Law: Income Tax Ordinance, 1979

Section: 136

Income Tax Ordinance (XXXI of 1979)----S. 136---Reference to High Court---Excise duty---Profit & loss expenses--Question Was whether Appellate Tribunal was right to hold that excise duty was to be debited to profit and loss account and not to manufacturing and trading account---Held; if excise duty was indeed passed on in full to the purchaser and was not relatable to inputs at all then it had no bearing on product cost and it could not be charged to the manufacturing/trading account but was required to be charged to Profit & Loss Account and if, on the other hand, excise duty was relatable to inputs /production then to the extent that it entered into product cost, it was required to be charged to the manufacturing account---Reference was refused by the Appellate Tribunal as the question formulated was not fit for reference -to High Court. "Carter's Advanced Accounts, (p.31); (1960) 2 Tax (V-4) and I.T.A. No. 7428/LB of 1996 rel. ORDER This reference application by Revenue, formulates the following question, statedly, question of law, for reference to the High Court:-- "Whether the ITAT was right to hold that excise duty is to be debited to profit and loss account and not to manufacturing and trading account." 2. According to the DR, excise duty being an indirect levy, properly pertains to the manufacturing/trading account and not to the P&L account. 3. The assessee/respondent is not present and no adjournment has been sought. The application will be decided ex parte on merits. 4. The question has been examined. 5. As clarified in "Carter's Advanced Accounts. (page 31):-- "Duty: This includes both Customs and Excise duties. Customs duties are levied on goods imported and exported; excise duties are imposed on goods produced and consumed in the country itself. A distinction must be made between duties on Purchases and duties of Sales, the former being debited to Trading Account and the latter to Profit and Loss". 5A. The Tribunal in (1960) 2 Tax (V-4) has referred to the well established accounting principle enunciated above and in I.T.A. No.7428/LB of 1996 (Assessment year, 1993-94), dated 30-10-2003, that principle has been followed by this Bench.…

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