JINDAL ALUMINIUM LTD. Vs. DEPUTY COMMISSIONER OF INCOME TAX (ASSESSMENT)

JUDGEMENT

(1.) The assessee has preferred this appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act" for short), against the order dated November 20, 2001, passed by the Income-tax Appellate Tribunal, Bangalore Bench (hereinafter referred to as "the Tribunal" for short) in I.T.A. No. 19/Bang/1994, wherein the Tribunal has upheld the order of the Commissioner of Income-tax, Karnataka-II, Bangalore (for short "the revisional authority") which held that the assessee should have disclosed by way of debit the customs duty paid of Rs. 32,22,067 according to the Sixth Schedule. The assessee is a company which is engaged in the business of manufacturing of aluminium extrusions. The relevant assessment year for this appeal is the assessment year 1990-91. The assessee filed its return of income on October 29, 1991, declaring the total income of Rs. 70,75,210. The assessment came to be completed under section 143(3) of the Act on November 14, 1991. The assessee claimed deduction under section 32AB of the Act at 20 per cent, on Rs. 1,43,62,298 amounting to Rs. 28,72,480. However, the assessing authority allowed only a sum of Rs. 26,45,488 under this head. The revisional authority, by virtue of the power conferred to him under section 263 of the Act initiated proceedings on the ground that the assessment order was prejudicial to the interests of the Revenue in so far as the Assessing Officer allowed excessive relief under section 32AB of the Act. In pursuance of the notice issued, the assessee appeared and submitted its reply. The material on record discloses that the entire raw material imported with respect to which customs duty of Rs. 32,22,067 was paid was consumed in the production, within the accounting period. However, while computing the profit under section 32AB of the Act, the assessee did not deduct this customs duty out of the profit. Therefore, the revisional authority went into the question whether the assessee ought to have debited the customs duty of Rs. 32,22,067 to the profit and loss account and then it should have arrived at the profit and out of the said profit, the assessee was entitled to the benefit of 20 per cent and the same being deposited under section 32AB. It was also observed that there was a valid order from the Department of Customs levying a duty of Rs. 11,25,400. The assessee did not agree with the levy and moved the High Court. The High Court did not set aside the order levying the duty, it merely stayed the recovery of the levy subject to certain conditions, one of them was the due payment of 25 per cent of the duty. That 25 per cent of the duty amounts to Rs. 32,33,067. The revisional authority was of the view that the assessee ought to have debited to the profit and loss account this amount according to the accountancy principles.

(2.) Part II of the Sixth Schedule to the Companies Act enjoins on the assessee to disclose in the profit and loss account, the expenditure incurred on, among others, rates and taxes, excluding tax on income. The assessee should have disclosed by way of debit the customs duty paid of Rs. 32,33,067 according to the Sixth Schedule and, therefore, the revisional authority rejected the claim of the assessee and the Assessing Officer was directed to modify the assessment by recomputing the relief under section 32AB of the Act and withdrawing the excess relief allowed. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal, after considering section 32AB of the Act, held that the amount paid by the assessee towards the customs duty shall go to reduce the profits under the head "Profit and gains of business or profession" which are eligible for deduction under section 32AB. A reference to the Companies Act and the audited financial statements does not lead to the conclusion that the basic principle enshrined in the computation of income in Part D of Chapter IV is done away with. In view of the explicit provisions, as outlined the above, the same have to be interpreted to mean only the profits as computed under the Income-tax law and not with reference to the Companies Act alone. Therefore, the, decision of the Commissioner of Income-tax in concluding that the assessment was erroneous in so far as to be prejudicial to the interests of the Revenue on account of the profits not being reduced with the amount of customs duty of Rs. 32,22,067 paid is in accordance with law and is well founded. Therefore, the appeal came to be dismissed. Aggrieved by the said order, the assessee is in appeal before this court.

(3.) This appeal was admitted on November 10, 2010, to consider the following substantial questions of law: