M/S HYDROLINES INDIA V. THE COMMISSIONER OF

RP/352/2014

AI Insights

The case involves M/s. Hydrolines India, represented by its partner Sri Deepak Sethi, who filed a review petition against the order dated 4th October 2012 in ITA No. 750/2007. The original order required the assessee to include excise duty in the valuation of goods for tax purposes under Section 145-A of the Income Tax Act. The review petition sought to address the omission of a provision that the excise duty paid should be considered an expenditure, thereby benefiting the assessee. The court's decision clarified the accounting treatment of excise duty in the context of inventory valuation and its impact on taxable income.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 727131 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-12-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs Mahaveer Aluminium Ltd
• Laws Referred To: Income Tax Act, Order 47 Rule 1 of CPC
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI
• Keywords: Excise Duty; Income Tax; Inventory; Review petition; Valuation of Goods
• Section: 145-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 12th DAY OF DECEMBER, 2014 PRESENT THE HON' BLE MR. JUSTICE N.KUMAR AND THE HON' BLE MR. JUSTICE B. MANOHAR REVIEW PETITION No. 352/2014 (T-IT) in ITA 750/2007 BETWEEN: M/s. Hydrolines India, M-4, 5th Cross, I Stage, Peenya Industrial Estate, Bangalore-560 058, Represented by its Partner, Sri Deepak Sethi, Aged about 68 years, Son of late O.P. Sethi. ... PETITIONER (BY SRI S. PARTHASARATHI, ADVOCATE) AND: 1. The Commissioner of Income Tax, Central Circle, C.R. Building, Queens Road, Bangalore-560 001. 2. The Asst. Commissioner of Income-tax, Circle-6(1), C.R. Building, Queens Road, Bangalore-560 001. ... RESPONDENTS (BY SRI K.V. ARAVIND, ADVOCATE) … 2 This review petition is filed under Order 47 Rule 1 of CPC praying to review the order dated 4.10.2012 passed in ITA No. 750/2007 on the file of this Court, Bangalore. This review petition coming on for Orders this day, N. Kumar J., made the following: ORDER The assessee has preferred this review petition seeking review of the order dated 4th October, 2012 in ITA No.252/2007 and other connected matters. 2. In the impugned order at para-12, this Court has held that the assessee has to make valuation of the goods in his possession under the process of manufacturing and not yet sold or clearance not done. In such cases, the assessee does not incur the liability to pay excise duty. However, he is obliged under Section 145-A of the Income Tax Act to value the goods which should include the excise duty paid or incurred. Further at para-15 relying on the judgment of the Delhi High Court in the case of Commissioner of Income Tax – vs- Mahaveer Alluminium Ltd reported in 297 ITR 77 it was held that the inclusion of excise duty or tax paid for 3 valuation at the time of inventory is necessary not only for the closing stock but also for the opening stock. The said finding is annulled by this Court negating the contention of the assessee that it is not liable to be included not only for the closing stock but also for the opening stock. 3. It is contended in this review petition that when such duty is paid, it has to be shown as an expenditure and the benefit has to be extended to the assessee and that is missing in the impugned order. It is for that inclusion of that observation, this review petition is filed. 4. The learned Counsel for the revenue submits whether it is charged of or not is a matter to be verified and therefore, he submits reserving liberty to the revenue, the Court may direct that the same is liable to be charged of, it is actually paid. 5. As is clear from Section 145-A of the I.T.Act, notwithstanding anything to the contrary contained in Section 145, the valuation of purchase and sale of goods 4 and inventory for the purposes of determining the income chargeable under the head ‘Profits and gains of business or profession’ shall be in accordance with the method of accounting regularly employed by the assessee. When once the excise duty is included in terms of Section 145A of the Act, to arrived at the value of goods, then the duty so paid has also to be accounted as an expenditure incurred. In that view of the matter, the revenue shall verify whether the actual said payment is paid and if it is so paid, shall give benefit of deduction of the same as an expenditure. In that view, we pass the following: ORDER Review Petition is partly allowed to the extent of aforesaid observations. Sd/- Judge Sd/- Judge Nsu/- "