Commissioner of Income Tax, Bangalore vs Indian Telephone Industries

V.G. Sabhahit, J.—This appeal is filed by the revenue being aggrieved by the order passed by the income tax Appellate Tribunal (hereinafter referred to as ''the Tribunal''), Bangalore Bench ''A'', in I.T.A. No. 2572/Bang/2004, dated 29-3-2007 reversing the order of the Appellate Commissioner confirming the order passed by the Joint Commissioner of income tax (Asst.), Special Range-H, Bangalore.

The substantial question of law that arises for determination as per the appellants is as to whether the excise duty actually paid by the assessee need not be added in the valuation of the closing stock as per section 145A of the income tax Act, 1961 (hereinafter referred to as ''the Act'') when the item of stock continued to lay with the assessee during the assessment year.

The assessee filed a return of income for the assessment year 1997-98 dated 26-11-1997 and in valuing the closing stock, had not taken into consideration the excise duty and assessment order was passed by the Assessing Officer - Joint Commissioner of income tax (Asst.) on 28-3-2000 holding that the excise duty leviable on the finished goods should be taken into consideration for computing the closing stock as per the judgment of the Hon''ble Supreme Court in the case of COMMISSIONER OF Income Tax, BIHAR and ORISSA Vs. MOHAN MALLAH., . The Appellate Commissioner by order dated 7-7-2004, upheld the finding of the Assessing Officer. Being aggrieved by the same, appeal was filed by the assessee before the Tribunal and the Tribunal held that the excise duty actually paid by the assessee need not be added in the valuation of the closing stock as per section 145 A of the Act when the item of stock continued to lay with the assessee during the assessment year.

The question of law that arises for determination in this appeal is no longer res integra and the Hon''ble Supreme Court in British Paints India Ltd. ''s case (supra) has held that when the market value has fallen, the excise duty paid need not be included as part of the closing stock even when the stock has continued during the current assessment year. The impugned order of the Tribunal is justified as the question of law is answered against the revenue. However, the learned counsel appearing for the appellants submits that this appeal is filed only on the apprehension that the amendment has been made to the Act by inclusion of section 145A of the Act by the Finance (No.2) Act of 1998 with effect from 1-4-1999. The said apprehension is unfounded as in the instant case, the assessment pertains to the year 1997-98 and the amendment brought to the Act by inserting section 145A of the Act is applicable to the assessment year 1998-99. Accordingly, we hold that the appeal is devoid of merit and pass the following Order:-

The appeal is dismissed.