOWANCE WAS MADE ONLY ON THE GROUND THAT IN THE VOUCHER PRODUCED, ONE OF THE ITEMS WAS NOT MANUFACTURED BY THE ASSESSEE COMPANY. FOR THIS REASON, THE AO HELD THAT THE FOREIGN TOUR EXPENSES INCURRED BY THE DIREC TOR WAS NOT FOR THE PURPOSE OF BUSINESS AND HE DISALLOWED RS.1,03,105/ - . 5 . ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSE CONTENDED THAT IT HAS MADE PAYMENTS TOWARD EXCISE DUTY AMOUNTING TO RS.23,29,874/ - (RS.15,49,148/ - DIRECT PAYMENT + 780727/ - ADJU STMENT OF MODVAT CREDIT) THE CENTRAL GOVERNMENT UNDER PROTEST AND HENCE THE SAME WAS CLAIMED AS BUSINESS EXPENDITURE U/S 43B OF T HE ACT. IT WAS ALSO EXPLAINED THAT IN THE EARLIER ASSESSMENT YEAR THE COMPANY WAS NOT UNDER AN OBLIGATION TO PAY EXCISE D UTY, ONLY IN THE YEAR UNDER APP EAL , ITS TURNOVER CROSSED EXEMPTION LIMIT LAID DOWN UNDER THE EXCISE LAW AND THEREFOR IT HAD TO AVAIL THE EXCISE REGISTRATION . THE ASSESSEE COMPANY GOT ITS REGISTRATION THOUGH ITS PRODUCT I.E. SS KITCHEN BASKETS IS AN EX EMPT ITEM UNDER THE EXCISE ACT BUT THE VIEW OF THE CENTRAL EXCISE AUTHORITY WAS DIFFERENT WITH THAT OF THE ASSESSEE AND THEREBY THE COMPANY WAS COMPELLED TO MAKE PAYMENT OF EXCISE DUTY ON THE PRODUCT MANUFACTURED BY IT. 6. BEFORE THE LD. CIT(A) IT WA S CLAIMED THAT EXCISE DUTY ACTUALLY PAID IS ALLOWABLE U/S 43B OF THE ACT. IN CASE OF REFUND THE SAME CAN BE TAXED U/S 41(1) OF THE ACT IN THE YEAR OF RECEIPT OF SUCH REFUND . OTHER CONTENTION OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT IN THE ITA NO.650/RJT/2012. AND CO - 1/R/2013 5 ASSESSM ENT YEAR 2005 - 06 THE PAYMENT OF EXCISE DUTY RS.32,05,626/ - WAS MADE. SUBSEQUENTLY, IN THE FINANCIAL YEAR 2009 - 10 THE PAYMENTS WERE MADE TO THE CENTRAL GOVERNMENT AND THESE WERE ALLOWED. IN THE ASSESSMENT YEAR 2005 - 06, THE AO HIMSELF COMPLETED THE AS SESSMENT U/S 143(3) WHEREIN HE ACCEPTED SUCH DUTY PAYMENT. FINALLY, IT WAS CONTENDED THAT BEFORE CESTAT THE ASSESSEE TAKEN ITS CASE AGAINST THE EXCISE DUTY. AS A RESULT OF THIS, THEIR ENTIRE DUTY PAID WAS REFUNDED ON 30.9.2009 AMOUNTING TO RS.1,42,30,2 92/ - WHICH INTERALIA INCLUDES RS.15,80,148/ - PAID IN THE ASSESSMENT YEAR UNDER APPEAL. THE SAID AMOUNT WAS OFFERED FOR TAXATION IN THE ASSESSMENT YEAR 2010 - 11 UNDER SECTION 41(1) OF THE ACT. THE DUTY PAID IS ALLOWABLE U/S 43B. IN SUPPORT OF THIS THE RELIANCE WAS PAID ON THE FOLLOWING DECISIONS: (A) DCIT, NEW DELHI V/S M/S SILICON GRAPHICS SYSTEMS (I)LTD (DATED 28.5.20 0 9); (B) GLAXO SMITHKLINE CONSUMER HEALTHCARE (2008) 299 ITR 1 CHD AND ( C ) CIT V/S FLOWSERV MICROFINISH VALVES PVT.L TD (2012)44 (I) ITCL 87 7 . AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A) ALLOWED THE EXCISE DUTY TO THE EXTENT OF RS.15,49,148/ - AND CONFIRMED THE DISALLOWANCE OF REMAINING AMOUNT OF RS.7,80,727/ - FOR THE DETAILED REASONS GIVEN IN PARAGRAPH 3.5 OF THE IMPUGNED ORDER WHICH READ AS UNDER : 3.5 I HAVE CONSIDERED THE CONTENTION OF THE AO AND THE SUBMISSION OF THE AR OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE RELEVANT DECISIONS RELIED UPON BY THE RIVA L PARTIES. DURING THE YEAR UNDER CONSIDER ATION, THE AO H A S DISALLOWED A ITA NO.650/RJT/2012. AND CO - 1/R/2013 6 SUM OF RS.23,29,874/ - DEBITED AS PAYMENT OF EXCISE DUTY U/S 43B UNDER PROTEST BY HOLDING THAT THE LIABILITY OF SUCH PAYMENT HAS NOT BEEN CRYSTALIZED DURING THE YEAR UNDER CONSIDERATIO N. FROM THE FACTS, IT IS SEEN THAT THE APPELLANT PAID A SUM OF RS.15,49,148/ - UNDER PROTEST ON ACCOUNT OF EXCISE DUTY AND CLAIMED ADJUSTMENT OF MODVAT CREDIT OF RS.7,80,727/ - WHICH AGGREGATES TO RS.23,29,874/ - . THE WHOLE CONTROVERSY UNDER REFERENCE IS COVERED BY THE SPECIAL BENCH DECISION IN THE CASE OF DCIT V/S GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD. OF CHANDIGARH BENCH REPORTED IN 299 ITR 1. IN THE SAID DECISION, THE HONBLE BENCH COMPRISING OF FIVE MEMBERS HAS DEALT WITH THE FOLLOWING TWO QUE STIONS : A) WHETHER DEDUCTION OF TAX, DUTY ETC. IS ALLOWABLE U/S 43B OF THE INCOME TAX ACT, 1961 ON PAYMENT BASIS BEFORE INCURRING LIABILITY TO PAY SUCH AMOUNTS ? (B) WHETHER MODVAT CREDIT AVAILABLE TO THE ASSESSEE AS ON THE LAST DAY OF THE PREV IOUS Y EAR AMOUNTS TO PAYMENT OF CENTRAL EXCISE DUTY U/S 43B? THE HON BLE MEMBERS HAVE ANSWERED THE QUESTION NO.1 IN FAVOUR OF THE ASSESSEE AND QUESTION NO.2 IN FAVOUR OF THE REVENUE. BY APPLYING HE RATIO OF THE SAID DECISION TO THE FACTS OF THE PRESENT CA SE, I DIRECT THE AO TO ALLOW THE CLAIM OF ACTUAL PAYMENT OF EXCISE DUTY OF RS.15,49,148/ - UNDER THE PROVISIONS OF SECTION 43B.THE REMAINING SUM OF RS.7,80,727/ - WHICH IS ON ACCOUNT OF ADJUSTMENT OF MODVAT CREDIT IS NOT TO BE ALLOWED AS THE CREDIT BALAN CE AT THE YEAR END LYING IN THE MODVAT CREDIT ACCOUNT DOES NOT AMOUNT TO PAYMENT OF TAXES U/S 43B IN VIEW OF THE DECISION CITED ABOVE. THUS THIS GROUND OF APPEAL IS PARTLY ALLOWED 8 . IN THE IMPUGNED ORDER THE LD. CIT(A) ALSO DELETED THE DISALLOWANCE OF TRAVELING ALLOWANCE TO THE EXTENT OF RS.1,03,105/ - FOR THE DETAILED REASONS GIVEN IN PARAGRAPH 4.2 WHICH READS AS UNDER : 4.2 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IT IS SEEN THAT ONE OF THE DIRECTOR S SHRI LUNAGARIA PARESH PARSHOOTAM HAD WEN T TO GANAGZHOU, CHINA FOR PURCHASE OF KITCHEN BASKETS, DRAWER, SLIDES ETC. IN SUPPORT OF ITS CLAIM, THE APPELLANT HAS SUBMITTED COPY OF PASSPORT AND VISA, AIR TICKETS, EVIDENCES OF OTHER EXPENSES INCURRED, PURCHASE BILL FOR IMPORT OF KITCHEN BASKETS AND COPY OF ENTRY PASS AND BROCHURE OF WELMAX INDUSTRIES, CHINA AND COPY OF CATALOGUE AND BROCHURE OF APPELLANT COMPANY ETC. IT IS A WELL KNOWN FACT THAT GANAGZHOU, IS A BUSINESS HUB OF CHINA AND IT CANNOT BE TERMED AS A TOURIST ITA NO.650/RJT/2012. AND CO - 1/R/2013 7 ATTRACTION PLACE AS SUCH. FROM THE DETAILS SUBMITTED IN SUPPORT OF THE CLAIM, IT IS EVIDENT THAT THE FOREIGN TOUR UNDERTAKEN BY THE DIRECTOR IS FOR THE EXCLUSIVE BUSINESS PURPOSE OF THE APPELLANT COMPANY AND NOT OTHERWISE . MERE FACT THAT THERE WAS DIFFERENCE IN THE BROCHURES SUBM ITTED BY THE APPELLANT AND PRODUCTS BEING MANUFACTURED SUBSEQUENTLY CANNOT BE LEAD TO THE CONCLUSION THAT THE FOREIGN TOUR EXPENSES INCURRED WERE NOT FOR THE BUSINESS PURPOSES , MORE SO WHEN THE PLACE VISITED IS A BUSINESS HUB AND NOT A TOURIST PLACE. CONSI DERING THESE FACTS, THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELETE 9 . AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL WITH THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CA S E IN ALLOWING THE CLAIM OF ACTUAL PAYMENT OF EXCISE DUTY OF RS.15,49,148/ - MADE U/S 43B OF THE ACT AND IN DELETING THE ADDITION OF RS.1,03,105/ - MADE ON ACCOUNT OF DISALLOWANCE OF FOREIGN TOUR EXPENSES INCURRED BY ITS DIRECTOR FOR NON - BUSINESS PU RPOSES . 2. ON THE FACTS OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO IN RESPECT OF DISALLOWANCE OF RS.15,49,148/ - MADE U/S 43B OF THE ACT AS THERE WAS NO LIABILITY TO PAY THE EXCISE DUTY DURING THE YEAR UNDER CONSIDERATION. THIS FACT IS FURTHER SUBSTANTIATED BY THE CLAIM OF ASSESSEE BEFORE THE LD. CIT(A) THAT THE SAME HAS BEEN REFUNDED TO IT BY THE EXCISE DEPARTMENT IN SU BSEQUENT YEAR. 3. ON THE FACTS OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO IN RESPE CT OF ADDITION OF RS.1,03,105/ - MADE TOWARDS FOREIGN TOUR OF THE DIRECTOR NOT BEING EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AS BROCHURES PRODUCED DURING ASSESSMENT PROCEEDINGS CONTAINED ITEMS DIFFERENT THAN ITEMS MANUFACTURED BY THE ASSESSEE . . 10 . AG AINST THE APPEAL OF THE REVENUE, THE ASSESSEE ALSO FILED CROSS - OBJECTION BY RAISING FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE CLAIM OF ACTUAL PAYMENT OF EXCISE DUTY OF RS.15,49,148/ - INSTEAD OF ALLOWING FULL CLAI M OF RS.23,29,874/ - MADE BY THE APPELLANT ON THE GROUND THAT ADJUSTMENT OF MODVAT CREDIT DOES NOT AMOUNT TO PAYMENT OF TAXES U/S 43B OF THE ACT. ITA NO.650/RJT/2012. AND CO - 1/R/2013 8 2. ON THE FACTS OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE FULL RELIEF OF EXCISE DUTY PAYMENT FOR RS.23,29 ,874/ - AS PROVIDED IN SECTION 43B OF THE ACT BECAUSE ENTIRE SUM WAS TAXED IN THE YEAR OF RECEIPT, THAT IS IN 2010 - 11, WHEN IT WAS REFUNDED BY HE CENTRAL EXCISE DEPARTMENT AND THEREBY THE SAME AMOUNTS TO DOUBLE TAXATION 1 1 . AT THE TIME OF HEARING BEFOR E US SHRI RAJESH M UPADHYAY, THE LD. COUNSEL APPEARED AND FILED PAPER BOOK CONTAINING 196 PAGES. HE DREW OUT ATTENTION THE PAGE 23 OF THE ASSESSEES PAPER BOOK AND CONTENDED THAT THE ASSESSEE HAS ACTUALLY PAID RS.23,29,874/ - (RS .15,49,148/ - TOWARDS P AYMENT OF EXCISE DUTY UNDER PROTEST AND RS.780,727/ - TOWARDS MODVAT CREDIT) AS EXCISE DUTY UNDER PROTEST TO CENTRAL GOVERNMENT. IN THE RETURN OF INCOME, THE ASSESSEE HAS CLAIMED DEDUCTION OF EXCISE DUTY U/S 43B OF THE ACT AMOUNTING TO RS.23,29,874/ - BEC AUSE THIS PAYMENT IS ALLOWABLE AS DEDUCTION IN THE YEAR OF PAYMENT. THE LD.COUNSEL FOR THE ASSESSEE EXPLAINED MODIFIED VALUE ADDED TAX (MODVAT) IS A PROCEDURE WHEREBY MANUFACTURER CAN UTILIZE THE CREDIT FOR INPUT DUTY AGAINST EXCISE DUTY PAYABLE ON FI NAL PRODUCT. FOR EXAMPLE, SAY A MANUFACTURES PRODUCT F AND EX - FACTORY PRICE OF SUCH PRODUCT IS RS.140/ - (INCLUSIVE OF EXCISE DUTY OF RS.20/ - ) AND SUCH PRODUCT IS USED AS INPUT FOR ANOTHER MANUFACTURER FOR THE MANUFACTURE OF PRODU CT Y, THE EX - FACTORY PRICE OF WHICH IS RS.200/ - INCLUSIVE OF EXCISE DUTY OF RS.30/ - ( THEN WE WILL PAY EXCISE DUTY TO THE TUNE OF RS.10 ONLY ) TAKING CREDIT FOR SUCH DUTY PAID BY A. THE MODVAT CREDIT HAS ALWAYS DEBIT BALANCE. THE LD. COUNSEL OF THE ASSESSEE FURT HER EXPLAINED THAT THE ASSESSEE FOLLOW EXCLUSIVE METHOD. UNDER THIS METHOD , THE DUTY PAID ON INPUT MAY BE DEBITED TO A SEPARATE ACCOUNT I.E. MODVAT CREDIT ACCOUNT AND MODVAT CREDIT IS ITA NO.650/RJT/2012. AND CO - 1/R/2013 9 DEBITED TO THE SEPARATE ACCOUNT IE. RECIPIENT ACCOUNT AS A MODVAT CREDIT IS ACTUALLY UTILIZED AGAINST THE PAYMENT OF EXCISE DUTY ON FINAL PRODUCT, THE ASSESSEE ADJUSTED THE EXCISE DUTY PAID ON ACCOUNT OF MODVAT CREDIT RECEIVABLE ACCOUNT TO THE ACCOUNT MAINTAINED BY PAYMENT/ PROVISIONS FOR EXCUSE DUTY ON FINAL PRODUCT. IN THIS MANNER, THE PURCHASE COST OF THE INPUT TO THE NET EXCISE DUTY OF PURCHASE COST NET OF INPUT DUTY. SINCE, THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD, THEREFORE, MODVAT CREDIT OF RS.7,80,727/ - ADJUSTED AGAINST THE EXCISE DUTY PAYABLE ON RS.23, 29,874/ - IS ALLOWABLE I.E.RS.15,49,148/ - ACTUALLY PAID DURING THE YEAR AND MODVAT CREDIT OF RS. 780,727/ - ADJUSTED AGAINST THE DUTY PAYABLE . 12 . ON THE OTHER HAND, THE LD. DR POINTED OUT THAT EXCISE DUTY PAID UNDER PROTEST AMOUNTING TO RS. 23,29,874 / - IS NOT ALLOWABLE THE ASSESSEE HAS NOT ADMITTED THE LIABILITY OF EXCISE DUTY . 1 3 . AFTER HEARING BOTH THE SIDES , WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD O F ACCOUNTING, THEREFORE, IT HAS ADJUSTED THE MODVAT CREDIT OF RS.7,80,727/ - AGAINST EXCISE DUTY PAYABLE RS.23,29,874/ - . THE BALANCE EXCISE DUTY RS.15,49,148/ - IS ACTUALLY PAID. THUS, THE ASSESSEE HAS ACTUALLY PAID RS.23,29,874/ - AS EXCISE DUTY WHICH IS ALLOWABLE U/S 43B OF THE ACT. A S PER THE DECISION OF CHANDIGRAH BENCH OF THE TRIBUNAL IN THE CASE OF GLAXO SMITHKLINE CONSUMER HEALTHCARE (SUPRA) AS RELIED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. IN THE IMPUGNED ORDER, THE LD.CIT(A) HAS ALL OWED ITA NO.650/RJT/2012. AND CO - 1/R/2013 10 ONLY THE EXCISE DUTY TO THE EXTENT OF RS.15,49,148/ - WHICH IN OUR CONSIDERED OPINION IS LEGALLY AND FACTUALLY CORRECT . HOWEVER, THE BALANCE EXCISE DUTY PAYABLE AMOUNTING TO RS.7,80,727/ - IS ALSO ACTUALLY PAID BY WAY OF MODVAT CREDIT ADJUSTED IS ALS O ALLOWABLE AS THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING . WE, THEREFORE, DIRECT THE AO TO ALLOW THIS BALANCE AMOUNT OF RS.7,80,727/ - ALSO U/S 43 B OF THE ACT. 1 4 . WITH REGARD TO THE DELETION OF RS.1,03,105/ - , WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITION OF FOREIGN TRAVELLING EXPENDITURE ON THE GROUND THAT GANAGZHOU, IS A BUSINESS HUB OF CHINA FROM WHICH EXPORT - IMPORT ACTIVITIES IS ALSO BEING DONE AND IT CANNOT BE TERMED AS A TOURIST ATTRACTION PLACE AS SUCH AND THE DIRECTOR PERF ORMED THE TRAVELING TO CHAINA DURING THE COURSE OF ITS BUSINESS. THEREFORE, WE ARE OF THE VIEW THE LD. CIT(A) IS RIGHT IN DELETING THE ADDITION ON ACCOUNT OF FOREIGN TRAVELING EXPENSES AMOUNTING TO RS.1,03,105/ - . ACCORDINGLY, WE CONFIRM THE ACTION OF THE LD. CIT(A) ON THIS ISSUE. 15. FOR THE AFOREMENTIONED REASONS, WE CONFIRM THE ORDER OF THE LD.CIT(A) DELETING THE DISALLOWANCE OF EXCISE DUTY OF RS.15,49,148/ - AND TRAVELING EXPENSE S OF RS.1,03,105/ - AND DIRECT THE AO TO ALLOW BALANCE AMOUNT OF RS.7,80,72 7/ - WHICH IS ACTUALLY PAID BY WAY OF MODVAT CREDIT AND ADJUSTED AS THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING. ITA NO.650/RJT/2012. AND CO - 1/R/2013 11 1 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS - OBJECTION OF THE ASSESSEE IS ALLOWED. THIS ORDER IS P RONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD SD ( U / D. K. SRIVASTAVA) ( A I / T. K. SHARMA) CAT0 / ACCOUNTANT MEMBER U / JUDICIAL MEMBER I/ ORDER DATE 28 - 0 2 - 201 3 . /RAJKOT SRL 8 RJ P / COPY OF ORDER FO RWARDED TO: - 1 ) / APPELLANT - 2 E) / RESPONDENT - 3 T / CONCERNED CIT , 4. - / CIT (A) , 5 ET, A T, / DR, ITAT, RAJKOT 6 I / GUARD FILE. / BY ORD ER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT.