TaxTMI 
TaxTMI 
2011 (2) TMI 1554
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....udication is called for. Hence, the same is dismissed. 3. Ground nos.2 to 7 relate to the issue as to whether the CIT(A) is justified in confirming the disallowance made by the A.O. on account of provision for warranty amounting to Rs. 2,26,05,903/-. 4. The eighth ground relates to the issue as to whether the CIT(A) is justified in upholding the exclusion of the interest income of Rs. 25,83,813/- from the profits of the eligible units for the purpose of computing deduction u/s 80-IB of the Act. 5. Brief facts of the case are as follows:- The assessee is a company. It is engaged in the manufacture and trading of computer systems and components. For the relevant asst. year, return of income was filed on 31/10/2005 declaring a tota....
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....s.8,24,29,136 - Rs. 5,98,23,233], being the excess amount debited to the P&L account over the actual expenditure incurred. 11.1 The action of the AO was upheld by the CIT(A). The CIT(A), we are of the view, has misdirected himself that the assessee had claimed different amounts towards provisions by comparing the amount of provision debited to the P&L account Rs. 8,24,29,136/-, disallowance made by the AO being Rs. 2,26,05,903/- and the amount of Rs. 12,16,75,204/-,being the closing provision of warranty appearing in the books of account. 11.2 The assessee creates provision for warranty based on the estimation of expenditure likely to be incurred on the past sales made on yearly basis at then prevailing market prices for spares and la....
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....ircumstances, the third option is most appropriate because it fulfills accrual concept as well as the matching concept. For determining an appropriate historical trend, it is important that the company has a proper accounting system for capturing relationship between the nature of the sales, the warranty provisions made and the actual expenses incurred against it subsequently"........ If warranty provisions are based on experience and historical trend(s) and if the working is robust then the question of reversal in the subsequent two years, in the above example, may not arise in a significant way". 11.4 In the assessee's own case in identical facts for the immediately preceding year, the Tribunal in ITA No.774 & 877/Bang/2008 vide order ....
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....lowed. Exclusion of interest for the purpose of computing the deduction u/s 80-IB of the Act 13. The AO has disallowed a sum of Rs. 25,83,813/- from the profits derived by the Unit for the purpose of computation of deduction u/s 80IB of the Act. The CIT(A) has decided the issue against the assessee company by following the ratio of the decision of the Hon'ble Supreme Court in the case of Pandian Chemicals (262 ITR 278). Before us, the learned AR submitted that the interest claimed for the purpose of computing of deduction u/s 80IB is to be bifurcated as follows:- 1) LC Margin Money Deposits with Bank - Rs.15,53,186/- 2) Fixed Deposits with bank - Rs.10,30,627/- Total - Rs.25,83,813/- 13.1 It wa....
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....e of CIT v Eltek SGS (P) Ltd. (300 ITR 6) is most appropriate in the present case. The Delhi High Court has held that the language used in section 80HH of the Act is different from the language used in 80IB of the Act. The relevant extract is provided below for reference: "13. A perusal of the above would show that there is a material difference between the language used in section 80HH of the Act and section 80IB of the Act. While Section 80-HH requires that the profits and gains should be derived from the industrial undertaking, section 80IB of the Act requires that the profits and gains should be derived from any business of the undertaking. In other words, there need not necessarily be a direct nexus between the activity of an ....
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.... the industrial undertaking following the judgement of Hon'ble Supreme Court in the case of Sterling Foods Ltd. (Supra) and in case of Pandyan Chemicals Ltd. (supra). It has been pointed out that above judgement have been delivered in connection with the deduction u/s 80HH in which the deduction was allowable in respect of profit derived from the undertaking whereas the language used in section 80IB is profit arrived from the business of undertaking. The Hon'ble High Court of Delhi in case of SGS Pvt. Ltd. (300 Page 10 of 11 ITA 10 No.784/Bang/2010 ITR 6) after noting the said difference have allowed the deduction in respect of duty drawback and following the said judgement the Tribunal in assessee's own case in assessment year 2001-02 allo....