The Dy. Commissioner of Income Tax, Circle-4(1)(2), Ahmedabad V. M/s. Transformers & Rectifiers (India) Ltd., Ahmedabad

ITA 2440/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5157 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Section: 143(3); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 4(1)(2), AHMEDABAD (APPELLANT) VS M/S. TRANSFORMERS & RECTIFIERS (INDIA) LTD. SURVEY NO. 340 - 350, CHANDGODAR, SARKHEJ BAVLA HIGHWAY, SANAND, AHMEDABAD - 382110 PAN: AACCT8243P (RESPONDENT) REVEN UE BY : S H RI LALIT P. JAIN , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 27 - 09 - 2 018 DATE OF PRONOUNCEMENT : 03 - 10 - 2 018 / ORDER P ER : AMARJIT SINGH, AC COUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A. Y. 2012 - 13 , ARI SES FROM ORDER OF THE CIT(A) - 8, AHMEDABAD DATED 14 - 07 - 2 016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSING OFFICER NOTICED THAT ASSESSE EE HA D SHOWN AMOUNT RECEIVABLE ON ACCOUNT OF UNREALIZED / CLOSING BALANCE ON ACCOUNT OF MODVET/CENVAT CREDIT UNDER LOAN AND ADVANCES WHICH WAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK. THE ASSESSING OFFICER OBSERVED THAT PROVISION OF I T A NO . 2440 / A HD/20 16 A SS ESSMENT YEAR 2012 - 13 I.T.A NO. 2 44 0 /AHD/20 16 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. TRANSFORMERS & RECTIFIERS (INDIA) LT D. 2 SECTION 145A O F THE ACT REQUIRES THAT THE TAXES/DUTY/CESS/FEES RELATED TO STOCK NEED TO BE INCLUDED IN THE VALUE OF CLOSING STOCK, THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY NOT ADDITION U/S. 145A OF THE ACT BE MADE. THE ASSESSEE EXPLAINED THAT IT HAS BEEN REGU LARLY FOLLOWING EXCLUSIVE METHOD OF VALUING THE PURCHASE/SALE OF GOODS AND INVENTORY EXCLUDING TAX DUTY AND CESS. IT WAS FURTHER SUBMITTED THAT NET EFFECT OF VALUATION PRESCRIBED U/S. 145A OF THE ACT IS RS. N IL. IT WAS EXPLAINED THAT THE COST OF RAW MATERIAL AND BACKING MATERIAL CONSUMED WAS SHOWN NET O F EXCISE DUTY AND CESS THEREFORE UNREALIZED CENVAT CREDIT HAD NOT BEEN ADDED WHILE VALUING CLOSING STOCK. T HE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT IN VIEW OF THE EXPRESS PROVISIONS OF SECTION 145A OF THE ACT THE SAID UNREALIZED BALANCES OF TAXES NEED TO BE INCLUDED IN THE VALUE OF CLOSING STOCK. THEREFORE, THE ASSESS ING OFFICER HAS MADE ADDITION OF RS. 1,15,74,181 / - ON THE GROUND THAT ASSESSEE HAS NOT INCLUDED THE SAME IN VALUING OF CLOSING STOCK. 3 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE STATIN G THAT AFTER DETAILED DISCUSSION ON THIS ISSUE FOR ASSESSMENT YEAR 2011 - 12 HER PREDECESSOR CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE ON THE IDENTICAL GROUND AND ALSO STATED THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD ALREADY ADJUSTED THE VALUING OF OPENING STOCK. 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS SHOWN THE AMOUNT RECEIVED ON ACCOUNT OF UNUTILIZED/CLOSING BALANCE OF MODVAT/CENVAT CREDIT UNDER THE LOANS AND ADVANCES AND THE SAME WAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK. AFTER THE PERUSAL OF MATERIAL ON RECORD IT IS NOTICED THAT THE ASSESSEE COMPANY HAS FOLLOWED THE EXCLUSIVE METHOD EXCLUDING TAX, DUTY AND CESS FOR ACCOUNTING OF PURCHASE, SALE , AND VALUATION OF INVENTOR Y. THE ASSESSEE HAS REGULARLY ADOPTED THIS NET METHOD AND DEBITED THE COST OF RAW MATERIAL AND PACKING MATERIAL NET OF EXCISE DUTY AND I.T.A NO. 2 44 0 /AHD/20 16 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. TRANSFORMERS & RECTIFIERS (INDIA) LT D. 3 CESS IN THE P & L ACCOUNT. IT IS FURTHER NOTICED THAT THE CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF THE VARDHMAN STA MPING PVT. FOR THE ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 VIDE ITA NO. 1520/AHD/2014 AND ITA NO. 1132/AHD/2015 HAS DELETED THE SIMILAR ADDITION BY OBSERVING AS UNDER: - 3. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT THE A SSESSING OFFICER WAS JUSTIFIED IN INCREASING THE VALUE OF CLOSING STOCK IN VIEW OF PROVISION OF SECTION 145A OF THE ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LD. DR HAS SUPPORTED THE ORDER OF THE LD. CIT(A). BUT WE HAVE NOTICED THAT CO - ORDINATE BENCH OF ITAT IN THE CASE OF THE ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2010 - 11 ON THE IDENTICAL ISSUE HAS DELETED THE ADDITION MADE BY ASSESSING OFFICER BY OBSERVING AS UNDER: - 12. WE FURTHER, OBSERVE THAT SIMILAR ISSUE RELATING TO ADDITI ON MADE BY INVOKING PROVISIONS OF 145A OF THE ACT, CAME UP BEFORE THE CO - ORDINATE BENCH IN THE CASE OF ITO V/S MAMATA BRAMPTOM ENGG. PVT. LTD (SU PRA) AND WAS DECIDED AGAINST THE REVENUE, FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF NARMADA CHEMATUR PETROCHEMICALS LTD.(327 ITR 369) BY OBSERVING AS FOLLOWS: WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT T O THE ADDITION OF UNUTILIZED CENVAT CREDIT TO THE CLOSING STOCK. WE FIND THAT THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAS GIVEN A FINDING THAT ASSESSEE IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING WHEREBY THE EXCISE DUTY IS NOT INCLUDED IN THE VALUATION OF STOCK AND RAW - MATERIALS AS THE EXCISE DUTY PAID AND COLLECTED IS NOT MADE PART AND PARCEL OF THE PROFIT & LOSS A/C. HE HAS FURTHER GIVEN A FINDING THAT ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 145A OF THE ACT AND THE EFFECT OF INCLUDING EXCISE DUTY IS VALUATION OF CLOSING STOCK DOES NOT AFFECT THE PROFIT AND IS REVENUE NEUTRAL. HE HAS FURTHER RELIED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF NARMADA CHEMATUR PETROCHEMICALS LTD.(SUPRA). BEFORE US, REVENUE HA S NEITHER CONTROVERTED THE FINDING OF LD.CIT(A) NOR HAS PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. WE FURTHER FIND THAT THE HON BLE APEX COURT IN THE CASE OF INDO NIPPO CHEMICALS (2003) 261 ITR 375 HAS HELD THAT UNAVAILED MODVAT CREDIT CANNOT BE CONSTRUED AS INCOME AND THERE IS NO LIABILITY TO PAY TX ON SUCH UNAVAILED MODVAT CREDIT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). THIS GROUND OF REVENUE IS DISMISSED 13. RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH, AND IN VIEW OF TOTALITY OF FACTS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT UNAVAILED CENVAT CREDIT CANNOT BE CONSTRUED HAS INCOME AS THERE IS NOT LIABILITY TO PAY TAX ON SUCH UNAVAILED CENVAT CREDIT AND ALSO THERE WILL BE NIL EFFECT ON THE PROFIT AS THE TAXES AND DUTIES IF ADDED TO THE CLOSING STOCK WILL FORM PART OF THE OPENING STOCK IN THE SUBSEQUENT YEAR. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). WE UPHOLD THE SAME. 4. RESPECTFULLY FOLLOWING T HE DECISION OF THE CO - ORDINATE BENCH, WE ARE OF THE VIEW THAT UNAVAILED CENVAT CREDIT WILL HAVE NIL EFFECT ON THE PROFIT AS THE TAXES AND DUTIES IF ADDED TO THE CLOSING STOCK WILL FORM PART OF THE OPENING STOCK IN THE SUBSEQUENT YEAR, I.T.A NO. 2 44 0 /AHD/20 16 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. TRANSFORMERS & RECTIFIERS (INDIA) LT D. 4 THEREFORE, WE ARE NOT INCLINED WITH THE DECISION OF THE LD. CIT(A). THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED. 5 . RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH, WE CONSIDER THAT THAT T HE ASSESSEE HAS BEEN REGULARLY FOLLOWING EXCLUSIVE METHOD OF VALUING THE PURCHASE/SALE OF GOODS AND INVENTORY EXCLUDING TAX DUTY AND CESS AND THE NET EFFECT ON THE PROFIT WOULD BE NIL, THEREFORE, WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A). ACCORDINGLY THE APPEAL OF THE REVENUE ON THIS ISSUE IS DISM ISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 03 - 10 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 03 / 10 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,