Decided on February 02,1994



R.M. Mehta, Accountant Member - (1.) THESE are cross appeals, pre�ferred by both the parties, being aggrieved with the order of the Com�missioner of Income-tax (Appeals) on various grounds. THESE came up for hearing before the Special Bench constituted by the President along with the appeal of Indian Communication Network (P.) Ltd. in the circumstances narrated in the order of the Tribunal in the latter appeal. Taking up for consideration the assessee's appeal, the first ground raised reads as follows : "1. Your appellant submits that, on the facts and in the circum�stances of the case, the learned Commissioner of Income-tax (Appeals)-IX erred in law in not allowing excise duty as claimed by your appellant in the sum of Rs. 81,60,723 under the provisions of Section 43B of the Income-tax Act, 1961."
(2.) The assessee in this case is a public limited company, engaged in the manufacture and sale of various kinds of food products, like NESCAFE" instant coffee, "LACTOGEN" baby food, "MAGGI" noodles, "CERELAC" baby cereal, etc. In the year under consideration, there was a change in the method of accounting followed by the assessee vis-a-vis the valuation of closing stock and which is denoted by Note No. 3 to the audited accounts as follows : "In past years, it has been the practice to charge the total expenses on excise duty to the profit and loss account and include the amount relating to unsold stocks in the closing stock valuation. The current year's liabilities for excise duty have been charged as an expense only in respect of goods cleared and sold and the balance amount of Rs. 81.61 lakhs relating to goods cleared from bonded warehouse and remaining unsold has been included under 'loans and advances' in Schedule H. Had the previous year's practice been followed, the charge to excise duty and the value of closing stock would have been higher by Rs. 81.61 lakhs. How�ever, this change has no effect upon the profit before taxation for the year. In computing the provision for income-tax, the above-referred sum of Rs. 81.61 lakhs has been considered as an allowable deduction under the provisions of Section 43B of the Income-tax Act, 1961."
(3.) BY means of a letter dated July 18, 1986, the assessee stated that the aforesaid change had been effected with a view to "comply with the requirements of Section 43B of the Income-tax Act, 1961". To appreciate the view-point canvassed on behalf of the assessee, the Income-tax Officer extracted in the assessment order the relevant figures vis-a-vis the earlier method and the new method, which was sought to be adopted. These figures are as under : JUDGEMENT_2664_TLIT0_19940.htm ;

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