Nr Jet Enterpises Ltd, Mumbai vs Assessee
- CitationITA No. 6247/Mum/2010
Ratio decidendi
The rule this decision rests on
Under section 145A of the Income Tax Act, the adjustment for excise duty and similar taxes on the valuation of stock is not confined to closing stock; the element of such duty must be taken into account at each stage of the trading account, namely opening stock, purchases, sales and closing stock, so that the valuation is consistent across the accounting period. Where the Assessing Officer has added excise duty only to closing stock without corresponding adjustment to opening stock, the assessment rests on an incorrect application of section 145A, and the matter is to be remitted to the Assessing Officer to make the appropriate adjustments at every stage after obtaining the relevant information from the assessee. A consequential claim for set-off of brought-forward losses, which depends on the outcome of the main valuation issue, is likewise to be reconsidered by the Assessing Officer once that issue has been remitted.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
M/s. NR Jet Enterprises Ltd. Income Tax Officer 7(1)(1) 64-66 Senapati Bapat Marg Vs. Aayakar Bhavan, M.K. Road Mahim, Mumbai400016 Mumbai 400020 PAN - AAACN5895K Appellant Respondent
Appellant by: Shri Kirit Kamdar & Shri Pranay Gandhi Respondent by: Shri V.K. Bora
Date of Hearing: 03.03.2015 Date of Pronouncement: 03.03.2015
ORDER
Per D. Manmohan, V.P.
These appeals of the assessee-company are directed against the orders passed by the CIT(A) 13, Mumbai and they pertain to assessment years 2007-08 and 2008-09. Common issue is involved in both these appeals and therefore they are taken up together.
2. In A.Y. 2007-08 the only issue under consideration is as to whether the CIT(A) erred in directing the DCIT to prepare the Profit & Loss Account of the assessee by including the element of excise duty under section 145A of the Act and accordingly make an addition to the total income. In the alternative it was contended that if excise duty is included in the value of 2 ITA No. 6247&8651/Mum/2010 M/s. NR Jet Enterprises Ltd.
closing stock similar adjustment has to be made to the opening stock also; AO ought to have included the duty element in the purchases, sales and closing stock. Without prejudice it was contended that making a separate addition would amount to double addition.
3. The AO as well as the CIT(A) followed the decision of the Hon'ble Bombay High Court in the case of Melmould Corporation 202 ITR 789 while coming to the conclusion that as per section 145A of the Act, inserted w.e.f. 01.04.1999, excise duty element has to be included while valuing closing stock but there cannot be any adjustment to the opening stock.
4. At the time of hearing the learned counsel for the assessee placed before us a copy of the order passed by the ITAT 'B' Bench, Mumbai in assessee's own case for assessment years 2003-04 and 2004-05 (ITA Nos. 1357/Mum/2007 dated 22.12.2008 & ITA No. 118/Mum/2009 dated 25.03.2013) wherein identical issue was set aside to the file of the AO by observing that adjustments under section 145A on account of any duty, tax, etc. is required to be made at each stage, i.e. opening stock, purchases, sales as well as closing stock. The learned counsel for the assessee also submitted that identical issue was decided by the Hon'ble Bombay High Court in the case of Mahalaxmi Glass Works (P) Ltd. 318 ITR 116.
5. On the other hand, the learned D.R. strongly relied upon the orders passed by the tax authorities.
6. We have considered the rival submissions and carefully perused the record. Consistent with the view taken by the ITAT in assessee's own case for earlier years and also in the light of the decision of the Hon'ble Bombay High Court (supra) we set aside the matter to the file of the AO to make appropriate adjustments to the opening stock, etc. after obtaining relevant information from the assessee in this regard.
7. In respect of the appeal for A.Y. 2008-09 assessee, vide ground Nos. 3 & 4, contends that the learned CIT(A) erred in not directing the AO to allow set off of brought forward losses. This is purely consequential in nature. Since the main issue is set aside to the file of the AO in line with the view 3 ITA No. 6247&8651/Mum/2010 M/s. NR Jet Enterprises Ltd.
taken by the Tribunal in assessee's own case for earlier years, we hereby set aside this issue also to be reconsidered after giving effect to the directions given by us with regard to ground Nos. 1 & 2.
8. In the result, the appeals filed by the assessee are treated as allowed for statistical purposes.
Order pronounced in the open court on 3rd March, 2015.
Sd/- Sd/ (Chandra Poojari) (D. Manmohan) Accountant Member Vice President
Mumbai, Dated: 3rd March, 2015
Copy to:
1. The Appellant 2. The Respondent 3. The CIT(A) - 13, Mumbai 4. The CIT- 7, Mumbai City 5. The DR, "B" Bench, ITAT, Mumbai
By Order
//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.
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