July 2011
Business expenditure: Deduction only on actual payment: Section 43B of Income-tax Act, 1961: A.Y. 1989-90: Excise duty paid in advance: Assessee entitled to deduction: AO not right in holding that deduction allowable only on removal of goods from factory.
By K. B. Bhujle, Advocate
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[CIT v. Modipon Ltd., 334 ITR 106 (Del.)]
For A.Y. 1989-90, the assessee had claimed a deduction of Rs.14,71,387 as business expenditure on account of excise duty paid in advance. Reliance was placed on section 43B of the Income-tax Act, 1961. The Assessing Officer disallowed the claim holding that the deduction can be claimed only on removal of goods from the factory. The Tribunal allowed the assessee’s claim.
On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:
“(i) With regard to the deduction of Rs.14,71,387 on account of excise duty paid in advance as business expenditure, the procedure envisaged for payment of excise duty envisages such duty to be deposited in advance with the treasury before the goods were removed from the factory premises. The duty, thus, already stood deposited in the accounts of the assessee maintained with the treasury and the amount, thus stood paid to the State.
(ii) The submission of the Department that it was only on removal of goods that the amount credited to the personal ledger account could be claimed as deductible u/s.43B of the Act, could not be accepted.”
