M/S Kisan Sahkari Chini Mills Ltd., ... vs Department Of Income Tax
- CitationITA No.764/LKW/2014
Ratio decidendi
The rule this decision rests on
Where the Supreme Court's decision in a case governed by an earlier assessment year rested on the pre-amendment position of the law, that decision cannot be followed for a later assessment year in which section 145A, inserted with effect from 1 April 1999, applies; the Tribunal is therefore not bound to follow it and the order of the first appellate authority relying on it cannot be sustained. Where the first appellate authority has decided the question of inclusion of excise duty in closing stock on the footing that excise duty is not part of manufacturing cost, and that footing is not correct because the excise liability on finished goods is incurred on completion of manufacture, the closing stock valuation under section 145A must include such excise duty; any deduction for it is then governed by section 43B, depending on whether payment was made before the due date of filing the return of income. Where the factual position as to payment of excise duty before the due date of filing the return has not been examined, the issue cannot be finally determined on the existing record and is to be remitted to the first appellate authority for fresh adjudication after affording both parties a reasonable opportunity of being heard.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Dy.C.I.T., Vs M/s Kisan Sahkari Chini Mills Ltd., Circle-1, Semikhera, Baheri, Bareilly. Bareilly. PAN:AAAAK3453A (Appellant) (Respondent)
Appellant by Shri Puneet Kumar, D. R. Respondent by Shri Shyam Lal, F.C.A. Date of hearing 24/02/2015 Date of pronouncement 31/03/2015
ORDER PER A. K. GARODIA, A.M.
This is Revenue's appeal directed against the order passed by learned CIT(A), Bareilly dated 17/07/2014 for the assessment year 2009-2010.
2. Ground No. 1 is as under:
"1. That the CIT(A) has erred in law and on facts in deleting the addition of Excise Duty in closing stock made by the Assessing Officer at Rs.2,72,10,536/-."
3. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).
4. We have considered the rival submissions. We find that this issue has been decided by learned CIT(A) by following a judgment of Hon'ble Apex Court rendered in the case of CIT vs. Dynavision Limited 348 ITR 380 (SC). We find that in this case, the assessment year involved was 87-88 but there is amendment in the Act by way of insertion of section 145A in the Act with 2
effect from 1999-2000. In the present case, the assessment year involved is 2009-10 and therefore, this judgment of Hon'ble Apex Court cannot be followed in the present case after insertion of section 145A with effect from 01/04/1999 and therefore, the order of CIT(A) is not sustainable but in the interest of justice, we restore this matter back to the file of CIT(A) for fresh decision. Accordingly, on this issue, we set aside the order of CIT(A) and restore the matter back to his file for fresh decision after affording reasonable opportunity of being heard to both the sides. Ground No. 1 is allowed for statistical purposes.
5. Ground No. 2 reads as under:
"2. That the CIT(A) has erred in law and on facts in deleting the addition of Rs.74,56,472/- in the closing stock of sugar rightly made by the Assessing Officer."
6. Learned D.R. of the Revenue submitted that the decision of CIT(A) is on the basis that Excise Duty is not a part of manufacturing cost and therefore, this addition in increasing the cost of closing stock is against the law and facts of the case. He submitted that Excise Duty on finished goods is incurred on completion of manufacturing, although the same is payable on dispatch and therefore, the Excise Duty on finished goods stock has to be added in the value of the closing stock although deduction for such Excise Duty expenses is to be allowed subject to the provisions of section 43B of the Act. Learned AR of the assessee supported the order of CIT (A).
7. We have considered the rival submissions. We find that CIT(A) has decided the issue on the basis that Excise Duty is not a part of manufacturing cost but the order of CIT(A) is not correct because Excise Duty, on finished goods, is payable on dispatch of finished goods after sale but the liability for Excise Duty is incurred on completion of the manufacturing and therefore, as per section 145A, closing stock valuation 3
should be inclusive of Excise Duty. It is also true that the Excise Duty on finished goods has to be considered as expenses also but allowing deduction on that account is according to the provisions of section 43B and if the assessee can establish that the Excise Duty on closing stock was paid before due date of filing of return of income, the assessee is eligible for deduction u/s 43B in respect of Excise Duty expenses and ultimately there will be no addition but if the assessee is not able to establish that, then such deduction is allowable u/s 43B and in that situation, there will be addition although the assessee will be eligible for deduction in the year in which the assessee has made payment of Excise Duty against the closing stock of finished goods in the present year. Since for deciding this issue, these aspects are to be examined, we feel it proper to set aside the order of CIT(A) and restore the matter back to his file for fresh decision. We order accordingly. This issue is also restored to the file of CIT(A) and CIT(A) should pass necessary order as per law after affording reasonable opportunity of being heard to both the sides. Ground No. 2 is also allowed for statistical purposes.
8. In the result, the appeal of the Revenue stands allowed for statistical purposes.
(Order was pronounced in the open court on the date mentioned on the caption page)
Sd/. Sd/.
(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member
Dated:31/03/2015. *C.L.Singh
Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar
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