COMMISSIONER OF INCOME TAX Vs. INDIA FOILS LTD

JUDGEMENT

(1.) The assessee is a limited company engaged in the business of manufacture and sale of aluminium foils. The assessment year involved is 1980-81. The assessee claimed deduction of the following three items of excise duty while computing the business income : (Rs.)

(2.) The case of the assessee before the Income-tax Officer was that it was not liable to excise duty. It moved the High Court to pass an interim order restraining the central excise authorities from realising the duty. By a notification dated December 13, 1980, the Government exempted aluminium foils from payment of duty if they are made for export. This exemption became effective from January 5, 1981, i.e., subsequent to the previous year under consideration. The Income-tax Officer disallowed the claim of the assessee on the ground that the excise duty related to a period prior to the previous year under consideration and the same was not allowable under the mercantile system of accounting.

(3.) On appeal, the Commissioner of Income-tax (Appeals) found that the sum of Rs. 2,57,304 was relatable to the clearance of goods made during the year 1979, which is the relevant previous year now under consideration. Hence, he held that the statutory liability to pay the duty arose on the clearance of the goods notwithstanding the fact that the assessee was disputing its liability. Relying on the decision in the case of Kedarnath Jute Mfg. Co. Ltd. v. CAT , he directed the allowance of the sum of Rs. 2,57,304 as a deduction. However, so far as the other two items were concerned, he did not find any case in favour of the assessee as those demands related to a period prior to the previous year under consideration. Hence, he disallowed the other two amounts.