Law: Wealth Tax Act, (XV of 1963)

Section:

Accounts-Trading account-Profit and Loss account-Excise duty paid on capacity basis- Whether an item of Profit and Loss account and not of trading account-Held yes. It is evident from Central Excise General Order No. 374 that payment of duty on capacity basis has nothing to do with the production process. Consequently in this new scheme of capacity levy payment of excise duty is quite an independent issue from the factum of production. According to the accepted principles of accountancy payment of excise duty is chargeable to trading account only if it is levied on actual production. In this view of the matter the appellants case does not fall within the ambit of excise duty on production basis. Hence, excise duty paid on capacity basis is an item of profit and loss account and not of trading account. JUDGMENT [The order was passed by KHIZAR HUSSAIN, Accountant Member]- The appeal in this case has been filed at the instance of a registered firm and is directed against the order of the Appellate Assistant Commissioner dated 20-1-1976, modifying the assessment for the charge year 1975-76. The only issue raised and pressed is with regard to the considering of excise duty as an item of trading account rather than profit and loss account as claimed by the appellant firm. 2. The facts so far as relevant to the issue are that upto 31st December, 1974 excise duty was paid on production basis. However, the position underwent a charge with effect from 1st January, 1975 when the appellant-firm opted to pay excise duty on capacity basis. The excise duty paid on capacity basis was charged to the profit and loss account and which has now become subject matter of second appeal before us. 3. According to the Income Tax Officer after the levy of excise duty with effect from 1st January 1975, the same had not been charged separately from the customers by the assessee firm. Consequently according to him it was not known whether the excise duty was actually realized from the customers or paid by the assessee firm, directly on capacity basis. The Income Tax Officer went on to state that there was absolutely no doubt that the excise duty was chargeable to the trading account as…

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