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By Vijay Kumar

Income Tax

Computation of gross profits - for allowing deduction under section 80HHC , depreciation has to be allowed : ITAT

THE issue decided in this appeal before ITAT relates to allowance of depreciation which was not claimed by the assessee in assessment years under consideration. The facts of the case stated in brief are that the assessee company was incorporated on 30.03.1993 and commenced its business on 26 April 1993. For the assessment years 1994-95 to 1997-98, the assessee did not claim deduction on account of depreciation allowance. A search and seizure operation was carried on 18.6.2003. During the course of assessment proceedings u/s 153 A , the Assessing Officer found that in the computation of taxable income the assessee added back the depreciation as per Companies Act to the net profit for the purpose of computing gross total income. The assessee did not claim any depreciation allowable as per Income-tax Act. Thus the profits shown by the assessee were not the actual profits of the assessee company. The assessee company earned profits by using its assets but did not claim depreciation with the intention to claim higher deduction under Chapter VI-A of the Act. The Assessing Officer, therefore, worked out depreciation allowable to the assessee. He recomputed WDV and depreciation to be deducted for the purpose of determination of gross total income for assessment years 1998-99 to 2004-05. Accordingly, reassessment under section 153A was made for assessment years 1998-99 to 2003-04 and assessment under section 143(3) was made for assessment year 2004-05.

Central Excise

Admitted that Compounded Levy Scheme did not legally warrant a manufacturer from showing duty element in sales bills issued but it does not absolve him from furnishing evidence that amount was not recovered – Refund disallowed on ground of unjust enrichment by Tribunal

THE appellants were working under the Compounded Levy Scheme during the period 1.4.1999 to 31.3.2000. As per provisions of the Compounded Levy Scheme their Annual Production Capacity was determined and duty liability fixed. This duty liability was challenged by the appellant & during the period when their appeal was pending, the appellant paid duty as per his own computation & later when the same was objected by the department, upon insistence he started paying a differential duty Rs 50,000/- per month. Ultimately their appeal was allowed by the CESTAT & the Commissioner was asked to re-fix their annual production capacity after taking into consideration the relevant factors and after hearing the appellants. After hearing the appellants, the Commissioner re-determined the annual production & the duty liability & which worked out to Rs.60 ,597 /- per month. In totality, since the assessee had paid in excess, they filed a refund claim in respect of Rs.2 ,73,108 /-.

The refund claim was sanctioned by the lower authority but on Revenue's appeal the order of sanctioning refund was set aside on grounds of unjust enrichment by the Commissioner (Appeals).

Before the Tribunal, the appellant contended that during the compounded levy scheme the law did not require them to show excise duty separately in the invoice and, therefore, the provisions of Section 12B of the Central Excise Act, 1944 are not applicable to them; it was for the Revenue to come out with the evidence to show that the duty has been recovered from the customers and on their failure to do so the refund cannot be denied. They also submitted a certificate from the Chartered Accountant which stated that no excise duty had been collected in the sales bills raised by them nor there was any agreement between the seller and the buyer having any understanding for payment and charging excise duty separately in the sales bills. Moreover, since the differential duty was deposited subsequently the question of recovering the same from the customers does not arise.