TIOL-DDT 2673
28 08 2015
Friday

RECENTLY, the ITAT delivered an important judgement related to Central Excise.

Section 43B of the Income Tax Act reads as,

43B.  Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-

(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or

(b) to (f) …………..

shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him :

…...'.

The questions before the ITAT were whether balance in PLA, balance in CENVAT Account and Duty paid under Protest are eligible for deduction under Section 43B.

PLA: The Tribunal observed, "The assessee paid certain sum under PLA which is nothing, but, excise duty paid in account as advance, to be adjusted against actual excise duty required to be paid at the time of removal of goods from bonded warehouse. 

It is in the nature of advance payment of excise duty to be adjusted against the removal of goods from bonded warehouse at a later point of time in subsequent year. Normally, at the time of payment of excise duty, the amount goes to the PLA, which is an item of asset appearing in the balance sheet. When goods are removed from bonded warehouse, a corresponding sum of excise duty is taken away from PLA and is carried to Profit and Loss account as Excise duty."

Held: While we hold that the above referred sum of unutilized amount in PLA at the end of the year u/s 43B under 'Exclusive method' qualifies for deduction, we also hold that this amount cannot be allowed deduction once again in the immediately succeeding year and also the similar amount allowed as deduction in the preceding year u/s 43B requires to be included in the computation of income of the current year.

Balance in CENVAT Credit Account: Under the central excise law, a manufacturer is entitled to claim Modvat credit in respect of the amount of central excise duty paid on raw material and inputs purchased for manufacture of excisable goods. The amount in dispute is Modvat credit unutilized at the end of the year. The assessee treated it as payment of tax and claimed deduction u/s 43B of the Act. The AO refused to allow this deduction.

At the outset, the Tribunal mentioned that the Special Bench of the Tribunal in Glaxo Smithkline Consumer Healthcare has held that unexpired Modvat credit before it is set off, cannot be treated as tax paid. Accordingly the Special Bench held that the Modvat credit available to the assessee as on the last date of the previous year does not amount to payment of excise duty and is, hence, not allowable u/s 43B. In earlier years, the Tribunal has followed the dictum of this Special Bench verdict and upheld the disallowance.

The Supreme Court in the case of  CIT Vs. Shri Ram Honda Power Equipment Ltd.- 2012-TIOL-88-SC-IT held that: 'The Authorities below are right in coming to the conclusion that MODVAT Credit is excise duty paid'. The jurisdictional High Court in the assessee's own case in  CIT vs. Maruti Suzuki India Ltd. - 2012-TIOL-1038-HC-DEL-IT,after taking note of the judgment of the Hon'ble Supreme Court in the case of Shri Ram Honda Power Equipment Corporation has held that: 'This court also notices that the Supreme Court has upheld the view which allows assesses to claim credits, such as Modvat, etc, falling within the description of liability paid, to escape the mischief of Section 43-B.'

Held: Since this amount is considered as excise duty paid, the same has to be allowed as deduction during the year of payment as per section 43B. Caveat remains that deduction in the current year, being the Modvat credit unutilized at the end of the year under the exclusive method, also requires enhancement of income of the succeeding year to this extent. 

Duty paid under protest: The AO disallowed it on the ground that the same was being contested and there was no finality regarding the liability and further, such amount was not debited to the Manufacturing, Trading, Profit and loss account ('Profit and loss account').

Held: Since the amount in question has been paid during the year, it qualifies for deduction in terms of section 43B under the exclusive method. Thus on one hand deduction for excise duty paid under protest is available in the year of payment under the exclusive method, the same amount cannot be allowed to get deducted once again on the finalization of the dispute with the Excise department on its transfer to Excise duty account. Simultaneously, the amount of excise duty paid under protest in earlier years getting deduction u/s 43B calls for inclusion in the total income of the current year on the removal of the amount from Excise duty paid under protest account.

For more details of the case, please see 2015-TIOL-1346-ITAT-DEL

Income Tax - Reporting of Financial Transactions  

AS per Section 285BA of the Income Tax Act, certain authorities responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed are required to furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax authority or such other authority or agency as may be prescribed.

As per Sub rule (9)(a) of Rule 114G of the Income Tax Rules, the statement shall be furnished to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation) through online transmission of electronic data to a server designated for this purpose under the digital signature in accordance with the data structure specified in this regard by the Principal Director General of Income-tax (Systems).

Now, the Director General of Income-tax (Systems) lays down the procedures, data structure and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.

(a) Registration of the reporting financial institution: The reporting financial institution is required to get registered with the Income Tax Department by logging in to the e-filing website with the log in ID used for the purpose of filing the Income Tax Return of the reporting financial institution. A link to register reporting financial institution has been provided under "My Account". The reporting financial institution is required to submit registration details on the screen. A reporting financial institution may submit different registration information under different reporting financial institution categories.

(b) Submission of Form 61B: Once the reporting financial institution gets registered successfully, it is required to submit the Form 61B or Nil statement under "e-File" menu. The prescribed schema for the report under form 61B can be downloaded from the e-filing website. The reporting financial institution will be required to submit the calendar year for which report is to be submitted and the reporting entity category for which the report is to be submitted. The reporting financial institution will then be provided the options to upload the Form 61B. The form is required to be submitted using a Digital Signature Certificate.

(c) Submission of Nil statement: In case nil statement has to be submitted by the reporting financial institution, the option to submit Nil statement is required to be selected. The reporting financial institution will then be required to submit a declaration with respect to pre-existing accounts (As defined in Rule 114H(2)(h) of Income Tax Rules, 1962 and new accounts (As defined in Rule 114H(2)(d) of Income Tax Rules, 1962. The declaration is required to be submitted using a Digital Signature Certificate.

(d) Digital signature certificate: in case if the designated director (as reported in registration details submitted by the reporting financial institution as per para 2(a) above) is same as the person authorised to verify the return of income of the reporting financial institution as per the provisions of section 140 of the Income-tax Act, 1961, the Form 61B or Nil statement is required to be submitted with the digital signature certificate of the person authorised to sign the return of income of the reporting financial institution, in other cases, the procedure will be notified separately.

CBDT Notification No. 03/2015., Dated August 25 2015. Please also see Nosy Government peeps at Citizens Through More Returns

No IT Return under RTI Act - SC Dismisses Petition

THE Petitioner is Shailesh Gandhi an RTI activist and a former Information Commissioner. Under the RTI Act, he asked for the Income Tax returns and balance sheets of Ajit Pawar, the then Deputy Chief Minister of Maharashtra.The CPIO of the Income Tax Department denied the said information sought by the petitioner.

The writ petition filed in the Bombay High Court was dismissed in June 2015 on the ground that, the Income Tax Returns constitute personal information and are exempted from disclosure under Section 8(1)(j) and that the said personal information can only be divulged if the CPIO or the State Public Information Officer reaches a conclusion that it would be in the larger public interest to reveal such information.

The activist appealed to the Supreme Court, but last week during the hearing, the counsel for the petitioner sought permission to withdraw the petition. The Supreme Court dismissed the petition as withdrawn.

CBEC wants Under Secretaries and Technical Officers

THERE are as many as 17 posts lying vacant in the Board -9 posts of Under Secretary/5 posts of Senior Technical Officer/3 posts of Technical Officers. These are Assistant Commissioner/Deputy Commissioner grade posts. Board wants Chief Commissioners to send the names of eligible and willing officers to work in the eminently prestigious but acknowledgedly unattractive posts in the Board.

CBECF.No.A.35017/57/2014-Ad.II., Dated: August 27, 2015

Until Monday with more DDT

Have a nice weekend.

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