TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1943
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....d in law and on facts in deleting the disallowance of Rs. 1,81,10,000/- made by the AO on account of provision for warranties without appreciating facts that this amount is a provision and a contingent, unascertained and non-crystallized liability. 4. The Ld. CIT(A) has erred in law and on facts in directing to allow deduction of Rs. 7,35,640/- on which TDS was deducted in A.Y. 2007-08 and Rs. 52,40,669/- on which provision was reversed in A.Y. 2007-08 without appreciating the fact that an additional claims, can be made only by filing revised returns. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 6. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent." 3. The brief fact of the case is that the assessee company had filed return of income on 30th October, 2007 declaring income at Rs. 17,37,74,366/- after adjusting carry forward losses and depreciation total income was shown at Rs. nil. The assessee company is engaged in the business of manufacturing and trading in air conditioners, washing machines and ....
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....tion has noted that facts of the case of the assessee in this year are identical to the earlier years, and he had followed the decision of his predecessor. We further find that in ITA No. 2363/Ahd/2008 for A.Y.2004-05, similar issue was decided by the Co-ordinate Bench of 1TAT in favour of the assesee and the addition was deleted following the order in Revenue's appeal for A.Y.2003-04 in ITA No.2281/Ahd/2007, while deciding the Revenue's appeal, the issue was decided by holding as under: "36. We have considered rived submissions and perused the material on record, and gone through the orders of the authorities below. We find that the issue regarding payment of royalty at the rate of3.75% to the AE by the assessee, as against the royalty at the rate of 3% by other group entities, it was explained by the assessee before the AO that the royalty at 3.75% was applied after reducing various expenses from ex-factory sale value of the concerned products. It was also explained before the learned CIT(A) that if the effective rate is considered, then the effective rate of royalty is less than the royalty paid by other AEs to Hitachi Limited i.e., parent company. In our considered o....
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....tated that the same issue has been decided by his predecessor for assessment year 2004-05 & 2007-08 wherein the disallowance made was deleted holding that it was not a mere provision for liability but it was on account of loss determined by the assessee in value of stock. 9. We have heard the rival contentions and perused the material on record carefully. We have noticed that Co-ordinate Bench of the ITAT in the case of the assessee itself vide ITA No. 182, 216, 1137/Ahd/2011 has decided the identical issue in favour of the assessee. The relevant part of the decision of the ITAT is reproduced as under:- "20. We have considered rival submissions and perused the material available on record. We find that the CIT(A) while deleting the addition has noted that facts of the case of the assessee in the year are identical to the earlier years, and he had followed the decision of his predecessor. We further find that while deciding the Revenue's appeal in ITA No.2363/Ahd/2008 and others (ITA No.2881/Ahd/2007 for A.Y.2003-04). similar issue was decided by the ITAT in favour of the assesee and the addition was deleted as under: "33. We have considered rival submissions. We find that ....
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....essee has claimed warranty expenses which do not pertain to the relevant accounting year. Therefore, the assessing officer has worked out the warranty expenses pertaining to subsequent year by taking 3 months in respect of warranty expenses of air conditioners pertaining to subsequent year and warranty expenses of compressors divided into five equal parts. Consequently, he has re-worked the warranty expenses and disallowed an amount of Rs. 1,81,10,000/- treating the amount of provision as uncertain liability. 11. Aggrieved assessee has filed appeal before the ld. CIT (A). The ld. CIT (A) allowed the appeal of the assessee stating that warranty was not unascertained liability as computation of warranty charges were made on the basis of unit sold and similar issue had been decided in assessee's own case in favour of the assessee by his predecessor for assessment year 2004-05 to 2006-07. 12. We have heard the rival contention and perused the materials on record carefully. We have noticed that the Co-ordinate Bench of the ITAT vide ITA 2303 & 2420/Ahd/2015 for assessment year 2000-01 to 2001-02 has decided the identical issue in favour of the assessee. The relevant part of the deci....
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....ed by the CIT(A), if it is going to the basic legal claim of the assessee. It is submitted that the claim for payment made of IDS and consequent deduction u/s.40(a)(ia) is the basic legal issue and is to be allowed by the CIT(A). Similarly to the provision reversed back amounting to Rs. 52,40,669/- is also an amount which is not allowed in the past and hence could not be taxed u/s. 41(1) though offered for tax in the return but claimed to be not taxable in the assessment proceedings. The CIT(A) has power to entertain such claim. This view is supported by the ITAT, Ahmedabad decision in the case of Shalby Hospital Ltd. vide order dated 20-5-2011. On consideration of the above, I find that in the case of Shalby Hospital Ltd. the ITAT, Ahmedabad has held as under: "Reliance is placed on the recent decision of ITAT Ahmedabad, whereby the Bench has set aside the matter back the CIT(A) to re-decide the matter in accordance with law, Shalby Hospitals Limited V. Deputy Commissioner of Income-tax (OSD) Circle-8- ITA No. 24377 Ahd/ 2010- Income Tax Appellate Tribunal - Ahmedabad. Dated 20.5.2011 "....5. We have heard both trie parties and gone through the facts of the case. As is ap....
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....eversed but was not allowed deduction in the past. Accordingly this ground of appeal is allowed." 15. During the course of appellate proceedings before us, the ld. departmental representative supported the order of assessing officer. On the other hand, ld. Counsel has supported the order of CIT(A) and also placed on the decision of Hon'ble Gujarat High Court in the case of Mitesh Impex Ltd. 270 CTR (Guj). 16. We have heard both the sides and perused the material on records carefully. The amount of Rs. 7,35,640/- was disallowed in assessment year 2005-06 on account of non-deduction of tax but the same was deducted during the year under consideration and claimed as deduction u/s.40(a)(ia) of the act. The second amount of Rs. 52,40,669/- represents the amount credited on account of reversal of expenditure debited in the account of earlier year, the same was considered as part of profit & loss in this year. After perusal of the detailed finding of ld. CIT(A) holding that the A.O. ought to have allowed deduction for the aforesaid amount of Rs. 7,35,640/- u/s. 40(a)(ia)and further amount of Rs. 52,40,669/- which was credited to the Profit & Loss Account for provision reversed but was....
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....dvances for Rs. 1,16,04,101/- and provision for bad debt written back for Rs. 3,79,223/- in view of the retrospective amendment to explanation 5 of section 1115JB by the Finance At, 2009 with effective from 0104-2001. The ld. CIT(A) has also not allowed the claim of the assessee. Relevant part of the decision of the CIT(A) is reproduced as under:- "9.3 In this connection, it may be noted that the first clause of second limb of the Explanation-1 to section 115JB allows reduction of the following amount from the net profit as shown in the Profit & Loss Account: "the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April 1997 otherwise than by way of debit to the profit and loss account), if any such amount is credited the profit and loss account: Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April. 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of w....
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.... the appellant company is also supported by the decision of the Mumbai Tribunal in the case of Kochi Refineries Ltd. v. DCIT [2010] 4-ITR (Trib)-95 (Mumbai), wherein the tribunal held as under: "............ It is an admitted fact that the provision for bad and doubtful debts was made in the financial year relevant to the assessment year 1998-99 and the same amount was added back in the regular computation. By virtue of law, it is the duty of the Assessing Officer to compute the normal total income and also the book profit under section 115JA in that year and then compare and decide to invoke the normal provisions of the Act or special provisions of book profit under section 115JB. Once the Assessing Officer invokes the normal provisions of tax, it indirectly means that he has compared the computation under section 115JA and decided that the income under normal provisions was more. In that situation it is to be presumed that the provision was added back to the book profit of that year. Even by means of Explanation (g) introduced to section 115JA by the Finance (No. 2) Act, 2009, with retrospective effect from April 1, 1998 the provision for bad and doubtful debts would be deemed....
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....r in the decision of ld. CIT(A) directing the assessee to approach the A.O. if such amounts are added back in calculation of book profit u/s. 115JA/JB in respective years.. Accordingly, the appeal of the assessee is dismissed on this issue. Ground no. 3 (Confirming the addition of Rs. 31,91,000/- being provisions for slow moving/absolute stock) 21. The assessing officer had disallowed the claim of provisions for slow moving/absolute stock and added the same to the book profit u/s. 115JB of the act which was sustained by the ld. CIT (A). The relevant part of the decision of the ld. CIT (A) is reproduced as under:- "11.1 Appellant's submissions are as under: It appears that this addition has been made in view of clause (i) of Explanation 1 of section 115JB which is inserted by the Finance (No.2) Act 2009. This amendment is retrospective from assessment year 2001-02 but it is inserted after the clause of the year under consideration. On this issue the appellant submits that it is not in dispute that the amount represents provision for doubtful debt and thus would be covered by clause (i) referred to above. But at the same time it is to be appreciated that this clause is ....
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....ventory for the non-moving or slow-moving items of * inventory, as per method of valuation being followed by company. Therefore, the same should not be added to the Book profit. 10.4 Without prejudice to the above, it is also submitted that the said amount of provision is credited to the Cost of inventories charged to the Profit and Loss Account, in the year in which the actual sale / use of the said inventories takes place. Therefore, the amount charged to the Profit and Loss Account is lower by the said amount of provision, In view of above, it is submitted that if the above amount of Rs. 31,91,000/- is added to the book profit, the amount of provision adjusted against the cost of goods sold, which is charged to P & L Account, should be reduced from the Book profit. Such amount credited during the year under consideration is Rs. 93,11,850/-. This is for the reason that the said amount represents the credit out of the Provision which is not allowed as deduction in computation of book profit. The details explanation in connection with the same is given in para-9 of this Statement of Facts." 11.2 I have considered the assessment order and the above submissions. In view of t....
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....Explanation (i). It is in that context the appellate Commissioner as well as the Tribunal has granted relief to the assessee. Realising the fatality of the said argument, it is contended now that item (i) cannot amount to satisfaction as provision for diminishing in the value of assets is substituted, in case of the assessee falls under Item (c). In meeting the aforesaid case, the learned counsel for the assessee bought to our notice the judgment of the Apex Court in the case of Vijaya Bank ( supra) where the Apex Court had an occasion to consider his explanation. It accepted the argument on behalf of the Revenue to the effect that the explanation makes it very clear that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other. A mere debit to the profit and loss account would constitute a bad and doubtful debt, but it would not constitute actual write off and that was the very reason why the explanation stood inserted. Prior to the Finance Act, 2001 many assessees used to take the benefit of deduction under Section 36(1)(vii) of the 1961 Act by merely debiting the impugned bad debt to the profit and loss account and, there....