TaxTMI 
TaxTMI 
2024 (3) TMI 1556
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....onvenience. 3. The assessee has raised the following grounds of appeal in ITA No. 3811/Del/2014:- "1. That the Ld. CIT (A) has erred in not allowing the expenses classified as prior period expenses amounting to Rs. 1,14,07,229/- on account of reversal of overhead expenses which was wrongly capitalized in the previous year without appreciating facts & circumstances of case. Alternatively, the Ld. CIT (A) has erred in not allowing the depreciation on these expenses which had been capitalized during the previous year and depreciation was allowed in the previous year as per the provisions of the Income Tax Act. 1.1 The Ld CIT (A) has erred in confirming the addition of Rs. 13,26,878/- on account of other expenses disallowed by the Ld. AO out of 'Prior Period Expenses without properly appreciating the facts and also against the provisions of the Income Tax Act. 2. That the Ld. CIT (A) has erred in confirming the action of Ld. AO and not allowing the depreciation @ 80% on the energy saving devices consisting of voltage stabilizers and UPS etc. treating these as normal part of plant & machinery. NP 3. That CIT (A) has erred in confirming....
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.... 6. We have heard the rival submissions and perused the material available on record. 7. The assessee company is engaged in the business of manufacturing and assembling of tractors and tractor parts and components. There has been no change of the business activities of the assessee during the year under consideration when compared to that of earlier years. The return of income for AY 2009-10 was electronically filed by the assessee on 30.09.2009 declaring total taxable income of Rs. 102,16,71,550/-, which was duly processed u/s 143(1) of the Act. Later, the case was selected for scrutiny. During the course of assessment proceedings, the ld. AO observed from Schedule 18 of the balance sheet and point No. 22(a) of the Audit Report that the assessee has debited expenses of Rs. 1,53,48,234/- to Profit and Loss Account which relate to prior period. Accordingly, a show cause notice was issued as to why the said prior period expenses should not be disallowed on the ground that as it is not related to the year under consideration. In response the assessee submitted that accounts have been maintained by the assessee though on mercantile basis but these items which are categorized under ....
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..../- are enclosed in pages 1 to 4 of the Paper Book. We find that as per accounting standard-5 (AS-5) issued by the Institute of Chartered Accountants of India (ICAI) the expression prior period items is defined therein, which says that prior period items are expenses / income which arises in the current period as a result of error or omission in the preparation of the financial statement of one or more prior period. 10. As per AS-5 vide para 17 error and omission referred to thereon have been elaborated by stating error may occur as a result of mathematical mistake, mistake for applying accounting policies, misinterpretation of effective or oversight. The present case of overhead cost of dyes had been wrongly capitalized in the earlier years and the same had been charged off to revenue pursuant to rectification of mistake in applying accounting policies. Hence, this item squarely becomes a prior period item as accounting standard AS-5 issued by ICAI the assessee had claimed the sum of Rs. 1,14,07,229/- as revenue expenditure on net basis i.e. (original cost of asset less depreciation) as expenditure which in our considered opinion would be squarely allowable as deduction during t....
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....ed as deduction by the ld. CIT(A). 12. In the result, ground No. 1 of the revenue is dismissed and ground No. 1 and 1.1 of assessee's appeal are allowed. 13. Ground No. 2 raised by the assessee was stated to be not pressed by the ld. AR. The same is reckoned as a statement made from the bar and accordingly dismissed as not pressed. 14. Ground No. 3 raised by the assessee is challenging the disallowances made u/s 14A of the Act where there is no exempt income derived by the assessee. This issue is no longer res integra in view of the decision of the Hon'ble Jurisdictional High Court in the case of PCIT Vs. Era Infrastructure India Ltd reported in 141 taxmann.com 289 wherein, the Hon'ble jurisdictional High Court even after considering the amendment brought in by the Finance Act, 2022 in section 14A had categorically held that said amendment would be prospective in nature applicable from 01.04.2022 onwards and that there is no exempt income, the provision of section 14A of the Act cannot be brought into service. Respectfully following the same, the ground No. 3 raised by the assessee are allowed. 15. Ground No. 2 raised by the revenue is challenging the deletion of disall....
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.... for Warranty Created Actual Amount of Warranty Expenses Total Sales 2007-08 Rs. 2.63 lakhs Rs. 140.63 lakhs Rs. 110.82 crore 2008-09 Rs. 79.6 lakhs Rs. 329.8 lakhs Rs. 952.83 crore 2009-10 (CY) Rs. 502.48 lakhs Rs. 402.48 lakhs Rs. 1131.36 crore 20. The assessee also gave the workings of determination of warranty provision made for the year in the following manner:- Opening Balance [Pg. 17 of PB (D)| (b/1 unutilized 'provision of warranty' as on 31.03.2008) Rs. 190 lakhs Add: Provision created Rs. 502.48 lakhs Less: Actual expenses Rs. 402.48 lakhs Total Rs. 100 lakhs Closing Balance Rs. 290 lakhs 21. The assessee also submitted that out of total provision made of Rs. 2.90 cores the assessee had already disallowed a sum of Rs. 1.90 crores in AY 2008-09 in the computation of income thereby drawing the attention of the ld. CIT(A) that there is double addition made by the ld. AO to the extent of Rs. 1.90 crores. The assessee also submitted the basis of arriving at the provision on a scientific manner which is inconsonance with th....
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....er sheet entry dated 22.12.2011 asking for employee list of the years 2005-06 to 2008-09 along with muster roll and attendance sheet; appointment letters of old and new employees along with resignation letters of the employees who left the organization and also to explain why deduction u/s 80JJAA of the Act was not claimed in the return of income for AY 2007-08. The ld. AO observed that the ld. AR of the assessee expressed his inability to produce the desired records within a short span of time and on the adjourned date of hearing on 28.12.2011 the ld. AO observed that the assessee had merely stated and it had complied with all the requirement section 80JJAA of the Act. The ld. AO also observed that the assessee furnished a CD containing the details of salary paid to different persons starting from April 2006 to March 2009 but did not give any break-up of casual workers, permanent workers and workers employed through contract labour. The ld. AO observed that in the absence of these primary details the claim of deduction u/s 80JJAA of the Act was not allowable to the assessee company and accordingly a sum of Rs. 3,73,37,902/- was disallowed and added back to the total income. Before....
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....l placed before it before allowing deductions claimed by the assessee. The Tribunal, however, instead of examining this aspect of the matter, observed, and in our view, incorrectly, that because an opportunity was not given to the AO to examine the material, therefore, the matter needed to be remanded to the AO for a fresh verification. 15. In our view, unless the Tribunal would have reached to a conclusion and expressed its clear view, in that respect, as to what was wrong or missing in the examination made by the CIT(A), a remand was not called for. We agree with Mr. Seth's contention that the CIT(A) in the exercise of its powers under section 250(4) of the Act was entitled to seek production of documents and/or material to satisfy himself as to whether or not the deductions claimed were sustainable/viable in law. This was, however, a case where the details were placed before the AO, who declined to entertain the claims only on the ground that they did not form part of assessee's original return and that the assessee had not made a course correction by filing a revised return. 15.1 This view was based, as noticed above, on the judgment of the Supreme Cou....
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....ssessee, as allowed by the CIT(A), will have to be sustained. It is ordered accordingly. 18. The questions of law are answered in the favour of the assessee and against the revenue." 26. Similar view was taken for AY 2008-09 by the Hon'ble Delhi High Court. As far as for AY 2009-10 that is the year under consideration is concerned the fresh claim is only in respect of Rs. 1,33,72,312/- for which the details were indeed filed before the ld. AO in the audit report in Form 10DA was duly filed which is also enclosed in pages 179 to 184 of the Paper Book. The details of employees recorded during the year are enclosed in pages 168 to 178 of the Paper Book. All these details were already filed before the lower authorities. The ld. CIT(A) had examined the said details and accordingly granted relief to the assessee. Hence, on merits as well as the eligibility of the assessee to claim u/s 80JJAA of the which is covered by the decision of the Hon'ble Jurisdictional High Court in assessee's own case, we do not find any infirmity in the order of the ld. CIT(A) in granting relief to the assessee. Accordingly, ground No. 4 raised by the revenue is dismissed. 27. Ground No. 5 ra....
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..... We have heard the rival submissions and perused the material available on record. 33. The ld. AO observed that the assessee had purchased a BMW and had claimed higher depreciation @50% thereon in the return of income which was restricted to 15% by the ld. AO. The case of the ld. AO is that BMW falls under the category of light motor vehicle (LMV) as per definition of Commercial Vehicle in new appendix added in Income Tax Rules. It was submitted that exclusion from eligible commercial vehicles was only with respect of maxi-cab, motor-cab, tractor and road-roller. The assessee's vehicle does not fit into these categories. Further, observation made by the ld. AO that assessee company is engaged in the business of manufacturing and not in the business of transport was rejected by the ld. CIT(A) as the income tax depreciation chart provides for separate rate of depreciation in respect of master bus, motor lawry and motor taxis used in the business to run them on hire. We find that the term motor can is defined u/s 2(25) under the motor Vehicle, 1988. Further, commercial vehicle is defined in the income tax depreciation schedule is under:- "Commercial vehicle means "heavy g....
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....Light motor vehicle 13. 95310 Vehide Rhino 1603 kgs Light motor vehicle 14. 95313 Vehide Rhino 1603 kgs Light motor vehicle 15. 95304 Maruti Alto LX 850 kgs Light motor vehicle 16. 95308 BMW M-3 Saloon 1580 kgs Light motor vehicle 36. In view of the aforesaid observation considering the chart given above, considering the definition of light motor vehicle under the Motor Vehicle Act and considering the definition of Commercial Vehicle under the Income Tax Depreciation Schedule, we hold that vehicles bought by assessee between 01.01.2009 to 01.10.2009 being eligible for depreciation @50%. Accordingly, ground No. 6 raised by the revenue is dismissed. 37. Ground No. 7 raised by the revenue is challenging the deletion of disallowance of bad and doubtful debts. 38. We have heard the rival submissions and perused the material available on record. 39. During the course of assessment proceedings on 22.12.2011, the assessee through its authorized representative submitted a statement of revised taxable income wherein, a sum of Rs. 1,48,94,594/- was claimed as bad debt written off. The ld. AO disallowed this claim of the a....