Asstt. Commissioner of Income Tax vs D and H Secheron Electrodes (P) Ltd.

Shri R.L. Jain, senior advocate with Shri A.P. Patankar, senior standing counsel and Ms. Veena Mandlik for the revenue.

Heard on admission.

This appeal u/s 260A of the Income Tax Act, 1961 has been filed against the order 25-5-2007 passed by the Tribunal in ITA No. 591/Ind/2006. The only question raised for consideration within the parameters of Section 260A of the Act reads as follows:

Whether the Tribunal is justified in confirming the order of the Commissioner (Appeals) thereby deleting the addition made on account of under valuation of closing stock by non-inclusion of excise duty in value of closing stock without considering the decision of the apex court in the case of CIT v. Britsh Paints India Ltd. : [1991]188ITR44(SC) ?

From the question as formulated it is luculent that the assessing officer had made addition of the excise duty payable on the goods manufactured by the assessee in computation of the value of the stock of the assessee on the ground that under the provisions of Section 145A, the amount of tax, duty, cess or fee was required to be included in the price of the goods in stock. Reliance has been placed on the decision of the Supreme Court in CIT v. British Paints India Ltd. : [1991]188ITR44(SC) .

In the decision in British Paints (supra) their Lordships have observed that the principles which govern the market value of the stock require inclusion of all overhead charges and, therefore, according to the learned Counsel, excise duty irrespective of the fact that it was not paid as the manufactured goods had not left the premises of the assessee, was liable to be taken into account in computation of the stock value. We have carefully gone through the above decision and we find that the interpretation of the department labours under a patent misconception. The Apex Court, while laying down that the value of the stock would be material plus expenditure, has not stated that the liability for excise duty on the uncleared goods shall also form part of the price of the goods. At the stage, it would be useful to refer the provisions contained in Section 145A of the Income Tax Act which read as extracted below:

Section 145 Notwithstanding anything to the contrary contained in Section 145, the valuation of purchase and sale of goods and inventory of the purposes of determining the income chargeable under the head "Profit and gains of business or profession" shall bein

(a) in accordance with the method of accounting regularly employed by the assessee; and

(b) 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.

A bare look at the provision manifests that it is only when the tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to the place of its location that the said amount forms part of the value. It is not disputed in the present case that the excise duty has not been paid by the assessee on the goods in stock as the goods did not leave the premises.

Under these circumstances, there was no justification on the part of the assessing officer in adding the excise duty to the price of the raw material etc. in computing the value of the goods. We are, therefore, of the considered view that the question formulated by the department does not arise out of the facts of the case. Accordingly, this appeal is dismissed summarily.