AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1741
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....Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 71,57,055/- on account of upward adjustment of international transaction in respect of royalty payment. 2. The ld. CIT(A) has also erred in law and on facts in deleting the disallowance of Rs. 1,100,09,859/- 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. 3. The Ld. CIT(A) further erred in law and on facts in directing to allow deduction u/s.80IB(10) on Foreign Exchange Fluctuation gain attributable to Jammu Unit. 4. The Ld. CIT(A) further erred in law and on facts in directing to allow deduction of Rs. 5,83,00,000/- u/s. 80IB(4) in respect of Jammu Unit. 5. The ld. CIT(A) also erred in directing to allow MAT credit as increased by surcharge and deduction cess when the said MAT already includes the such charge and cess. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 7. 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 ab....
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....7,055/- out of the total royalty payment of Rs. 3,57,85,275/- and added to the total income of the assessee. 7. The aggrieved assessee preferred an appeal to the Ld. CIT(A) who deleted the addition made by the Assessing Officer by observing as under: "3.3 DECISION I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The addition has been made on account of upward adjustment of Rs. 71,57,055/- for Royalty paid to the AE. It has been pointed out by the appellant that while deciding the appeal pertaining to AY 2007-08, the similar issue was decided in favour of the appellant by my predecessor CIT(A) VIDE Appeal Number CIT(A)-VIII/DC CIR-4/744/10-11 dated 23-06-11. Since the facts and the issue are identical, respectfully following the decision of my predecessor the addition made on account of upward adjustment for Royalty paid to the AE is directed to be deleted." 8. Being aggrieved by order of the Ld. CIT(A), the Revenue is in appeal before us. 9. Both the parties before us relied on the orders of authorities below as favorable to them. 10. We have heard the rival contentions and perused the materials available o....
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...., only stated rate is not decisive and effective rate has to be considered, and when the amount of royalty paid by the assessee is considered with exfactory sale value, without deducting various expenses, such as dealer commission, special commission, warranty etc., as has been noted by the learned CIT(A) at page no.4 of his order, then the effective rate worked out is only 2.3% on sale, as against 3% paid by oilier group entities. This finding of the fact given by learned CIT(A) could not be controverted by the learned DR of the Revenue, and hence, on this aspect, we hold that no interference is called for in the order of the learned CIT(A), and accordingly, the ground no.5 of the Revenue is rejected. " Since the facts in the year under appeal are identical to earlier years as admitted by both the parties, we find no reason to interfere with the order of the CIT( A) on this issue, and thus, this ground of the Revenue is dismissed." Respectfully following the decision of Co-ordinate Bench as cited above on identical facts and issue involved during the year under consideration we do not find any merit in the appeal of the revenue, therefore, the same is dismissed." 11. As the i....
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....ty of one year for AC should be allowed in proportion to nine months only in the year under consideration. Thus, the Assessing Officer worked out the provision for warranty expenses pertaining to three months for Rs. 73,09,760/- being Rs. 2,92,39,038 x 3 / 12. 12.6. Similarly, the Assessing Officer was of the view that the compressor warranty expenses for five years should be allowed only for one year. Accordingly, the Assessing Officer worked out the expenses of Rs. 27,00,099/- being Rs. 33,75,124 x 4 / 5. Thus, the sum of Rs. 1,00,09,859/- (Rs. 73,09,760 + 27,00,099) was disallowed and added to the total income of the assessee. 13. The aggrieved assessee preferred an appeal to the Ld. CIT(A) who deleted the addition made by the Assessing Officer by observing as under: "6.3. DECISION I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. It has been pointed out by the appellant that while deciding the appeal pertaining to A.Y. 2007-08, the similar issue was decided in favour of the appellant by my predecessor CIT(A) vide Appeal Number CIT(A)-VIII/DC CIR-4/744/10-11 dated 23-06-11. Since the facts and the issue are....
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....fully following the same, we do not find any reason to interfere in the order of the Ld. CIT(A). Accordingly, we direct the Assessing Officer to delete the addition made by him. 17.1. We also note that the Revenue preferred an appeal against the order of ITAT which was decided by the Hon'ble Gujarat High Court in the Tax Appeal No. 1236 of 2018, dated 09/10/2018, in favor of the assessee. The relevant extract is reproduced as under: "5. Quite apart from the Tribunal's observations on the issue of consistency which seem to be commencing, independently also we do not think that the disallowance was justified on merits. The assessee who was engaged in the business of manufacturing and selling air conditioned units would provide five year warranty to the customer. The expenditure was estimated on the basis of date of past five years of failure of the compressors which obviously in all air conditioned units would be the main concern. The principle of allowing expenditure on the basis of estimation which is derived through some scientific exercise, which in statistical terms used as actuary is well established." 17.2. The issue in Revenue's appeal is also identical to the issue as di....
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.... that it had earned foreign exchange gain in connection with the raw-material imported and working capital borrowed in foreign currency and the Assessing Officer has not doubted this fact. Therefore, we can safely presume that assessee has earned foreign exchange gain from the activities carried out in connection with the business. The purchase of raw materials and working capital loan are an integral part and has direct nexus with the business. Therefore, any gain arising in the course of business are eligible for deduction u/s 80IB(10) of the Act. 25.1. It is also important to note that the assessee in the succeeding year has incurred a loss of Rs. 4,20,47,705/- which was accepted as a business loss by the Revenue. Therefore, we hold that the impugned gain is a business income and eligible for deduction u/s. 80IB(10) of the Act. In this regard, we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of Metrochem Industries Ltd. reported in 389 ITR 181 wherein it was held as under: "33. Learned counsel Mr. Nitin Mehta for the Revenue, however, contended that the foreign exchange fluctuation gain may arise under various circumstances, not all of ....
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....tal receipt in the hands of the assessee. 30. The aggrieved assessee preferred an appeal to the Ld. CIT(A) who has deleted the addition made by the Assessing Officer by observing as under: "8.3. DECISION I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has held that the Excise Duty refund received by the appellant was not a profit derived from the business of industrial undertaking but it was a result of establishment of industrial undertaking in industrially backward area. He held that it was an incentive and not the profit derived from any business and accordingly, it was not eligible for deduction under section 80-IB. The appellant has submitted that the excise duty refund is an integral part of business activity and therefore, it should be allowed deduction under 80IB on the same. After considering the facts it is noted that the appellant at the time of manufacturing and clearing the goods pays the excise duty from its P&L account after taking the due credit of CENVAT which is available on account of purchase of raw material. The excise duty which cannot be adjusted from the credit available to it....
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....rom the judgment of Hon'ble Supreme Court in the case of Meghalaya Steel Ltd. reported in 383 ITR 217, wherein it was held as under: "Section 28(iii)(b)* specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head "profits and gains of business or profession". If cash assistance received or receivable against exports schemes are included as being income under the head "profits and gains of business or profession", it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head "profits and gains of business or profession", and not under the head "income from other sources"." 36. We also find support and guidance from the order of this Tribunal in the case of M/s. Cadila Pharmaceuticals Ltd. Vs. DCIT in ITA No.1117/Ahd/2012 vide order dated 11/09/2017, wherein it was held as under: "21. The assessee's fifth substantive ground challenges Section 80IB deduction disallowance of Rs. 16,34,58,692/- out of total claim o....
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....bove, we do not find any reason to disturb the findings of the Ld. CIT(A), therefore the ground of appeal raised by the Revenue is dismissed, and the ground of appeal of the assessee in the application filed under Rule No. 27 of ITAT is allowed. 39. The last issue raised by the Revenue is that the Ld. CIT(A) erred in directing to allow MAT credit u/s 115JAA of the Act as increased by the amount of surcharge and education cess. 40. The assessee while working out the tax liability under the normal provisions of Act has claimed the credit of the tax paid under MAT along with the surcharge and education cess. However, the Assessing Officer did not allow the benefit of MAT credit to the assessee by the amount of surcharge and education cess. 41. The aggrieved assessee, preferred an appeal to the Ld. CIT(A) who held that the meaning of tax as defined under the provisions of section 2(43) of the Act r.w. the explanation 2 to section 115JB of the Act includes the amount of surcharge and education cess. Accordingly, the Ld. CIT(A) allowed the MAT credit to the assessee including surcharge and education cess. 42. Being aggrieved by the order of Ld. CIT(A), Revenue is in appeal before us.....
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....Nos.1 & 2 of Revenue's appeal are dismissed. 50. Likewise, ground No.3 is also identical to the facts of ground No.4 in ITA No.2399/Ahd/2013 for AY 2008-09 of Revenue's appeal (supra). Respectfully following the order passed in ITA No.2399/Ahd/2013, ground No.3 of Revenue's appeal is dismissed. 51. Remaining grounds are general in nature which requires no independent adjudication. Revenue's appeal in ITA No.931/Ahd/2016 for AY 2010-11 52. Revenue has raised following grounds of appeal: 1. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,59,20,901/- on account of upward adjustment of international traction in respect of royalty payment. 2. The Ld.CIT(A) erred in deleting the addition made to book profit under 115JB consequent to the upward adjustment made u/s.92CA. 3. The Ld.CIT(A) has also erred in law and on facts in deleting the disallowance of Rs. 2,86,64,963/- 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, which is not scientifically arrived at. 4. The Ld.CIT(A) erred in deleting the 115JB adjustment made con....
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.... following grounds of appeal: 1.1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in partly upholding the disallowance on account of provision for warranty expenses amounting to Rs. 91,44,050 (out of total disallowance of Rs. 3,78,09,013) which pertained to providing five year warranty on the compressors used in the Air Conditioners sold during the present assessment year. He ought to have appreciated, inter alia, that the appellant's method for estimating such warranty expenses yielded a reliable estimate and in terms of the ratio of the Supreme Court decision in Rotork Controls (India) P.Ltd. vs. CIT (180 Taxman 422), the same deserved to be allowed. 1.2. Without prejudice to the foregoing, in law and in the facts and circumstances of the appellant's case, the learned CIT(A) ought to have appreciated that it was an incontrovertible fact that the appellant was providing a five year warranty on the compressors used in the Air Conditioners sold by it and, therefore, it was not open to the learned CIT(A) to uphold the impugned disallowance of Rs. 91,44,050 in its entirety but instead, he ought to have granted deduction or d....
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....re him challenging the levy of interest u/s.234B. He ought to have appreciated, inter alia, that the appellant had challenged the very levy of this interest and, in the peculiar facts and circumstances of its case, even if the impugned disallowance came to be ultimately sustained, the ratio of the decision of the Gujarat High Court in Bharat Machinery and Hardware Mart's case (136 ITR 875) and of the decision of the ITAT, Delhi Bench in Haryana Warehousing Corporation v. DCIT [252 ITR (A.T.) 34] was attracted and the levy deserved to be cancelled. 4. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No.9 of the appellant's appeal before him challenging the initiation of penalty proceedings u/s.271(1)(c), as premature. He ought to have appreciated, inter alia, that in the peculiar facts and circumstances of the appellant's case, there being absolutely no warrant/justification for initiating the penalty proceedings, he ought to have ordered for their being dropped, thereby saving both the appellant and the Department from long drawn unnecessary litigation. 59. Ground No.1.1 & 1.2 is similar to Ground No.1 o....