Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) comprising of Judicial Member S.S.Godara and Accountant Member Pramod Kumar has deleted the addition under the Income Tax Act in respect of unutilized CENVAT credit.
Assessee in the instant case, is running the business of letting out cars for hire and it is paying service tax on such charges and it is claiming the benefit of unutilized CENVAT credit as per the Excise Rules for claiming the CENVAT credit.
During the course of assessment proceedings, the Assessing Officer (AO) has made addition of the unutilized CENVAT credit shown in the balance sheet of the assessee. He was of the view that it cannot be treated as advance given to the Government on account of excise payable.
Assessee contended that the CENVAT balance was not a subsidy or incentive. The balance was on account of Excise Duty charged by the car manufacturer in the sale invoice. It was further submitted that the assessee has purchased certain motor cars for carrying out business of Cab Operator and the value of vehicles has been reduced by the appellant by the Excise Duty paid on purchase and has been transferred to a separate account.
On appeal CIT (A) deleted the addition made by the AO on account of unutilized CENVAT credit by finding that the capitalized value of cars used for the purpose of letting out has also been reduced by the CENVAT credit transferred by it to a separate account and accordingly no depreciation on the CENVAT portion has been claimed by the assessee. And the assessee has neither claimed unutilized CENVAT credit as expenditure not debited to profit and loss account, hence it cannot be considered as an incentive and accordingly addition on account of unutilized CENVAT of credit would not be possible in the present case.
While perusing the material facts and records the Tribunal bench upheld the order pronounced by the CIT (A) and observed that there is no dispute that the assessee had paid the impugned excise duty on motor cars purchased for its hiring business. It reduced the relevant excise duty on the said purchases from the total cost of the motor cars; thereafter the assessee treated the excise duty amount as an advance in its balance sheet’s asset side.
The division bench further ruled that while considering all these facts it is clear that there is no income element embedded therein since the assessee is not entitled to get the same refunded from the government since the same has to be utilized only against the service tax payable. While concluding the issue the bench also declared that excise duty cannot be added in closing stock value since the assessee runs its cars on hire and it is not possible to such an addition in respect of unutilized CENVAT credit.
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