Income Tax Act, 1961 – S. 43B – Certain Tax Deductions allowed only on Actual Payment – Whether the assessee is entitled to claim deduction in respect of the excise duty paid in advance in the Personal Ledger Account? Held, the advance deposit of central excise duty constitutes actual payment of duty within the meaning of S. 43B and, therefore, the assessee is entitled to the benefit of deduction of the said amount.
CIVIL APPELLATE JURISDICTION
(RANJAN GOGOI) AND (NAVIN SINHA) JJ.
NOVEMBER 24, 2017
CIVIL APPEAL NO.19763 OF 2017
(Arising out of S.L.P.(C) No.29816 of 2011)
COMMISSIONER OF INCOME TAX II …APPELLANT(S)
M/S MODIPON LTD. …RESPONDENT(S)
WITH CIVIL APPEAL NO. 19767 OF 2017 (ARISING OUT OF S.L.P. (C) NO.16633 OF 2012) CIVIL APPEAL NO.19768 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 15939 OF 2012) CIVIL APPEAL NO.19769 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 29817 OF 2011) CIVIL APPEAL NO.19770 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 31209 OF 2011)
For Petitioner(s) Mrs. Anil Katiyar, AOR For Respondent(s) Mr. U.A. Rana, Adv. Mr. Himanshu Mehta, Adv. Mr. Satendra Kr. Rai, Adv. For M/S. Gagrat And Co, AOR Mr. Jagdish Kumar Chawla, AOR
J U D G M E N T
RANJAN GOGOI, J.
1. Leave granted in all the Special Leave Petitions.
2. Four of the present appeals involve the same assessee, i.e., M/s Modipon Ltd. and are in respect of the Assessment Years 1993-1994, 1996-1997, 1997-1998 and 1998-1999 respectively. The fifth appeal is in case of another assessee, i.e., Paharpur Cooling Towers Ltd. and pertains to the Assessment Year 1996-1997.
3. The question involved in all the appeals is the same and may be formulated as hereunder:
“Whether the assessee is entitled to claim deduction under Section 43B of the Income Tax Act, 1961 in respect of the excise duty paid in advance in the Personal Ledger Account (“PLA” for short)?”
4. Before delving into the question formulated one significant fact common to the appeals involving the assessee-Modipon Ltd. may be noted. From the Assessment Year 1984-1985 (from which assessment year Section 43B of the Income Tax Act, 1961 came into force), the assessee has been claiming deduction under the aforesaid provision of the Income Tax Act in respect of the balance amount in the PLA at the end of each accounting year and the assessee had been adding back the same amount as part of the taxable income in the immediately succeeding accounting year in order to avoid double deduction. The aforesaid practice consistently adopted by the assessee had been all along accepted by the Revenue from the Assessment Year 1984-1985 up to the Assessment Year 1998-1999 except for the four assessment years under consideration.
5. Shri K. Radha Krishnan, learned senior counsel for the Revenue has urged that though levy of excise is on manufacture of excisable goods, actual payment of duty is at the stage of removal. The advance duty paid in the PLA is adjusted/debited from time to time, against clearances/removal made by the assessee. Unless such clearances/removal are made and excise duty is debited from the advance deposit there is no actual payment of duty so as to entitle an assessee to the benefit of deduction under Section 43B of the Income Tax Act which contemplates deduction only against actual payment as distinguished from accrual of liability. It is urged on behalf of the Revenue that the amount in deposit is akin to a loan and under the provisions of Central Excise Rules, part or whole of the said amount can be refunded to the assessee. It is further submitted that under Rule 21 of the Central Excise Rules, 1944, at any time before removal, the Commissioner or the other authorities prescribed therein may remit duty in respect of manufactured goods lost or damaged or otherwise unfit for consumption or marketing. The amount of advance deposit, therefore, does not represent actual payment of duty so as to entitle an assessee to the benefit of deduction under Section 43B. Accordingly the orders of the High Courts challenged in the appeals are liable to interference.