2009 (9) TMI 1033

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....sessing Officer on account of provision for warranty amounting to Rs. 10,86,000/-. 2. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in deleting the disallowance on account of interest on borrowed capital amounting to Rs. 29,94,035/-." 3. The first issue for consideration relates to deleting the addition made by the Assessing Officer on account of provision for warranty. The facts of the case stated in brief are that the company is engaged in the business of imports, promoting, marketing, distributing and providing special distributing rights to cable and broadcast entities, trading of satellite receiver and procurement of advertisement. The Assessing Officer during the course of assessment proceeding....

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....heard both the parties and have perused the material available on record. We find that similar issue came up for hearing before ITAT, Delhi Bench 'H', New Delhi. in I.T.A. No.97/Del./2008 for assessment year 2003-04 in assessee's own case, wherein vide order dated 03.07.09, the ITAT confirmed the order of Commissioner of Income-tax (Appeals) following the decision of Hon'ble Delhi High Court in the case of CIT vs. Sony India (Pvt.) Ltd. in I.T.A. Nos.344,483,484 & 489/Del./2006 dated 17.04.2006. Since the issue is directly covered by the decision of Tribunal in assessee's own case and the provision for warranty has been made on the basis of actuarial basis, in our considered opinion, the provision for warranty payment is allowable as deduct....

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.... these companies. It was also submitted that assessee had obtained loans from its holding companies in financial years 1998-99 and 2000-01. The loan was obtained for the purpose of working capital requirements which have been utilized for the business purposes in the earlier years. Necessary approval for obtaining ECB loan at the rate of interest chargeable thereon was obtained from RBI. Therefore, it was submitted that the loan was obtained by the assessee for the purpose of business and was used for meeting the working capital requirements. Interest paid by the assessee in respect of capital borrowed was for the purpose of business and, therefore, allowable as business expenditure. This contention of the assessee was rejected by the Asses....

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....st. He further noted that an analysis of item of expenditure incurred on behalf of group companies revealed that those were the expenses arising out of contractual obligation taken up by the assessee for which assessee was compensated. The fact remained that these expenses were temporarily incurred by the assessee out of commercial expediency. The Assessing Officer had not brought on records any fact to show that loan money was utilized by the recipient for non-business purposes. He accordingly held that proportionate expenses out of interest paid could not be disallowed u/s 36(1)(iii) of the Act. 10. Before us, Ld.Sr.DR submitted that assessee was not required to incur the expenditure on behalf of group companies. The same is not coming....