COMMISSIONER OF INCOME TAX Vs. SAMTEL INDIA LIMITED

JUDGEMENT

(1.) This appeal by the Revenue, which pertains to Assessment Year 1995-96, was admitted for hearing vide order dated 30th January, 2001 on the following substantial questions of law:-

(2.) The assessment order records that there was accumulation of unutilised input MODVAT credit of Rs.3.95 crores. The assessee had claimed this as a deduction in the computation of income. This claim was made in the revised return. Assessee premised that they had paid excise duty and additional customs duty and this constitutes an expense under Section 37(1) of the Income Tax Act, 1961 (Act, for short). The claim was rejected by the Assessing Officer observing that the MODVAT credit had not been utilised and could have been utilised in the next year.

(3.) Commissioner of Income Tax (Appeals) recorded the statement of the assessee that excise duty and additional customs duty paid on the raw material formed part of the cost of the raw material and had to be allowed when the raw material has been consumed. Under the excise rules, additional customs duty and excise duty paid on raw material formed part of MODVAT credit, which was utilised at the time of clearance of goods, subject to fulfilling conditions. The CIT (Appeals) observed that the assessee had received refund of MODVAT credit in the subsequent assessment year 1996-97, but it could not be ascertained whether the refund was against the MODVAT credit available as on 31st March, 1995. He also observed that while valuing the closing stock on 31st March, 1995, excise duty paid on input and utilised in the finished goods was not taken into consideration and as per note No. 4 of the accounting policy and note on accounts, excise duty payable on finished goods was accounted for at the time of removal of goods. He observed that whether the cost of raw material utilised for manufacture of finished goods included customs duty or not was not very clear. He further held that the respondent-assessee had got refund and the addition should be confirmed.