Law:

Section:

Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment - Assessment years 1985-86 to 1987-88 - Assessee being a manufacturer of cement and asbestos sheets, paid customs duty on imported asbestos fibre, a part of which could not be used in manufacture of sheets in relevant assessment year - Assessee claimed as revenue deduction for amount of customs duty paid on asbestos fibre left in stock by contending that until that imported fibre was used in course of manufacture, custom duty, paid at time of importation, did not form part of cost of asbestos fibre - It also claimed revenue deduction for excise duty paid on cost of finished products after paying duty and removing same from godown on ground that until sales were effected, excise duty paid should be regarded as a separate item, and amount of duty paid thereon was to be deducted from value of closing stock of those finished products - Whether assessee was not entitled as revenue deduction of said customs and excise duty component of value of closing stock - Held, yes FACTS The assessee-company was a manufacturer of cement as also of asbestos sheets. For the purpose of manufacturing asbestos sheets, it imported asbestos fibre on which it paid customs duty. While a major portion of the quantity so imported, was utilised in the manufacture of sheets, in the relevant assessment year, at the end of each assessment year there remained with the assessee some portion of the duty paid imported stock of asbestos fibre. While it showed in its accounts the value of the consumption of raw materials including the duty element on the imported fibres, and also showed the value of the closing stock as including the customs duty paid, for the purpose of income-tax, it claimed a revenue deduction for the amount of the customs duty paid on the fibre in stock by contending that until that imported fibre was used up in the course of manufacture, the customs duty paid at the time of importation did not form part of the cost of the asbestos fibre. It also claimed revenue deduction for the excise duty paid on the cost of finished products after paying the duty and…

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