ALSTOM T & D INDIA LIMITED,CHENNAI V. DCIT, CHENNAI

MA 12/CHNY/2024

AI Insights

The case revolves around GE T&D India Ltd.'s appeal against the disallowance of a provision for warranties claimed as a deduction in the Assessment Year 2009-10. The company had created a provision for warranties amounting to Rs.6,61,04,000, which was disallowed by the Assessing Officer on grounds that it was not based on a scientific basis considering past trends and future liabilities. The company contested this decision through various levels of appeal, including the Commissioner (Appeals) and the Income Tax Appellate Tribunal. The Tribunal initially upheld the disallowance but later, upon the filing of a Miscellaneous Application, rectified its earlier decision, allowing the deduction for the actual release of the provision during the year.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107105 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-08-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMUEL PITTA
• Assessee Lawyers: TUSHAR JARWAL

Judgement Text

"आयकर अपीलीय अिधकरण, ‘डी’ Ɋायपीठ, चेɄई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI ŵी एबी टी. वकŎ, Ɋाियक सद˟ एवं ŵी एस. आर. रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER M.A No.12/Chny/2024 (Arising out of ITA No.2093/Chny/2014) िनधाŊरण वषŊ /Assessment Year: 2009-10 GE T&D India Ltd., (Previously known as Alstom T & D India Ltd.,), 19/1, IOC, GST Road, Pallavaram, Chennai – 600 062. [PAN: AAACG 2115R] Vs. The Dy. Commissioner of Income Tax, LTU, Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथŎ की ओर से/ Assessee by : Shri Tushar Jarwal, Advocate ŮȑथŎ की ओर से /Revenue by : Dr. Samuel Pitta, JCIT सुनवाई की तारीख/Date of Hearing : 23.08.2024 घोषणा की तारीख /Date of Pronouncement : 18.10.2024 आदेश / O R D E R PER S.R. RAGHUNATHA, A.M : By way of this Miscellaneous Application, the assessee seeks rectification in the Tribunal order passed in ITA No.2093/Chny/2014 for A.Y 2009-10 dated 20.11.2023. 2. The assessee’s grievance against the impugned order of the Tribunal is stated in the application filed, which is reproduced as under: “1. For the relevant year under consideration, i.e., A.Y. 2009-10, the Applicant has created a provision in respect of provision for warranties to the M.A No.12/Chny/2024 :- 2 -: tune of Rs.6,61,04,000/- and claimed a deduction of the same. 1-Iowever, the assessing officer has disallowed the provision towards warranty, as the same was not made on the scientific basis considering the past trend and the future liability required to be settled the warranty claim. The said provision was added back in the computation of income by learned assessing officer in the computation of income which is at page 21 of the assessment order. However, the learned Assessing Officer while disallowing the provision for warranty has allowed the actual release of provision to the tune ofRs.4,71,12,000/- but directed the same to be reduced from the opening balance of Rs.21,54,23,000/- .This fact is evident from the finding of the assessing officer at page 4of the assessment order. 2. The order of the Applicant was challenge before the Ld. Commissioner (Appeals) wherein a specific ground (Grounds of Appeal) No.2 was taken that the learned AO had erred in not even granting the release made during the year in respect of the provision of warranty. However, the learned CIT(Appeals) did not allow the said ground vide its order dated 29.05.2014. but it had after consideration held that the disallowance of the closing balance as on 31.03.2007 ( i.e., opening balance as on 01.04.2007) of Rs 19,81,26,000 /- is incorrect in law as entire amount already stands reversed/utilised by the Applicant company. 3. Aggrieved by the order of the learned CIT(Appeals) the Applicant filed an appeal before this Hon'ble Tribunal challenging the nongrant of deduction on account of release made during the year in respect of the provision for warranty. 4. While disposing off the captioned Appen1, this Hon'ble Tribunal held as under: 3.3 In so far as alternative arguments of the ld.Counsel for the assessee that, at least the Assessing Officer may be directed to allow actual expenditure incurred towards warranty amounting to Rs.4,71, 1 2,000/-, we find that the appellant could not give any detail as to whether actual expenditure incurred during the year is out of provision created for the impugned year or out of opening balance brought forward from earlier financial year. In absence of specific details with regard to utilisation of warranty expenses, the claim of the assessee cannot be accepted. Thus, we reject the alternative arguments of the Ld. Counsel for the assessee.” 5. The Applicant submits that the CTT(A) in its order dated 29.05.2014 had after consideration held that the disallowance of the closing balance as on 31.03.2007 (i.e., opening balance as on 1.04.2007) of Rs. 19,81,26,000 /- is incorrect in law as entire amount already stands reversed/ by the Applicant company. This order has been accepted by the department and an appeal effect order dated 04.03.2015 as been passed which was placed before this Hon'ble Tribunal in the paper book at page 86 and 87 filed during course of hearing. 6. For the next year i.e. A Y 2008-09, the Applicant suo moto disallowed the provision made by it and claimed the release. Similarly, for A Y 2009-10, while the AO disallowed the provision made by the Applicant, but it allowed the actual release but directed it to be reduced from opening balance. In effect if the provision is disallowed (i.e. offered to tax) then the release must be available as a deduction to the Applicant 7. A mistake crept in the order of the Hon'ble Tribunal in Para No 3.3 wherein this Hon'ble Tribunal observed that the Applicant did not give any details whether this release is from opening balance brought forward from earlier year or the actual provision when it is apparent that the entire opening as on M.A No.12/Chny/2024 :- 3 -: 1.04.2007 had already been appropriately offered to tax and therefore automatically the provision as per release has to be allowed in the respective AY. The denial has resulted in double taxation to the extent of 4,71,12,000/-. 8. In view of the aforesaid facts by way of the present application, the Applicant therefore most humbly and respectfully seeks rectification of the said error by rectifying the order dated 20.11.2023 passed in ITA No. 2093/CHNY/2014 for A Y 2009-10 and thereby allow the claim of deduction of actual release made during the A Y 2009-10 in respect of provision for warranty.” Ld. Authorized Representative (AR) reiterated aforesaid facts and made the prayer as noted (supra). 3. Per contra, the Ld. Departmental Representative (DR) supported the order of the Tribunal, does not want us to interfere in the impugned order. 4. We have heard the rival submissions, and perused the materials available on record. On perusal of records and orders, it is noted that the entire provision for warranty created by the assessee has been consistently disallowed, which is confirmed by the order of Ld.CIT(A) dated 29.05.2014. The amount of provision created upto 31.03.2017 to the tune of Rs.19,81,26,000/- has been disallowed in the computation of total income and taxes thereon. Further, we note that during the A.Y 2009-10 also the provision made has been disallowed to the tune of Rs.6,61,04,000/- which emanated from the order of the Tribunal in para 3.2. That means, the assessee has never claimed the provison created as allowable expenditure for the purpose of computation of M.A No.12/Chny/2024 :- 4 -: total income and tax thereon, which is apparent from record. Further, in para No.5 of the assessment order passed u/s.143(3) of the Act on 30.01.2013, the A.O has observed that the assessee has made an actual payment towards warranty expenses to the tune of Rs.4,71,12,000/-. Considering the facts and circumstances of the case, we are of the opinion that the details of payment made towards warranty expenses during the A.Y 2009-10 to the tune of Rs.4,71,12,000/- is available in the records and hence, we are inclined to rectify the error and direct the A.O to allow the expenditure incurred towards warranty amounting to Rs.4,71,12,000/- and re-compute the total income of the assessee accordingly. 5. In the result, the Miscellaneous Application filed by the assessee stands allowed to the extent as prayed for (supra). Order pronounced on 18th October, 2024. Sd/- (एबी टी. वकŎ) (ABY T. Varkey) Ɋाियक सद˟ / Judicial Member Sd/- (एस. आर. रघुनाथा) (S.R. Raghunatha) लेखा सद᭭य /Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated: 18th October, 2024. JPV/- आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकर आयुƅ/CIT, Chennai 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF "