LML Ltd. v. Jt. CIT - Taxpublishers.in

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The Tax PublishersI.T.A. Nos. 3545 and 4441/Mum/2002, 3585, 4882 and 7222/Mum/2002 2014 TaxPub(DT) 2925 (Mum-Trib) : (2014) 151 ITD 0303 : (2015) 169 TTJ 0010 : (2015) 119 DTR 0201 : (2014) 033 ITR (Trib) 0269 LML Ltd. v. JCIT INCOME TAX ACT, 1961 --Deduction under section 80HHC--Computation of total turnoverTreatment of sales tax and excise duty--Sales tax and excise duty would be excluded from export turnover as well as total turnover for computing deduction under section 80HHC. Income Tax Act, 1961, Section 90HHC INCOME TAX ACT, 1961 --Accounting method--Valuation of closing stockAdjustment for Modvat--Where no adjustment was made in respect of duties/levies of taxes, etc., for assessment years 1997-97 and 1998-99 for assessment year 1999-2000 onwards adjustment for Modvat would be made in opening stock, purchases, sales and closing stock. The issue, as Tribunal discern, would necessarily have to be bifurcated with reference to pre and post co-option of section 145A on the statute, i.e., by the Finance (No. 2) Act, 1998 with effect from 1-4-1999, or assessment year 1999-00 onwards. For the first two years, i.e., assessment years 1997-98 and 1998-99, the only question that is relevant is if the assessee is properly accounting for the various levies, including excise, charging or, as the case may be, crediting the operating statement with the net amount of duty suffered or recovered in excess, i.e., as the case may be. Tribunal say so as a duty under the modvat (cenvat) being charged on value addition, recovery is usually in excess. No adjustment under the circumstances, to the value of the closing stock, for the amount of duty component attributable thereto, would be required to be made. Subject to this verification by the AO, so that the adjustment, if any, would be for the net expense or income on account of the levies, forming part of expense or revenue for the relevant year/s, shall ensue. [Para 72] For the assessment year 1999-2000, however, the non obstante clause of section 145A will have to be given effect to. Even though the assessee may continue to follow the exclusive method in accounts, for the purpose of computation of income under section 145A, the opening stock, purchases, sales and closing stock, would have necessarily to be valued at gross of all taxes and duties incident thereon. It is open for the assessee to argue of the provision being tax neutral, and that no adjustment, therefore, to the profit as disclosed per its operating statement shall arise. The same may well be, but is not a matter of presumption and, would need to be demonstrated. The adjustment, if any, that may result to the declared profit/loss is, it may appreciated, incidental and in fact consequential. The provision being mandatory, effect thereto is to be in any case or view of the matter given. Further, it is only the value of the closing stock, gross of all levies, etc., so determined, that would be required to be carried over for being considered, likewise, as the value of the opening stock for the following year. [Para 73] SUBSCRIBE FOR FULL CONTENT

The Tax PublishersI.T.A. Nos. 3545 and 4441/Mum/2002, 3585, 4882 and 7222/Mum/2002
2014 TaxPub(DT) 2925 (Mum-Trib) : (2014) 151 ITD 0303 : (2015) 169 TTJ 0010 : (2015) 119 DTR 0201 : (2014) 033 ITR (Trib) 0269

LML Ltd. v. JCIT

INCOME TAX ACT, 1961

--Deduction under section 80HHC--Computation of total turnoverTreatment of sales tax and excise duty--Sales tax and excise duty would be excluded from export turnover as well as total turnover for computing deduction under section 80HHC.

Income Tax Act, 1961, Section 90HHC

INCOME TAX ACT, 1961

--Accounting method--Valuation of closing stockAdjustment for Modvat--Where no adjustment was made in respect of duties/levies of taxes, etc., for assessment years 1997-97 and 1998-99 for assessment year 1999-2000 onwards adjustment for Modvat would be made in opening stock, purchases, sales and closing stock.

The issue, as Tribunal discern, would necessarily have to be bifurcated with reference to pre and post co-option of section 145A on the statute, i.e., by the Finance (No. 2) Act, 1998 with effect from 1-4-1999, or assessment year 1999-00 onwards. For the first two years, i.e., assessment years 1997-98 and 1998-99, the only question that is relevant is if the assessee is properly accounting for the various levies, including excise, charging or, as the case may be, crediting the operating statement with the net amount of duty suffered or recovered in excess, i.e., as the case may be. Tribunal say so as a duty under the modvat (cenvat) being charged on value addition, recovery is usually in excess. No adjustment under the circumstances, to the value of the closing stock, for the amount of duty component attributable thereto, would be required to be made. Subject to this verification by the AO, so that the adjustment, if any, would be for the net expense or income on account of the levies, forming part of expense or revenue for the relevant year/s, shall ensue. [Para 72] For the assessment year 1999-2000, however, the non obstante clause of section 145A will have to be given effect to. Even though the assessee may continue to follow the exclusive method in accounts, for the purpose of computation of income under section 145A, the opening stock, purchases, sales and closing stock, would have necessarily to be valued at gross of all taxes and duties incident thereon. It is open for the assessee to argue of the provision being tax neutral, and that no adjustment, therefore, to the profit as disclosed per its operating statement shall arise. The same may well be, but is not a matter of presumption and, would need to be demonstrated. The adjustment, if any, that may result to the declared profit/loss is, it may appreciated, incidental and in fact consequential. The provision being mandatory, effect thereto is to be in any case or view of the matter given. Further, it is only the value of the closing stock, gross of all levies, etc., so determined, that would be required to be carried over for being considered, likewise, as the value of the opening stock for the following year. [Para 73]