B. N. Srikrishna, J. - (1.) Leave granted.
(2.) The assessee is a company engaged in the manufacture and sale of paints, varnishes and other allied products. During the previous year ending on 31st December, 1983 pertaining to the assessment year 1984-85, the petitioner in its returns had disclosed a sum of Rs. 1,33,31,370/- as income. During this period, the appellant-assessee had incurred expenditure on account of customs and excise duty aggregating to Rs. 5,85,87, 181/- which was duly debited to the Profit and Loss Account of the petitioner for the relevant previous year and was also fully paid during the relevant previous year. In addition thereto, the petitioner had also credited to the Profit and Loss Account of the relevant previous year an amount of Rs. 98,25,833/- relatable to the customs and excise duty on the closing stock of inventory by including the said sum in the valuation of such closing stock. During the assessment proceedings for the assessment year 1984-85, the appellant-assessee claimed that under Section 43-B of the Income-tax Act, 1961 (hereinafter referred to as the Act) that it was entitled to deduction of the entire sum of Rs. 5,85,87, 181/- being the duties actually paid during the relevant previous year.
(3.) On similar basis, the appellant-assessee had claimed a deduction of an amount of Rs. 1,22,54,261/- being the actual customs and excise duty included in the value of the closing stock for the previous year pertaining to the assessment year 1986-87 and offered for tax a sum of Rs. 98,25,833/- being customs and excise duty included in the value of the opening stock. Similarly, for the assessment year 1986-87, the petitioner claimed a deduction of Rs. 24,28,428 (Rs. 1,22,54,261 - Rs. 98,25,833). The assessee claimed a deduction of Rs. 77,81,739 (Rs. 2,00,36,000 - Rs. 1,22,54,261) on similar basis for the assessment year 1987-88.;