COMMISSIONER OF INCOME TAX Vs. INDIA PISTONS LTD.

JUDGEMENT

(1.) THE above tax case appeals are directed against the common order of the Tribunal in ITA Nos. 1042 and 1044/Mad/1998, dt. 16th June, 2004.

(2.) THE Revenue is the appellant. The assessee is a manufacturer of pistons for heavy commercial vehicles. During the relevant assessment years, the assessee's claim with regard to the excise duty and customs duty should not be added in the closing stock for computing the income was disallowed by the AO. Further, the AO disallowed the interest on foreign bills. Hence, the assessee filed appeals before the CIT(A), who allowed the appeals. On appeals, at the instance of Revenue, the Tribunal dismissed the appeals by following the decision of this Court in CIT v. Addison Paints and Chemicals Ltd.

(3.) 1 In respect of question No. 1 viz., excise duty and customs duty on closing stock not to be included in the total turnover, this Court, in CIT v. English Electric Co. of India Ltd. (2000) 161 CTR (Mad) 235 : (2000) 243 ITR 512 held that the liability for payment of excise duty was incurred when the process of manufacture was complete in relation to an excisable item. All payments and liability incurred towards duty were exhibited separately. The assessee's liability for payment of duty could not be regarded as part of the assets held by the assessee in the form of higher value assigned to the closing stock. A liability could not be converted into an asset in that manner. A liability was an item 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. 4.2 In view of the ratio laid down by this Court in the decision cited supra, we hold that the excise duty and customs duty on closing stock are not to be included in the total turnover, while computing the income under Section 80HHC of the Act.