Top Stories Income Tax Deduction on Excise Duty does not Amount to Double Deduction: Bombay HC [Read Order] The Bombay HC observed that the income tax deduction on excise duty does not amount to double deduction By Kalyani B. Nair – On February 8, 2024 5:33 pm – 2 mins read The Bombay High Court in a recent decision observed that the income tax deduction on excise duty does not amount to double deduction.

The Income Tax Appellate Tribunal ( ITAT ) in its impugned order dated 19th August 2002, on the issue at hand, came to a factual finding that the Assessing Officer ( “AO” ), by allowing deduction of Rs. 980.74 lakhs have allowed Rs. 60,99,426/- as part of Rs. 2,08,08,346/- and therefore, if that amount of Rs. 60,99,426/- was again allowed in the assessment, it would amount to double deduction, which is not permissible. The Tribunal also relied upon a judgment of the Calcutta High Court in the case of CIT v. Burger Paints ( India ) Ltd, to come to the conclusion that assessee was not entitled to the deduction of Rs. 60,99,426/- representing the ‘Excise Duty Claim’ under Section 43B of the Income Tax Act, 1961. That judgment of the Calcutta High Court has been reversed by the Apex Court in Burger Paints ( India ) Ltd. v. CIT in favour of assessee. By having a perusal of the documents submitted the Court found out that the excise duty amounting to Rs. 2,08,08,346/- was transferred to pre-paid account and added to the closing stock of finished products.

If the opening balance of Rs. 1,47,08,920/- is reduced, that would leave a sum of Rs. 60,99,426/- in the pre-paid account. A Division Bench of Dr Justice Neela Gokhale and Justice KR Shriram observed that “While computing the total income for Assessment Year 1986- 1987, appellant had claimed the deduction in respect of excise duty Gitalaxmi 4/5 202-ositxa-103-2003 with ositxa-148-2003.doc amounting to Rs. 60,99,426/- being the differential excise duty attributable to opening and closing stock of the finished goods held by them during the previous year ended 29th December 1985.” The Court noted that the excise duty paid and included in the closing stock has to be claimed separately as a deduction otherwise appellant would not be claiming the entire excise duty paid in the year of its payment

. Section 43B of the Income Tax Act, which came to be introduced from Assessment Year 1984- 1985 onwards, provides that the excise duty would be deductible only on the payment basis in the year in which it is actually paid. “Therefore, while computing the total income for Assessment Year 1986-1987, assessee had claimed a deduction of excise duty amounting to Rs. 2,08,08,346/- actually paid in the year 1985 and included in closing stock less excise duty paid and included in closing stock of 1984 already claimed, amounting to Rs. 1,47,08,920/-. Therefore, in our view, the Tribunal was not correct in coming to a conclusion that this amount of Rs. 60,99,426/- would amount to double deduction” the Bench noted.