Madras High Court
Commissioner Of Income Tax vs Xomox (India) Ltd. on 12 November, 2003
Equivalent citations: (2004)188CTR(MAD)141, [2004]271ITR228(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, S.R. Singharavelu
ORDER R. Jayasimha Babu, J.
1. The asst. yr. 1987-88. The assessee had imported raw material for use in the process of manufacture made by it. On such imports, customs duty has been paid.
2. The AO, while considering its claim for deduction of the amount of customs duty paid during the year under Section 43B of the IT Act, held that though that claim was in order, the assessee's further claim for exclusion of customs duty in the valuation of closing stock of raw material was against the principles of accounting and that the closing stock of raw material had to be valued after including the customs duty component. He went on the observe, "both these amounts are not considered for the computation of total income for the year."
3. The appellate order refers to the ground relating to "disallowance of customs duty component of closing stock of Rs. 14,39,060." The CTT (A) directed that, that amounts be allowed subject to adjustment being made in the opening stock for subsequent year.
4. On further appeal, the Tribunal affirmed the order of the GIT(A).
5. Before us, it is submitted by counsel for the Revenue that this has resulted in a double deduction. Counsel for the Revenue relied on the decision of this Court in the case of Southern Asbestos Cement Ltd. v. CTT wherein it was held that the closing stock had necessarily to be valued in a manner which reflected the actual cost and that in respect of imported material, the customs duty component would form part of the costs to the assessee.
6. Counsel for the assessee, on the other hand, placed reliance on the decision of this Court in the case of Chemicals and Plastics India Ltd. v. CTT (2002) 125 Taxman 648 (Mad). In that case the assessee had taken to the P&L a/c the cost of the imported material inclusive of duty only on consumption basis and the balance of imported duty paid on the raw material held as closing stock was taken to the balance sheet as part of the asset under the head "inventories". The Court noted the fact that necessary adjustment statement had been filed before the AO, and held that the amount of duty that was actually paid was required to be allowed under Section 43B of the Act.
7. In this case it is not clear as to whether the amount paid as duty has been allowed under Section 43B, The assessee is required to value the imported raw material by including therein the amount of duty paid. After the closing stock is so valued, the assessee would be entitled to claim the deduction for the amount of duty actually paid under Section 43B of the Act.
8. The question raised in this appeal as to whether the Tribunal was right in law in upholding the decision of the CTT (A) in directing the AO to allow deduction in respect of the customs duty element pertaining to the closing stock is answered against the assessee but subject to the right of the assessee to receive, if it has not already received, deduction under Section 43B for the amount of duty actually paid during the year.