MSL Driveline Systems Limited Vs ACIT (ITAT Mumbai)
Section 145A Is Not a Profit-Making Tool: ITAT Mumbai Deletes ₹38.26 Lakh MODVAT / CENVAT Addition
Mumbai ITAT allowed the Assessee’s appeal and deleted the addition of ₹38,26,165 made u/s 145A on account of MODVAT / CENVAT credit allegedly relatable to inventory.
The Tribunal noted that the AO had mechanically invoked section 145A and added MODVAT credit to closing stock without making corresponding adjustments and without demonstrating any real impact on profits. The Assessee had consistently followed the exclusive method of accounting, in line with the ICAI Guidance Note on CENVAT, and had furnished reconciliation statements showing nil impact on profits, a position repeatedly accepted by the Tribunal in the Assessee’s own case for earlier years (AYs 2011-12, 2014-15, etc.).
The ITAT also found fault with the CIT(A), who failed to adjudicate the issue on merits on an erroneous assumption that relief had already been granted by the AO u/s 154, which was factually incorrect. The Tribunal held that section 145A is a computation provision and not a charging provision, and cannot be used to create artificial income where profit neutrality is established and the method of accounting is consistently followed.
In the absence of any change in facts or law, and following judicial consistency, the ITAT held that the addition was unsustainable and deleted the same in full. The appeal was accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
