The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has deleted additions made towards excise duty, CST & VAT debited to profit and loss account.
The assessee, R.S. Steel Manufacturers has assailed the order of the CIT(A) both on legal aspects as well on merits of the addition made. The arguments made by the assessee pertain only to the merits of the case against the addition of Rs. 27,24,159/- made to the income of the assessee towards Excise duty, CST and VAT.
The assessee had explained the nature of the Excise, CST and VAT debited to the profit and loss account as only that part of the total of such duties and taxes paid, the set off/credit of which was not available and hence was an expense for the assessee.
The presumption of the CIT(A), it appears from the above , is therefore probably that the VAT receivable was very much available for set off as per the books of the assessee and as opposed to that claimed by it that it was not available for set off.
The coram of Judicial Member, Mahaveer Prasad and Accountant Member, Annapurna Gupta has noted that this finding of the Ld. CIT(A) is not based on correct appreciation of facts .Firstly as per double entry system of accounting which is universally followed for book keeping every transaction is represented by both debiting and crediting different accounts. And the outstanding debit and credit balances in the different accounts are reflected either in the profit and loss account or balance sheet as per its nature. As per the Ld.CIT(A) the assessee has both debited the profit and loss account and also shown the debit balance in the VAT receivable account in the balance sheet ,which is not possible. A debit balance in an account can either be reflected in the profit and loss account as expense or as an asset in the balance sheet. It cannot be reflected in both the financial statements at the same time. Therefore surely the amount of VAT debited to the profit and loss account is not the same as that reflected as receivable in the balance sheet. This is further cemented by the fact on record that the said two amounts are not the same also. While the amount debited to the profit and loss account of VAT amounts to Rs. 6,02,804/- the amount reflected as receivable as per the Ld. CIT(A) himself amounts to Rs. 5,77,764/-.Therefore the basis of the Ld. CIT(A) for rejecting the assessee’s explanation of VAT debited to the profit and loss account, we find, has no legs to stand on and is therefore dismissed.
The Tribunal held that the revenue authorities have proceeded on totally incorrect interpretation of facts of the case while making the impugned addition of Rs. 27,24,159/- on account of Excise duty, VAT and CST debited to the profit and loss account which we find the assessee had duly explained for doing so and it is clearly not a case of any extra claim made on account of the same of the assessee.
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