- (1.) AT the instance of the Revenue, the Tribunal has stated a case and referred the following question of law in relation to the asst. yr. 1986-87 of the assessee. "Whether on the facts and circumstances of the case, the Tribunal is correct in law in holding that the excise duty of Rs. 39,64,061 paid on the unsold goods should be reduced from the closing stock ?"
(2.) THE assessment year involved is 1986-87 and the relevant previous year ended on 31st Aug., 1985. During the course of assessment proceedings, the assessee claimed a sum of Rs. 39,64,061 as deduction in the computation of the business income on the score that the said amount was paid as excise duty and should be allowed as deduction under S. 43B of the IT Act, 1961 (hereinafter referred to as "the Act"). The AO found that the assessee had valued the closing stock at cost and showed the excise duty paid under the heading "loans and advances" from the customers. The AO, therefore, held that the closing stock was not properly valued as the assessee did not include the excise duty paid on the finished goods as part of the cost of the closing stock of the unsold goods. The AO, therefore, held that the excise duty paid should be taken as a part of the component of valuation of the closing stock, and made an addition of Rs. 39,64,061 towards the closing stock of the unsold goods. It is, no doubt, true that the AO has also granted the necessary deduction of the said sum on the ground that it was paid. The order of the AO making addition of the excise duty and granting deduction also on the same amount was upheld by the CIT(A) on appeal. However, the Tribunal without going into the factual details of the matter held that the excise duty cannot form part of the closing stock valuation of the unsold goods held by the assessee and allowed the appeal preferred by the assessee. Aggrieved by the order of the Tribunal, the Revenue has sought for reference and hence, the reference has been made on the question of law referred to us earlier.
(3.) HEARD Mrs. Pushya Sitharaman, senior standing counsel for the income-tax and Mr. P.P.S. Janarthana Raja appearing for the assessee.;