ACIT, Pune V. DANA INDIA P. LTD, Pune

ITA 1805/PUN/2012

• Counselvise Citation: 180524514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 10-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: R D ONKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S.PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1805/PN/2012 (ASSESSMENT YEAR 2006-07) ASST. COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE. .. APPELLANT VS. DANA INDIA PVT. LTD., S.NO.278, RAISONI INDUSTRIAL PARK, VILL : MANN-HINJEWADI, TAL : MULSHI, PUNE-57. .. RESPONDENT PAN NO.AABCD1873A APPELLANT BY : SHRI P.L. PATHADE RESPONDENT BY : SHRI R.D. ONKAR DATE OF HEARING : 15-10-2013 DATE OF PRONOUNCEMENT : 22-10-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 28-06-2012 OF THE CIT(A)-V, PUNE RELATING TO ASSESS MENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION MADE OF RS.12 70,996/- BEING THE PROVISION FOR WARRANTY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN HOLDING THAT THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS LTD. 314 ITR 6 2] IS APPLICABLE IN THIS CASE WHEN SCIENTIFIC BASIS OF THE PROVISION OF WARRANTY IS NOT EXCLUSIVELY ESTABLISHED. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF AUTOMOTI VE COMPONENTS, AXLES FOR TRACTORS, CRANES, EARTH MOVING CRANES ETC. DUR ING THE COURSE OF 2 ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED FROM NOTES OF ACCOUNTS THAT THE ASSESSEE HAS MADE A PROVISION FOR WARRANTY OF RS.12,70,996/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISION FOR WARRANTY OF RS.12,70,996/- SHOULD NOT BE DISALLOWED AND ADDED TO ITS TOTAL INCOME BEING CONTINGENT LIABILITY. REJECTING THE E XPLANATION GIVEN BY THE ASSESSEE AND FOLLOWING HIS ORDERS FOR A.Y. 2004-05 AND 2005-06 THE ASSESSING OFFICER DISALLOWED THE PROVISION FOR WARR ANTY OF RS.12,70,996/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSES SEE. 3.1 IN APPEAL THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION BY OBSERVING AS UNDER : 6. AFTER CAREFUL CONSIDERATION OF THE FACTS OF THE C ASE AND THE REPLY OF THE APPELLANT IT IS SEEN THAT THE STAND TAKEN BY THE A SSESSING OFFICER THAT PROVISION FOR WARRANTY LIABILITY IS A CONTINGENT LIAB ILITY, IS NOT CORRECT. HON'BLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA P. LTD V/S CIT, REPORTED IN 314 ITR 62 HAS HELD THAT PROVISION FOR WA RRANTY LIABILITY IS AN ALLOWABLE EXPENDITURE PROVIDED IT IS CALCULATED ON SC IENTIFIC BASIS. IT IS ALSO SEEN THAT THE ASSESSMENT ORDERS FOR A.Y. 2004-05 & 2005- 06 WHEREIN DISALLOWANCE ON THIS ACCOUNT WAS MADE BY THE ASSESSING OFF ICER, TRAVELLED UP TO ITAT LEVEL AND HON'BLE ITAT SET ASIDE THE MATTE R TO THE FILE OF COMMISSIONER OF INCOME-TAX(APPEALS) FOR DECIDING THE I SSUE A FRESH IN THE LIGHT OF HON'BLE SUPREME COURT'S ORDER IN CASE OF ROT ORK CONTROLS INDIA P. LTD. VS. CIT(SUPRA). SINCE THEN APPELLATE ORDERS FOR 2 004-05 & 2005-06 HAVE BEEN PASSED BY THE UNDERSIGNED AND AFTER EXAMINING THE PROVISION FOR RESPECTIVE YEARS, PARTIAL RELIEF WAS ALLOWED TO THE AP PELLANT AS THE APPELLANT COULD NOT PROVE THAT WARRANTY LIABILITY WAS CALCULAT ED ON SCIENTIFIC BASIS. HOWEVER, WHEN THE PROVISION FOR WARRANTY LIABILITY O F RS.12,70,996/- IS EXAMINED CONSIDERING THE REVERSAL OF THE PROVISION AS W ELL AS THE EXPENDITURE INCURRED DURING THE YEAR, IT IS SEEN THAT THE PROVISION FOR WARRANTY LIABILITY IS JUSTIFIED IN THE SENSE THAT RS.12 ,70,996/- PROVIDED ON ACCOUNT OF WARRANTY LIABILITY DURING THE YEAR WHICH WAS REVERSED BACK IN NEXT YEAR AND ACTUAL EXPENSES WERE SHOWN AT RS.18.87 LA CS. CONSIDERING THE FACT THAT THE WARRANTY PROVISIONS ARE APPLICABLE FOR GOODS SUPPLIED BY THE APPELLANT COMPANY FOR A PERIOD OF 12 TO 18 MONT HS. THE ACTUAL EXPENSE OF RS.18.87 LACS JUSTIFIES THE DEBIT ON ACCOUNT OF WARR ANTY LIABILITY AMOUNTING TO RS.12,70,996/- MADE DURING THE RELEVANT ASSESSMENT YEAR. 3.2. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 3 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT IN THE PRECEDING ASSESSMENT YEARS THE LD.CIT(A) FOLLOWING THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD., (SUPRA) HAD GIVEN PART RELIEF TO THE ASSESSEE. HOWEVER, FOR TH E IMPUGNED ASSESSMENT YEAR THE LD.CIT(A) HAS GIVEN FULL RELIEF AND THEREF ORE THE ORDER OF THE LD.CIT(A) IS NOT PROPER. 5. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND SUBMITTED THAT THE PROVISION OF RS.12,70,996/- HAS BEEN REVERSED IN TH E SUBSEQUENT YEAR AND ACTUAL EXPENSES WERE AT RS.18.87 LAKHS. THEREFORE, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.12,70,996/ - BEING PROVISION FOR WARRANTY. HE ACCORDINGLY HELD THAT THE GROUNDS RAI SED BY THE REVENUE SHOULD BE DELETED. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE LD.CIT(A) WHILE DECIDING THE ISSUE HAS DISTINGUISHED THE FACTS VIS- A-VIS A.Y. 2004-05 AND 2005-06 BY GIVING A FINDING THAT AN AMOUNT OF RS.18 .87 LAKHS HAS BEEN ACTUALLY SPENT IN THE SUCCEEDING YEAR AND THEREFORE THE PROVISION FOR WARRANTY LIABILITY AT RS.12,70,996/- PROVIDED BY TH E ASSESSEE IN THE BOOKS IS JUSTIFIED. THE LD. DEPARTMENTAL REPRESENTATIVE COU LD NOT BRING ANY MATERIAL TO DEVIATE FROM THE FINDINGS GIVEN BY THE LD.CIT(A). SINCE THE LD.CIT(A) WHILE DECIDING THE ISSUE HAS GIVEN A FIND ING THAT THE AMOUNT OF RS.12,70,996/- PROVIDED ON ACCOUNT OF WARRANTY LIAB ILITY DURING THE YEAR WAS REVERSED BACK IN NEXT YEAR AND ACTUAL EXPENSES WERE SHOWN AT RS.18.87 LAKHS, THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD ., (SUPRA) WE FIND NO 4 INFIRMITY IN THE ORDER OF THE LD.CIT(A) DELETING TH E ADDITION. ACCORDINGLY, THE SAME IS UPHELD. THE GROUNDS RAISED BY THE REV ENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF OCTOBER, 2013. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE DATED: 22 ND OCTOBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-V, PUNE 4 CIT-V, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE