ACIT,Cir.-1, Aurangabad V. M/s. Bemco Sleepers Ltd., Aurangabad

ITA 715/PUN/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62748 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 23-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI. R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 715/PN/2011 (ASSTT. YEAR : 2004-05) THE ASSTT. COMMISSIONE R OF INCOME TAX , . .. APPELLANT CIRCLE-1, AURANGABAD V. M/S. BEMCO SLEEPERS LTD., RESPONDENT 3, CHETNA APARTMENT, STATION ROAD, AURANGABAD APPELLANT BY : SHRI ALOK MISHRA RESPONDENT BY : NONE DATE OF HEARING : 20/06/12 DATE OF PRONOUNCEMENT : 25-6-12 ORDER PER R.S. PADVEKAR, JM IN THIS APPEAL, THE REVENUE HAS CHALLENGED IMPUGN ED ORDER OF THE LD CIT(A)-III, AURANGABAD DATED 25/02/2011 FOR THE A.Y. 2004-05. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THE APPEAL : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE CIT(A) IS CORRECT IN DECIDING THAT THE UNUTILIZED M ODVAT CREDIT IS NOT A PART OF CLOSING STOCK ? 2) WHETHER THE LD. CIT(A) WAS RIGHT IN DECIDING THA T SECTION 145A OF THE I.T. ACT, 1961 IS NOT APPLICABLE? 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT(A) BE VAC ATED. 3. THE SHORT ISSUE IN CONTROVERSY IS WHETHER THE UN -UTILIZED MODVAT CREDIT IS TO BE ADDED TO THE TOTAL INCOME OF THE A SSESSEE. IT WAS NOTICED BY THE A.O THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF RS. 19,36,472/- TOWARDS UN-UTILIZED MODVAT CREDIT. IN THE OPINION OF THE A.O, THE ITA . NO.715/PN/2011 M/S. BEMCO SLEEPERS LTD., A.Y. 2004-05 PAGE OF 3 2 ASSESSEE SHOULD HAVE INCLUDED THE SAME IN THE CLOSI NG STOCK OR SHOULD HAVE ADDED IN COMPUTATION OF TOTAL INCOME. A.O. MA DE THE ADDITION IN RESPECT OF UN-UTILIZED MODVAT CREDIT SHOWN BY THE A SSESSEE IN THE BALANCE SHEET. ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A) WHO DELETED THE SAID ADDITION, BY FOLLOWING THE DECISION OF HON BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT V/S. INDO NIPPON CHEMICAL S CO. LTD., 245 ITR 384. THE OPERATIVE PART OF THE FINDING OF LD. CIT(A ) IS AS UNDER : 7.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ASSESSMENT ORDER OF THE A.O. AND SUBMISSION OF THE APPELLANT. THE CONTENTION OF THE APPELLANT THAT IT HAS ADOPTED EXCLUSIVE METH OD FOR VALUING OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK C ONSISTENTLY AND EVEN IF AS REQUIRED BY SECTION 145A OF THE ACT, THE INCLUSIVE METHOD IS FOLLOWED, THE PROFIT REMAINS THE SAME IS FOUND T O BE CORRECT AS THIS OF LAW IS UPHELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDO NIPPON CHEMICALS CO. LTD. (2000) 245 I TR 384. IN THIS CASE THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDE R : READING THE TWO METHODS GIVEN BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, IT IS CLEAR THAT IN BOTH CASE S THE MODVAT CREDIT IS RELATED ONLY TO THE RAW MATERIAL CONSUME D. EVEN A BARE READING OF R.57A OF CENTRAL EXCISE RULES SHOWS THAT THE MODVAT SCHEME PROVIDES FOR INSTANT CREDIT OF THE IN PUT ONLY ON THE RAW MATERIAL CONSUMED. THE CREDIT HAS A DIR ECT LINKAGE WITH THE CONSUMPTION OF THE RAW MATERIAL. IT IS OBTAINED ON THE DATE WHEN THE RAW MATERIAL IS PURCH ASED. HENCE, IT IS CLEAR THAT WHETHER ONE APPLIES THE NET METHOD OR THE GROSS METHOD THE GROSS PROFIT REMAINS THE SAME. FURTHER THE ABOVE DECISION IN THE CASE OF INDO NIP PON CHEMICAL CO. LTD. HAS BEEN CONFIRMED BY HONBLE SUP REME COURT IN THE YEAR 2003 REPORTED IN 261 ITR 275, WHEREIN IT HAS BEEN HELD THAT MERELY BECAUSE MODVAT CREDIT IS AN IRREVERSIBL E CREDIT AVAILABLE TO THE MANUFACTURERS UPON PURCHASE OF DUTY PAID RAW MATERIAL, IT WOULD NOT AMOUNT TO INCOME WHICH IS LIABLE TO BE TA XED. THE AMENDMENT TO SECTION 145A IN RESPECT OF APPLICABIL ITY OF INCLUSIVE METHOD HAS COME INTO FORCE W.E.F. 1/4/1999 AND THE DECISION IN THE CASE OF INDO NIPPON CHEMICALS CO. LTD. RELATES TO A .Y. 1989-90. HOWEVER, THE HONBLE BOMBAY HIGH COURT HAS CLEARLY STATED IN PARA-9 THAT WHETHER ONE APPLIES THE NET METHOD OR GROSS METHOD I.E. EXCLUSIVE METHOD OR INCLUSIVE METHOD PROFIT RE MAINS THE SAME. ITA . NO.715/PN/2011 M/S. BEMCO SLEEPERS LTD., A.Y. 2004-05 PAGE OF 3 3 4. WE HAVE HEARD THE LD. D.R. WE FIND THAT TH E ASSESSEE IS FOLLOWING THE EXCLUSIVE METHOD FOR VALUATION OF PURCHASES, SALES AND CLOS ING STOCK CONSISTENTLY. AS RIGHTLY HELD BY THE LD CIT(A), EVEN IF INCLUSIVE METHOD IS FOLLOWED, THE PROFITS REMAIN THE SAME. IF THE A.O WAS DESIRING TO MAKE ADJUSTMENT O F THE CLOSING STOCK, THEN THE CONSEQUENTIAL EFFECT SHOULD HAVE BEEN GIVEN TO THE OPENING STOCK ALSO. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD CIT(A) AS THE SAME IS IN ACCORDANCE WITH THE LAW. ALSO, IN THE CASE OF CIT VS. MAHALAXMI GLASS PVT. LTD., 318 ITR 116 (BOM), IT IS HELD THAT WHEREIN THE CLOSING STOCK UN-UTILISED MOD VAT CREDIT IS ADJUSTED, SIMILAR ADJUSTMENT SHOULD BE MADE TO THE OPENING STOCK ALSO AND ADJUSTMENT CANNOT ONLY BE MADE TO CLOSING STOCK. RELEVANT GROUNDS TAKEN BY TH E REVENUE ARE THUS DISMISSED. 5. IN RESULT, REVENUES APPEAL IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH JUNE, 2012. SD/- SD/- (G.S.PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 25TH JUNE, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT, AURANGABAD 4. THE CIT(A)- AURANGABAD 4. THE D.R. B BENCH, PUNE 5. GUARD FILE -TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE