COMMISSIONER OF INCOME TAX Vs. DYNA VISION LTD

JUDGEMENT

(1.) THE substantial question of law involved in this case is :

(2.) THE assessee is a private limited company carrying on the business of manufacture and sale of television sets. The assessment year is 1987-88. The assessee was following a consistent system of accounting in excluding excise duty in the valuation of its stock from year to year. The introduction of S. 43B of the IT Act has also made this a very convenient system of accounting.

(3.) IT has been held in the case of CIT vs. English Electric Co. of India Ltd. (2000) 161 CTR (Mad) 235 : (2000) 243 ITR 512 (Mad), that the liability for payment of excise duty is incurred only when the process of manufacture is complete. Such liabilities are shown in the excise duty account maintained by the assessee. The inclusion of excise duty in the valuation of closing stock was held to be permissible only if the liability for that amount in the excise duty account was given a deduction. It was further held that if the duty element due is included while valuing the closing stock, the result would be anomalous and therefore, the liability was deductible for the purpose of arriving at the profits for the year and only when such deduction was given, the amount could be added to the value of the closing stock and thus, the excise duty liability is not to be included in the valuation of closing stock. Since the excise duty is not a part of manufacturing cost, it is to be taken only in determining the net profit.