S. 145A — Valuation of inventory — Assessee following exclusive method of accounting for modvat valued its inventory excluding modvat credit — AO valued closing stock inclusive of modvat credit, but refused to similarly value opening stock — AO not justif

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ITAT ‘A’ Bench, Mumbai

Before J. Sudhakar Reddy (AM) and

P. Madhavi Devi (JM)

ITA No. 3290/Mum./2007

A.Y. : 2003-2004. Decided on : 26-5-2009

Counsel for revenue/assessee : S. K. Pahwa/

Ishwer Rathi

Per P. Madhavi Devi :

Facts :

The assessee was following exclusive method of accounting
for modvat i.e., it did not include un-utilised modvat in the value of
the closing stock. According to the AO, the assessee had not valued the
closing stock as per the S. 145A insofar as the duties relatable to the stock
were not included in the value of the closing stock. He therefore made an
addition of Rs.5.10 lacs to the value of the closing stock and also to the
total income of the assessee. The assessee’s contention to give similar
treatment in the value of the opening stock was rejected by the AO. On appeal,
the CIT(A) agreed with the assessee and allowed the appeal.

Held :

The Tribunal relying on the decisions of the Delhi High
Court in the case of Mahavir Aluminium Ltd. and of the Bombay High Court in
the case of CIT v. Mahalaxmi Glass, upheld the order of the CIT(A) and
dismissed the appeal filed by the Revenue.

Case referred to :

1. Mahavir Aluminium Ltd. in 297 ITR 77 (Del.)