Income Tax Appellate Tribunal - Chandigarh
M/S Cheema Boilers Ltd.,, vs Department Of Income Tax on 20 November, 2013
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IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'B' CHANDIGARH
BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND
MS. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No. 1016/CHD/2012
Assessment Year: 2009-10
The DC IT, Circle 6(1), Vs M/s Cheema Boilers Ltd.,
Mohali Mohali
PAN No. AABCC4031B
(Appellant) (Respondent)
Date of hearing : 20.11.2013
Date of Pronouncement : 28.11.2013
Appellant By : Shri J.S. Nagar
Respondent By : Shri Ajay J ain
ORDER
PER T.R.SOOD, A.M.
The appeal filed by the Revenue is directed against the order dated 18.7.2012 of Ld. C IT(A), Chandigarh.
2. In this appeal the assessee has raised the following grounds:-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing the exclusive method of accounting adopted by the assessee contrary to the provision of Section 145A which prohibits the same.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made as per the specific provision of section 145A, relying upon the decision of the Hon'ble Apex Court which 2 pertain to A.Y. 1989-90 whereas the provisions of Section- 145A were inserted with effect from 01/04/1999.
4. It is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer may be restored.
3. After hearing both the parties, we find that during assessment proceedings it was noticed that in the Tax Audit Report, the Auditor has mentioned that opening and closing stock of raw material and worked in progress has been verified without including the excise dut y element as per section 145A. According to Assessing Officer after inclusion of section 145A w.e.f. 1.4.1999 inclusion of excise dut y was of mandatory nature and accordingl y he increased value of closing stock. He worked out the net addition as under:-
"Value of raw material as on 31.03.2009 22,33,33,607/-
Work in progress
Exempted - 2,57,07,800/-
Taxable - 19,11,06,628/- 19,11,06,628/-
Total Excisable raw material and work in progress 41,34,40,235/-
Increase in value of closing stock of raw material and WIP On inclusion of Excise duty @ 10.30% on 41,34,40,235/- 4,25,84,344/- Cenvat Credit utilized during the year 16,50,51,786/-
TOTAL- X- 20,76,36,130/-
LESS:
Increase in purchase cost of raw material on inclusion of excise duty on which cenvat Credit is availed - Y-- 15,39,46,930/-
Add:
Increase in purchase cost of raw material on inclusion of excise duty paid though PLA-Z- 1,74,30,711/-
Total (Y+Z) 17,13,77,641/-
Balance X-(Y+Z) 3,62,58,489/-
Less:
Addition on value of closing stock after inclusion of Excise duty in last year 3,50,66,391/-
NET ADDITON 11,92,098/-
Accordingl y, Assessing Officer made an addition of Rs. 11,92,098/- to the income of the assessee. On appeal, it was submitted that issue was covered in 3 favour of the assessee by the order of the Tribunal. The Ld. CIT(A) following the order of the Tribunal decided the issue vide para 5, which read as under:-
"5. I have gone through the submission of the Ld. Counsel for the appellant and the order of Hon'ble ITAT Chandigarh in A.Y. 2005-06 in ITA No. 1013/Chd/2008 dated 29.04.2009. The Hon'ble Punjab & Haryana High Court has also deleted such addition in ITA No. 503 of 2007 in the case of M/s Nahar Spinning Mills Ltd. By respectfully following the decision of Hon'ble Punjab & Haryana High Court (supra) and Hon'ble ITAT Chandigarh, the addition made u/s 145A of the Act is deleted. All the grounds of appeal taken by the appellant are allowed.
4. Before us, the Ld. DR submitted that in the earlier years, the Tribunal has simpl y followed the decision of Hon'ble Punjab & Haryana High Court in case of C IT v Nahar Spinning Mills Ltd and Others in ITA Nos. 503, 370, 387 & 399 & 399 of 2007. He submitted that order was passed for assessment year 1999- 2000 and section 145A was introduced w.e.f. 1.4.1999. In that decision, amended provisions were not considered. The amended provision has been dul y considered in the case of CIT v Nahar Aluminum Ltd by Hon'ble Delhi High Court in 297 ITR 77(Delhi). This decision was again followed by Hon'ble Bombay High Court in the case of C IT v Mahalaxmi Glass Works P. Ltd 318 ITR 116 (Bom).
5. On the other hand, the Ld. Counsel for the assessee submitted that an earlier decision if was not to be followed then adjustment on account of excise dut y should be allowed to be made even in respect of opening stock and onl y the net amount is to be taxed.
6. We have considered the rival submissions carefull y. Section 145A of the Act reads as under:-
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"145A. Notwithstanding anything to the contrary contained in section 145,--
(a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be--
(i) in accordance with the method of accounting regularly employed by the assessee; and
(ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.
Explanation.--For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment.
(b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received."
7. The plain reading of the above provision would show that it is of mandatory nature and mandates that any tax, dut y etc. had to be included in the value of the closing stock. However, at the same time the Hon'ble Delhi High Court in the case of CIT v Nahar Aluminum Ltd (supra) held as under;-
"Held, dismissing the appeal, that paragraph 23.13 of the guidance note on tax audit under section 44AB issued by the Institute of Chartered Accountants of India made it clear that whenever any adjustment is made in the valuation of inventory, this will affect both the opening as well as the closing stock. If any adjustment was required to be made by a statute, effect should be given to it irrespective of any consequences on the computation of income for tax purposes. Section 145A begins with a non obstante clause and therefore to give effect to section 145A, if there is a change in the opening stock as on March 31, 1999, there must necessarily be a corresponding adjustment made in the opening stock as on April 1, 1998. Thus, the question of double deduction did 5 not arise since no adjustment was made by the assessee in the profit and loss account for the year ending March 31, 1998."
8. The above clearl y shows that adjustment to be made u/s 145A is to be made both in respect of opening stock as well as closing stock. The same view has been taken even by the Hon'ble Bombay High Court in the case of CIT Vs Mahalaxmi Glass Works P. Ltd (supra). Following these decisions, we set aside the order of Ld. C IT(A) and direct the Assessing Officer to adjust the value of opening as well as closing stock and only the net difference should be added to the income of the assessee.
9. In the result, the appeal is partl y allowed.
Order Pronounced in the Open Court on 28.11.2013.
Sd/- Sd/-
(SUSHMA CHOWLA) (T.R.SOOD)
JUDICIAL MEMBER ACCOUNTANT MEMER
Dated : 28 t h November, 2013
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
By order
Assistant Registrar,
ITAT, Chandigarh