M/s. BPL Medical Technologies Private Limited, Bangalore V. Deputy Commissioner Of Income Tax, Circle- 1(1)(2), Bangalore

ITA 105/BANG/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0442 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-07-2021
• Assessment Year: 2016-2017
• Appeal Filed On: 20-01-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R. PREMI
• Section: 20

Judgement Text

ITA NO.105/BANG/2020 M/S. BPL MEDICAL TECHNOLOGIES PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL CBENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.105/BANG/2020 ASSESSMENT YEAR: 2016-17 M/S. BPL MEDICAL TECHNOLOGIES PVT. LTD. 11 TH KM, ARAKERE, BANNERGHATA ROAD BANGALORE PAN NO :AAFCB3158E VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1(1)(2) BANGALORE APPELLANT RESPONDENT APPELLANT BY : MS. MANASA ANANTHAN, A.R. RESPONDENT BY : SMT. R. PREMI, D.R. DATE OF HEARING : 20.07.2021 DATE OF PRONOUNCEMENT : 20.07.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 30.10.2019 PASSED BY LD. CIT(A)-1, BANGALORE AND IT RELATES TO THE ASSESSMENT YEAR 2016-17. THE ONLY ISSUE URGED RELA TES TO THE DISALLOWANCE OF WARRANTY PROVISION MADE BY THE AO , WHICH WAS PARTIALLY SUSTAINED BY LD CIT(A). 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E ASSESSEE HEREIN IS A LEADING EXPORTER OF MEDICAL EQUIPMENT. IT FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING L OSS OF RS.10.45 ITA NO.105/BANG/2020 M/S. BPL MEDICAL TECHNOLOGIES PVT. LTD., BANGALORE PAGE 2 OF 4 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF WARRANTY PROVISION TO THE EXTENT OF RS.89,27,387/-. THE A.O . TOOK THE VIEW THAT THE ASSESSEE HAS CREATED THE PROVISION WITHOUT ANY SCIENTIFIC BASIS AND ACCORDINGLY TOOK THE VIEW THAT THE PROVIS ION FOR WARRANTY IS A CONTINGENT LIABILITY. ACCORDINGLY, HE DISALLO WED THE ABOVE SAID CLAIM. 3. THE LD. CIT(A) CONSIDERED THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD. (2009) 180 TAXMAN 422. THE LD. CIT(A) ALSO EXAMINED THE P AST HISTORY OF UTILIZATION OF PROVISION FOR WARRANTY CREATED BY THE ASSESSEE. ACCORDINGLY HE TOOK THE VIEW THAT THE ASSESSEE HAS CREATED THE PROVISION IN EXCESS DURING THE YEAR AND HELD THAT P ROVISION CREATED BY THE ASSESSEE MAY BE RESTRICTED TO 50%. ACCORDIN GLY HE DIRECTED THE AO TO ALLOW DEDUCTION OF 50% OF THE PROVISION C REATED DURING THE YEAR AND DISALLOW THE REMAINING AMOUNT. WHILE GIVING SAID DIRECTION, THE LD. CIT(A) TOOK THE AMOUNT OF WARRAN TY PROVISION CREATED DURING THE YEAR AT RS.2,18,45,588/- AND ACC ORDINGLY, DIRECTED THE A.O. TO ALLOW 50% THEREOF AS DEDUCTION AND DISALLOW THE BALANCE AMOUNT. 4. IT IS THE SUBMISSION OF THE ASSESSEE THAT THE AM OUNT ACTUALLY DEBITED TO PROFIT & LOSS ACCOUNT WAS RS.89,27,387/- ONLY, WHICH WAS WORKED OUT AS UNDER IN THE BOOKS:- WARRANTY PROVISION WORKED OUT - RS.2,18,45,588/ - LESS:- UTILISED AMOUNT - RS.1,29,1 8,201/- ---------------------- NET AMOUNT DEBITED TO P & L A/C - RS. 89,27,387 =============== ITA NO.105/BANG/2020 M/S. BPL MEDICAL TECHNOLOGIES PVT. LTD., BANGALORE PAGE 3 OF 4 ACCORDINGLY, HE SUBMITTED THAT THE NET AMOUNT OF PR OVISION DEBITED TO PROFIT & LOSS ACCOUNT WAS RS.89,27,387/- ONLY AN D THE SAME WAS DISALLOWED BY THE AO. ACCORDINGLY, THE LD. A.R. SU BMITTED THAT THE LD. CIT(A) WAS NOT CORRECT IN ADOPTING THE FIGURE O F RS.2,18,45,588/- FOR THE PURPOSE OF COMPUTING DISAL LOWANCE. ACCORDINGLY, THE LD. A.R. SUBMITTED THAT THE DISALL OWANCE AS DIRECTED BY LD CIT(A) SHOULD BE MADE ON RS.89,27,38 7/- ONLY. 5. WE HEARD LD. D.R. AND PERUSED THE RECORD. AS RI GHTLY POINTED OUT BY LD. A.R., THE AMOUNT OF WARRANTY PROVISION C LAIMED IN PROFIT & LOSS ACCOUNT WAS RS.89,27,387/-. WE HAVE ALSO OB SERVED EARLIER THAT THE AMOUNT DISALLOWED BY THE AO WAS ALSO RS.89 ,27,387/- ONLY. WE NOTICE THAT THE LD CIT(A) HAS DIRECTED AS UNDER:- ACCORDINGLY, AN AMOUNT OF RS.1,09,22,794/- (BEING 50% OF PROVISION CREATED OF RS.2,18,45,588/-) IS ALLOWED T O BE REASONABLE AND THE BALANCE PROVISION CREATED IS DIS ALLOWED BEING EXCESS. THE DIRECTION GIVEN BY THE LD CIT(A) RESULTS IN DIS ALLOWANCE OF RS.1,09,22,794/-, WHILE THE ACTUAL AMOUNT OF WARRAN TY PROVISION CLAIMED BY THE ASSESSEE WAS ONLY RS.89,27,387/-. 6. BEFORE US, THE LD A.R SUBMITTED THAT THE DI SALLOWANCE OF 50% SHOULD BE WORKED OUT ON THE AMOUNT OF RS.89,27,387/ -. ADOPTING THE REASONING GIVEN BY LD CIT(A), WE FIND MERIT IN THE SUBMISSION OF LD A.R. ACCORDINGLY, WE MODIFY THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 50% O F RS.89,27,387/-. WE ORDER ACCORDINGLY. ITA NO.105/BANG/2020 M/S. BPL MEDICAL TECHNOLOGIES PVT. LTD., BANGALORE PAGE 4 OF 4 7. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JUL, 2021. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 20 TH JUL, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.