IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM ITA No. 729 & 730/JP/2016 Assessment Years : 2010-11 and 2011-12 A.C.I.T., cuke M/s Modern Threads (India) Limited, Circle-6, Vs. A-4, Vijay Path, Tilak Nagar, Jaipur. Jaipur. PAN/GIR No.: AABCM 1850 Appellant Respondent Revenue by : Shri Rajendra Jha (JCIT) Assessee by : Shri Madhukar Garg (CA) Date of Hearing : 06/10/2016 Date of Pronouncement : 07/10/2016 ORDER PER: KUL BHARAT, J.M. These are appeals filed by revenue arise against order dated 26/05/2016 passed by ld. CIT(A)-5, Jaipur for assessment years 2010-11 and 2011-12. effective grounds of revenue s appeal for A.Y. 2010-11 is as under:- 1. Whether on facts and in circumstances of case and in law, ld CIT(A) was justified in deleting addition of Rs. 1,75,35,199/- made by A.O. on account of remission of liability U/s 41(1) of Income Tax Act, 1961. 2 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. 2. Whether on facts and in circumstances of case and in law, CIT(A) was justified in deleting addition of Rs. 25,71,000/- made by A.O. on account of Excise duty liability. Similar identical grounds has also been taken by revenue for assessment year 2011-12. 2. Both appeals are being heard together and for sake of convenience, consolidated order is being passed in ITA No. 729/JP/2016. 3. Briefly facts of case are that assessee is Domestic company and derived income from business of manufacturing of Polyester, viscose, blended, woolen, worsted yarn and wool tops. assessee filed its return of income for A.Y. 2010-11 on 27/09/2011 declaring NIL income. case of assessee was picked up for scrutiny assessment and assessment U/s 143(3) of Income Tax Act, 1961 (hereinafter referred as Act ) was framed vide order dated 06/03/2013. While framing assessment, Assessing Officer made addition on account of remission of liability of Rs. 1,75,35,199/- and valuation of closing stock at Rs. 25,71,000/-. Assessing Officer invoked provisions of Section 145A of Act and included value of excise duty in closing stock and made addition 3 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. of Rs. 25,71,000/- for non compliance of provisions of Section 145A of Act. 4. first ground of revenue s appeal is against deletion of addition of Rs. 1,75,35,199/- as made by Assessing Officer on account of remission of liability. 5. ld CIT(A), who after considering submissions made by both parties, allowed appeal by following decision of Hon ble ITAT, Jaipur Bench, Jaipur passed in assessee s own case for A.Y. 2009-10 in ITA No. 671/JP/2014 dated 22/01/2016. 6. Now revenue s is in appeal before us. ld CIT DR has vehemently supported order of Assessing Officer. However, he fairly conceded that issue under consideration is covered against revenue by decision of Hon ble ITAT, Jaipur Bench decision in assessee s own case for A.Y. 2009-10 passed in ITA No. 671/JP/2014. 7. At outset, ld AR of assessee has reiterated submissions made in written submissions. contents of written submissions are as under:- 4 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. first ground of appeal in Departmental appeal has been taken against action of learned CIT(Appeals) in deleting addition of Rs. 1,75,35,199/- made by Assessing Officer on account of remission of liability u/s 41(1) of Act. Facts in this case are that assessee had shown sum of Rs. 1,75,35,199/- under head exceptional items and it was explained that same was remission of principal loan amount and hence was not taxable. Assessing Officer has reproduced reply of assessee and relying on certain cases has treated said amount as income of assessee. Assessing Officer had not accepted explanation of assessee and relying on decision of Hon ble Supreme Court in case of CIT vs. Sundaram Iyengar reported in 222 ITR 344 he held that assessee has become richer because banks and financial institutions have written off amounts in their books and assessee has also written back said amounts in its books, he has therefore, added said amount of Rs.1,75,35,199/- to income of assessee. assessee had filed appeal before learned CIT(Appeals) and reliance was placed on following decisions:- Mahindra & Mahindra Ltd. vs. CIT reported in 261 ITR 501 (Bom) Polyflex (India) Pvt. Ltd. vs. CIT reported in 257 ITR 343 (SC) Nectar Beverages (P) Ltd. vs. DCIT reported in 314 ITR 314 (SC) 5 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. CIT vs. Tosha International reported in 331 ITR 440 (Del) and certain other cases. It was also brought to knowledge of learned CIT(Appeals) that this matter has been considered by Hon ble ITAT, Jaipur Bench, Jaipur in assessee s own case for assessment year 2009- 10 in ITA No.622/JP/2014 and vide order dated 22.1.2016 Hon ble ITAT, Jaipur Bench has deleted addition. learned CIT(Appeals) relying on order of Hon ble ITAT, Jaipur Bench in assessee s own case for assessment year 2009-10 had deleted addition. Thus, this issue is covered in favour of assessee by Hon ble ITAT, Jaipur Bench s decision and hence, order passed by learned CIT(Appeals) deserves to be sustained. 8. We have heard rival contentions of both parties, perused material available on record and also gone through orders passed by authorities below. We find that Coordinate Bench in assessee s own case has decided issue under consideration in favour of assessee. finding of Coordinate Bench is as under:- 6. We have heard rival contentions of both parties and perused material available on record. assessee company is manufacturing of woolen yarn and other wool items and taken loan from bank and financial institutions. 6 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. assessee company had become sick company and before BIFR banks/financial institutions had settled its outstanding loan whereby principal loan amount of Rs. 29,40,94,000/- was written back. loan was taken long time back for installing plant and machinery and same was on account of capital account. case laws referred by ld CIT(A) i.e. decision of Hon'ble Supreme Court in case of CIT Vs. Sundaram Iyengar (T.V.) and Sons Ltd. (supra) is not squarely application as wherein assessee got benefit of depreciation and on other hand remission of principal, which is covered U/s 28(iv) of Act. As per Section 28(iv) value of any benefit or prerequisite whether converted into money or not arising from business or exercise of profession can be taxed. Even Hon'ble Supreme Court in case of Nectar Beverages Pvt. Ltd. Vs. DCIT (supra) has held that depreciation is neither loss nor expenditure nor trading liability, therefore, settlement of principal amount by bank/financial institution cannot be assessed U/s 41(1) of Act. other case laws referred by AR particularly decision in case of Mahindra & Mahindra Ltd. Vs. CIT (supra) and CIT Vs. Tosha International Ltd. (supra) and others are squarely applicable. Therefore, we delete addition confirmed by ld CIT(A). assessee s appeal on this ground is allowed. 7 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. revenue has not brought to our notice any contrary judgment of Jurisdictional High Court, therefore, taking consistent view, we do not see any reason to interfere in order passed by ld. CIT(A). Therefore, order of ld. CIT(A) on this ground is hereby affirmed and ground No. 1 of revenue s appeal is dismissed. 9. 2nd ground of revenue s appeal is against deleting addition of Rs. 25,71,000/- made by Assessing Officer on account of excise duty liability by invoking provisions of Section 145A of Act. ld CIT(A), who after considering submissions made by both parties, allowed appeal by following decision of Hon ble ITAT, Jaipur Bench, Jaipur passed in assessee s own case for A.Y. 2009-10 in ITA No. 671/JP/2014 dated 22/01/2016. 10. Now revenue s is in appeal before us. ld CIT DR has vehemently supported order of Assessing Officer. However, he fairly conceded that issue under consideration against revenue is covered by decision of Hon ble ITAT, Jaipur Bench decision in assessee s own case for A.Y. 2009-10 passed in ITA No. 671/JP/2014. 8 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. 11. At outset, ld AR of assessee has reiterated submissions made in written submissions. contents of written submissions are as under:- Ground No.2 of appeal has been taken as to whether CIT(A) was justified in deleting addition of Rs.25,71,000/- made by Assessing Officer on account of excise duty liability. learned Assessing Officer has discussed matter on pages 6-8 of order and he held that excise duty becomes payable on completion of manufacture although goods lay uncleared in warehouse. Before learned CIT(Appeals) assessee had pointed out that Section 4 of Central Excise Act, 1944 provides that excise duty is chargeable on excisable goods at time of removal of goods. goods can be said to be removed from factory or any other place or premises of production or manufacturing or warehouse wherein excisable goods have been permitted to be deposited without payment of duty. excise duty is payable at time of removal of goods. Rule 49 of Central Excise Act, 1944 also provides that excise duty is chargeable only on removal of goods from factory premises or from approved place of store. Thus, on combined reading of Section 4 and Rule 49 excisable goods are chargeable when same are removed for sale from factory premises but when after manufacturing goods are kept in warehouse 9 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. excise duty would be payable only when goods are removed from such warehouse. This matter was considered by Hon ble Bombay High Court in case of CIT vs. Loknete Balasaheb Desai S.S.K. Ltd., reported in 339 ITR 288. In said case it was held that expression incurred by assessee in section 145A(b) is followed by words to bring goods to place of its location as on date of valuation . Thus, expression incurred by assessee relates to liability determined as tax, duty cess or fee payable in bringing goods to place of its location and condition of goods. Explanation to section 145A(b) makes it further clear that income chargeable under head profits and gains of business shall be adjusted by amount paid as tax, duty, cess or fee. Therefore, expression incurred in section 145A(b) must be construed to mean liability actually incurred by assessee. Therefore, though date of manufacture is relevant date for dutiability, relevant date for duty liability is date on which goods are cleared. In other words, in respect of excisable goods manufactured and lying in stock, excise duty liability would get crystallized on date of clearance of goods and not on date of manufacture. Apex Court in case of Collector of Central Excise v. Polyset Corpn. 2000(115) ELT 41 has held that dutiability of 10 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. excisable goods is determined with reference to date of manufacture and rate of excise duty payable has to be determined with reference to date of clearance of goods. Therefore, till date of clearance of excisable goods, excise duty payable on said goods does not get crystallized and, consequently, assessee cannot be said to have incurred excise duty liability. In respect of excisable goods lying in stock, no liability is determined as payable and, consequently, there would be no question of incurring excise duty liability. In instant case, it was not in dispute that manufactured sugar was lying in stock and same was not cleared from factory. Therefore, Tribunal was justified in holding that in respect of unsold sugar lying in stock, Central Excise liability was not incurred and, consequently, addition of excise duty made by Assessing Officer to value of excisable goods was liable to be deleted . Hon ble Gujarat High Court in case of ACIT vs. Narmada Chematur Petro Chemical Ltd., reported in 327 ITR 369 has held that under excise law assessee is liable to pay excise duty only upon both events taking place, viz. manufacture of excisable goods and removable of excisable goods and for purpose of IT Act position of law is not different. It was also pointed out that this matter was also considered by ITAT, Jaipur Bench in assessee s own case for assessment year 2009-10 and in para 10 it had been held that where 11 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. goods are lying in warehouse excise duty is payable at time of clearance of goods from warehouse. Therefore, no adjustment u/s 145A on account of excise duty is required to be made as per law. learned CIT(Appeals) has given his finding in para 3.3 and it has been mentioned by him that issue regarding addition of excise duty liability u/s 145A has already been decided in favour of assessee by CIT(Appeals)-ll, Jaipur in assessment year 2008-09 as well as assessment year 2009-10 and decision of CIT(Appeals)-ll, Jaipur for assessment year 2009-10 has been confirmed by ITAT, Jaipur Bench, Jaipur vide order dated 22.1.2016 in ITA No.671/JP/14 and hence, respectfully following decision of ITAT, Jaipur Bench addition of Rs.25,71,000/- on account of excise duty component added in closing stock is hereby deleted. Thus, it is clear that this matter has also been decided in favour of assessee by Hon ble ITAT, Jaipur Bench, Jaipur for assessment year 2009- 10 and relief has rightly been allowed by learned CIT(Appeals). In view of order of ITAT, Jaipur Bench, Jaipur for assessment year 2009-10 in assessee s case appeal of Department deserves to be dismissed. 12. We have heard rival contentions of both parties, perused material available on record and also gone through orders 12 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. passed by authorities below. We find that Coordinate Bench in assessee s own case has decided issue under consideration in favour of assessee. finding of Coordinate Bench is as under:- 10. We have heard rival contentions of both parties and perused material available on record. goods are lying in warehouse and on production, excise duty is not payable it is payable at time of goods cleared from warehouse, therefore, no adjustment U/s 145A on account of excise duty is required to be made as per law. Accordingly, we uphold order of ld CIT(A). revenue has not brought to our notice any contrary judgment of Jurisdictional High Court, therefore, taking consistent view, we do not see any reason to interfere in order passed by ld. CIT(A). Therefore, order of ld. CIT(A) on this ground is hereby affirmed and ground No. 2 of revenue s appeal is dismissed. 13. Now we take up revenue s appeal in ITA No. 730/JP/2016 pertaining to A.Y. 2011-12. facts in present year under appeal are identical to facts of case of A.Y. 2011-12 and there is no change into facts and circumstances of case. facts and grounds of ITA No. 730/JP/2016 for A.Y. 2011-12 are identical as in 13 ITA 729 & 739/JP/2016_ ACIT Vs M/s Modern Threads Ltd. ITA No. 729/JP/2016. respective representatives of revenue as well as assessee have adopted same argument as made in ITA No. 729/JP/2016. We have followed decision of Coordinate Bench, therefore, taking consistent view, we do not see any reason in order of ld. CIT(A) in this year also. Accordingly, grounds raised by revenue in A.Y. 2011-12 are hereby dismissed. 14. In result, both appeals of revenue are dismissed. Order pronounced in open court on 07/10/2016. Sd/- Sd/- (Vikram Singh Yadav) (Kul Bharat) Accountant Member Judicial Member JaipurDated:- 07th October, 2016 Copy of order forwarded to: 1. Appellant- A.C.I.T., Circle-6, Jaipur. 2. Respondent- M/s Modern Threads (India) Limited, Jaipur. 3. CIT 4. CIT(A) 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 729 & 730/JP/2016) By order, Asst. Registrar A.C.I.T., Circle-6, Jaipur v. M/s Modern Threads (India) Limited