The DCIT, Circle-4, Ahmedabad V. Hitachi Home & Life Solutions(I) Limited, Ahmedabad

ITA 182/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80284 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Business income; Transfer pricing; Diversion of income; International transaction; Bad and doubtful debts
• Section: 143(3); 92B; 37; 28

Judgement Text

, , , , B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH , , , , ! ' ! ' ! ' ! ' #$ #$ #$ #$ % % % %, , , , ' ' ' ' & & & & BEFORE S/SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AN D KUL BHARAT, JUDICIAL MEMBER) ITA NO.182/AHD/2011 [ASSTT.YEAR : 2005-2006] THE DCIT, CIR.4 AHMEDABAD. /VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. 9 TH FLOOR, ABHIJEET, MITHAKHALI SIX ROAD AHMEDABAD. PAN : AABCA 2392 K ITA NO.216/AHD/2011 [ASSTT.YEAR : 2005-2006] HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. 9 TH FLOOR, ABHIJEET, MITHAKHALI SIX ROAD AHMEDABAD. /VS. THE ACIT, RANGE.4 AHMEDABAD. ITA NO.1136/AHD/2011 WITH CO NO.148/AHD/2011 [ASSTT.YEAR : 2006-2007] THE DCIT, CIR.4 AHMEDABAD. /VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. 9 TH FLOOR, ABHIJEET, MITHAKHALI SIX ROAD AHMEDABAD. ( (( (() () () () / APPELLANT) ( (( (*+() *+() *+() *+() / RESPONDENT) ,' - . / REVENUE BY : SHRI V.K. SINGH, SR.DR 0 - . / ASSESSEE BY : SHRI S.N. SOPARKAR 1 - !/ DATE OF HEARING : 12 TH AUGUST, 2014 DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -2- 234 - !/ DATE OF PRONOUNCEMENT : 27-08-2014 5 / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: THESE ARE APPEALS BY THE REVENUE AND THE CROSS-APPEALS BY THE ASSESSE E CHALLENGING RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR THE ASSTT.YEARS 2005-06 AND 2006-2007. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE OF ALL THE APPEALS AND CO BY THIS CONSOL IDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE, AS CULLED OUT FROM THE RECORDS FOR THE ASSTT.YEAR. 2005-06 ARE THAT THE ASSESSEE IS COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF AIR-CONDITIONERS (ACS . FOR SHORT). THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2005-06 ON 30.1 0.2005 DECLARING TOTAL INCOME OF RS.NIL, WHICH WAS LATER REVISED ON 6.6.2006 BY D ECLARING TOTAL INCOME AT RS.NIL AFTER ADJUSTMENT OF CARRY FORWARD LOSS. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER, THE ASSESSMENT WAS FRAMED UNDER SEC TION 143(3) VIDE ORDER DATED 30.12.2008 AND THE TOTAL INCOME BEFORE THE ADJUSTME NT OF BROUGHT FORWARD LOSS WAS DETERMINED AT RS.21,57,22,429/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A)-XX, W HO VIDE ORDER DATED 29.10.2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A), BOTH THE ASSESSEE AND THE REVENUE ARE IN AP PEAL BEFORE US. FIRST WE TAKE UP ASSESSEES APPEAL FOR ADJUDICATION. ITA NO.216/AHD/2011 (ASSTT.YEAR 2005-06) ASSESSEE S APPEAL: DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -3- 3. THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE CH ALLENGING VALIDITY OF THE ASSESSMENT IS GENERAL IN NATURE NOT PRESSED FOR ADJ UDICATION, AND THEREFORE, DISMISSED AS NOT PRESSED. 4. THE GROUND NO.2 IS WITH RESPECT TO DISALLOWANCES OF DEDUCTION IN RESPECT OF WRITING OFF OF THE IRRECOVERABLE ADVANCES AND OTHER DEBIT BALANCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT T HE ASSESSEE HAD WRITTEN OFF AN AMOUNT OF RS.14,83,037/- WHICH WAS CLAIMED AS ADVAN CES AND ANOTHER AMOUNT OF RS.30,48,835/- AS BALANCES WRITTEN OFF. AO NOTED THAT THE AMOUNTS WERE IN THE NATURE OF ADVANCES AND BALANCES WHICH WERE DEBIT BA LANCES NOT ARISING OUT OF SALES AND DID NOT FALL UNDER THE PURVIEW OF SECTION 36(1) (VII) OF THE ACT. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE DEDUCTION CLA IMED UNDER THE ABOVE HEAD BE NOT DISALLOWED, TO WHICH, THE ASSESSEE, INTER ALIA , SUBMITTED THAT THE ADVANCES WRITTEN OFF WERE EARNEST MONEY DEPOSIT (EMD FOR S HORT) PAID IN RESPECT OF SUBMISSION OF TENDERS FOR SUPPLY OF ACS., AND SINCE THE SAID DEPOSITS WERE NOT RECEIVED BACK, AN AMOUNT OF RS.14,83,037/- WAS WRIT TEN OFF AND CLAIMED AS BUSINESS LOSS. WITH REGARD TO BALANCE WRITTEN OFF AGGREGATING TO RS.30,48,835/-, THE ASSESSEE SUBMITTED THE REASONS LIKE PARTY NOT T RACEABLE, COMPANYS EFFORTS TO RECOVER FAILED, THERE WAS A DISPUTE WITH CUSTOMER E TC. THE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE TO THE AO. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS NOT JUSTIFIED AS TO HOW THE DEBT HAS B ECOME BAD, AND HAD ALSO NOT MENTIONED ABOUT RECOVERY MEASURES TAKEN BY THE ASSE SSEE AGAINST THE PARTIES. HE WAS, THEREFORE, OF THE VIEW THAT IT COULD NOT BE SA ID THAT THE DEBT HAS BECOME ACTUALLY BAD, AND THEREFORE, THE SAME WERE NOT ALLO WABLE UNDER SECTION 36(1)(VII) OF THE ACT. HE FURTHER PLACING RELIANCE ON THE DEC ISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES AND ENG INEERS P. LTD. VS. CIT, 207 CTR 729, DISALLOWED ADVANCES WRITTEN OFF OF RS.14,8 3,037/-, BALANCES WRITTEN OF RS.30,48,835/- AND BAD DEBTS WRITTEN OFF OF RS.42,5 1,367/- AGGREGATING TO DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -4- RS.87,83,239/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE, UPHELD THE ORDER OF THE AO BY HOLDING AS UNDER: 7.8 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS AL SO SUBMISSIONS OF THE AR CAREFULLY. IT IS SEEN THAT WHAT IS WRITTEN OFF IS NOT BAD DEBT ARISING OUT OF SALES. THE AR OF THE APPELLANT WAS NOT ABLE TO JUS TIFY WHY THESE ADVANCES WERE GIVEN AND WHY THE WRITE-OFF SHOULD BE TREATED AS BAD DEBTS. THE AMOUNT WRITTEN OFF AS BUSINESS LOSS IT HAS TO BE PR OVED BY THE ASSESSEE THAT THE ADVANCE IS GIVEN IN THE REGULAR COURSE OF BUSIN ESS AND THAT THEY HAVE BECOME IRRECOVERABLE. IN THE INSTANT CASE THE AO HA S BROUGHT OUT CLEARLY THAT THE APPELLANT HAS NOT BEEN ABLE TO PROVE THAT THE DEBTS HAVE BECOME BAD. THE RELIANCE OF THE AR OF THE CASE OF TRF LTD . VS. CIT, REPORTED IN 323 ITR 397 (SC) IS NOT CORRECT. IN THAT CASE THE HONOURABLE SUPREME COURT WAS DEALING WITH BAD DEBTS MENTIONED IN SECTI ON 36(1)(VII)OF THE IT ACT WHEREIN AFTER THE AMENDMENT IT IS SUFFICIENT FO R THE ASSESSEE TO CLAIM BAD DEBTS UNDER SECTION 36(1)(III) OF THE IT ACT, 1 961 BY WRITING OFF THE AMOUNTS IN ITS BOOKS OF ACCOUNTS. FOR CLAIM OF BUS INESS LOSS OF ADVANCES GIVEN WHICH HAVE BECOME BAD, THE APPELLANT HAS TO P ROVE THAT THE ADVANCES HAVE INDEED BECOME BAD. IN THE INSTANT CASE THE DE TAILS OF THE ADVANCES GIVEN HAS NOT BEEN FURNISHED ONLY GENERAL EXPLANATI ON HAS BEEN GIVEN TO THE AO. THUS, THE CONDITION FOR THE CLAIM OF BUSIN ESS LOSS HAS NOT BEEN SATISFIED. IN VIEW OF THE ABOVE THE AO IS JUSTIFIED IN DISALLO WING THESE AMOUNTS. THE ADDITION MADE IS HENCE CONFIRMED. LD. CIT(A), HOWEVER, DELETED THE ADDITION OF RS.42 ,51,367/- BY HOLDING AS UNDER: 8.1 IT IS SEEN THAT THE AO HAD MADE ADDITION OF RS .42,51,367/- BEING BAD DEBTS WRITTEN OFF RELYING ON THE DECISION OF GUJARA T HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS P. LTD. VS. CIT RE PORTED IN (2006) 207 CTR 729. HOWEVER, IN THE RECENT JUDGMENT, THE HON BLE SUPREME COURT IN THE CASE OF TRF LIMITED VS. CIT (2010) 323 IT 397 ( SC) HAS HELD THAT FOR CLAIM OF BAD DEBTS, THE APPELLANT JUST NEEDS TO WRI TE OFF THE BOOKS OF ACCOUNTS. IT IS NOT NECESSARY FOR THE APPELLANT TO PROVE THAT DEBT HAD BECOME BAD. DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -5- IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE AO IS NOT JUSTIFIED AND THE SAME IS DELETED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS NOW IN APPEAL BEFORE US. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSE E REITERATED SUBMISSIONS MADE BEFORE THE CIT(A). WITH RESPECT TO ADVANCES WRITTE N OFF AMOUNTING TO RS.14,83,037/-, HE SUBMITTED THAT IN THE BUSINESS O F THE ASSESSEE, IT IS THE BUSINESS PRACTICE TO GIVE ADVANCES TO THE PARTIES TO SUPPLY ACS, WHICH WAS IN THE NATURE OF EARNEST MONEY IN RESPECT OF TENDERS, AND IT IS A NE CESSARY BUSINESS CUSTOM WHICH CANNOT BE FOREGONE. HE FURTHER RELIED ON THE DECI SIONS IN THE CASE OF CIT VS. ABDUL RAZAK & CO., (1982) 136 ITR 825 (GUJ), IN THE CASE OF COMMONWEALTH TRUST (INDIA) LTD. VS. CIT, (2000) 242 ITR 593 AND COMMISSIONER OF INCOME-TAX V. TRIVENI ENGINEERING AND INDUSTRIES LTD., 343 ITR 245. HE ALSO POINTED OUT THE LIST OF ADVANCES PLACED AT PAGE NO.48 AND 49 OF THE PAPER BOOK, IN SUPPORT OF HIS CONTENTION THAT THE DEPOSITS WERE TOWARDS EMD. WIT H RESPECT TO DEBIT BALANCES WRITTEN OFF AMOUNTING TO RS.30,48,835/-, HE SUBMITT ED THAT THE SAME WAS PAID FOR EXPENSES AGAINST WHICH INVOICES WERE NOT RECEIVED, AND WAS ALSO ON ACCOUNT OF WRONG ACCOUNTING. HE ALSO POINTED OUT TO LIST OF DETAILS OF BALANCES WRITTEN OFF PLACED AT PAGE NOS.50-51 OF THE PAPER BOOK. HE ALS O PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. RAO CONSTRUCTION P. LTD., (2013) 33 TAXMANN.COM 613 (GUJARAT). THE LEARNED DR, ON THE OTHER HAND , SUPPORTED THE ORDERS OF THE AO AND THE CIT(A). 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE DETAILS OF ADVANCES PLACED AT PAGE NOS.48- 49, IT IS SEEN THAT MAJORITY OF THE AMOUNTS ARE STATED TO BE TOWARDS EMDS. OF WHICH THE EARLIEST AMOUNT OUTSTANDING IS FROM THE YEAR 1997 AND THE LAST BEIN G OUTSTANDING FROM THE YEAR 2001. IT IS ALSO SEEN THAT THE LIST ALSO INCLUDES AN AMOUNT OF RS.7,31,425/- SHOWN AGAINST AMTREX EMPLOYEES WELFARE TRUST, FOR WHICH NO DETAILS HAVE BEEN DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -6- FURNISHED IN THE STATEMENT. AS FAR AS EMD DEPOSITS ARE CONCERNED, THE SUBMISSION OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY THE RE VENUE. FURTHER, RELYING ON THE DECISION CITED BY THE ASSESSEE IN THE CASE OF COMMO NWEALTH TRUST (INDIA) LTD. (SUPRA) AND ABDUL RAZAK & CO. (SUPRA), WE ARE OF TH E VIEW THAT THE AMOUNTS TOWARDS EMDS., WAS HAVING NEXUS WITH THE BUSINESS O F THE ASSESSEE, AND THEREFORE, THE SAME NEEDS TO BE ALLOWED. HOWEVER, WITH RESPEC T TO THE EMPLOYEES WELFARE TRUST, AMOUNTING TO RS.7,31,425/-, IN THE ABSENCE OF ANY DETAILS, WE ARE OF THE VIEW THAT THE SAME HAS RIGHTLY BEEN DISALLOWED BY T HE AO. WITH RESPECT TO THE BALANCE WRITTEN AMOUNT OF RS.30,48,835/-, FROM THE LIST PLACED AT PAGE NO.50-51 OF THE PAPER BOOK, IT IS SEEN THAT IT CONTAINED VARIOU S AMOUNTS WHICH ARE SHOWN TO BE NOT RECOVERABLE FROM THE PARTIES. HOWEVER, IT ALSO INCLUDES CERTAIN AMOUNTS LIKE PROVISION FOR GRATUITY, SALARY PAYABLE, PF PAYABLE, STAFF LOAN ETC. FROM WHICH THE FULL DETAILS THEREOF NOT PLACED BEFORE US CONSIDER ING TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT DISALLOWANCE IN THE PRESENT BE RESTRI CTED TO RS.1,00,000/- (RUPEES ONE LAKH) TO COVER SUCH AMOUNTS. WE DIRECT ACCORDI NGLY, AND THE GROUND NO.2 OF THE APPEAL ARE PARTLY ALLOWED. 7. THE GROUND NO.3 IS WITH RESPECT TO DISALLOWANCE OF DEDUCTION OF RS.46,247/- . DURING THE ASSESSMENT PROCEEDINGS, THE AO DISALLO WED RS.46,247/- WHICH WAS NOT ADDED BACK WHILE MAKING COMPUTATION BY THE ASSE SSEE. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE CARRIED THE MATTER B EFORE THE CIT(A). THE CIT(A) UPHELD THE DISALLOWANCE BY HOLDING AS UNDER: 9. DONATION IS NOT DIVERSION OF INCOME BUT APPLICA TION OF INCOME. HENCE PAYMENTS BY WAY OF DONATIONS ARE NOT ALLOWABL E AS DEDUCTION FROM THE BUSINESS INCOME. IN THE CASE OF MALAYALA MANOR MA CO. LTD., REPORTED IN (2006) 150 TAXMANN 505 (KER) HE HONBLE KERALA H IGH COURT HAS HELD THAT CONTRIBUTION MADE TO THE TRUST FOR REHABILITAT ION OF EARTH QUAKE VICTIMS WAS NOT EXPENDITURE LAID OUT WHOLLY, NECESSARILY AN D EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND WAS NOT ALLOWABLE AS DEDUCT ION. DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -7- IN VIEW OF THE ABOVE THE AO WAS JUSTIFIED IN DISAL LOWING THE DONATION MADE OF RS.46,247/-. THE SAME IS CONFIRMED. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS NOW IN APPEAL BEFORE US. BEFORE US, THE LEARNED AR SUBMITTED AND POINT ED OUT TO THE BREAK-UP OF THE DONATION OF RS.46,247/- AT PAGE NO.14 OF THE PAPER BOOK. FROM THE DETAILS, HE SUBMITTED THAT MAJOR AMOUNT OF RS.42,320/- WAS PAID TO RED CROSS SOCIETY AND WAS GIVEN TO THE SOCIETY TO COMPLY WITH THE SOCIAL RESPONSIBILITY TOWARDS SOCIETY AND WAS NOT IN THE NATURE OF DONATION. WITH RESPEC T TO OTHER DONATIONS LISTED OUT AT PAGE NO.14OF THE PB, HE SUBMITTED THAT THE PAYMENTS WERE MADE ON ACCOUNT OF BUSINESS EXPEDIENCY AND SOCIAL RESPONSIBILITY, AND HENCE ALLOWABLE AS DEDUCTION. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE OR DER OF THE AO AND THE CIT(A). 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE DETAILS OF THE DONATION GIVEN AT PAGE NO.14 OF THE PAPER BOOK, IT IS SEEN THAT THE MAJOR AMOUNT OF RS.42,320/- IS DONATION TO THE RED CROSS SOCIETY, AND THEREFORE, CLAIMED AS BUSINESS EXPENDI TURE. THE AFORESAID SUBMISSION OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY THE RE VENUE BY BRINGING ANY MATERIAL ON RECORD. WE, THEREFORE, ARE OF THE VIEW THAT SAM E NEEDS TO BE ALLOWED. 10. WITH RESPECT TO OTHER DONATIONS, CONSIDERING ME AGERNESS/SMALLNESS OF THE AMOUNTS, AGGREGATING TO RS.3900/-, AND CONSIDERING THE PECULIAR FACTS OF THE CASE WE CONSIDER THAT THE SAME BE ALLOWED. THUS, WE ALL OW THIS GROUND OF THE APPEAL OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE BEING ITA NO.216/AHD/2011 IS PARTLY ALLOWED. ITA NO.182/AHD/2011 (ASSTT.YEAR 2005-2006 : REVENUE S APPEAL): DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -8- 12. FIRST GROUND IS WITH RESPECT TO DELETION OF RS. 16,64,667/- ON ACCOUNT OF ADJUSTMENT IN RESPECT OF INTERNATIONAL TRANSACTION OF ROYALTY PAYMENT. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE ASSESSEE HAD INTERNATIONAL TRANSACTION WITH ASSOCIA TE ENTERPRISE (AE FOR SHORT) AS DEFINED UNDER SECTION 92B OF THE INCOME TAX ACT IN RESPECT OF PURCHASE/SALE OF COMPRESSOR, VALVES, COPPER TUBES, REMOTE PARTS ETC. REFERENCE WAS MADE TO TPO. TPO VIDE ORDER PASSED U/S.92CA(3) NOTED THAT THE AS SESSEE WAS CHARGED ROYALTY BY AE AT RATE HIGHER THAN WHAT HAS BEEN CHARGED TO OTH ER GROUP ENTITIES. THE TPO, THEREFORE, HELD THAT ARMS LENGTH RATE FOR PAYMENT OF ROYALTY SHOULD BE AT 3% INSTEAD OF 3.75% CHARGED FROM THE ASSESSEE. HE ACC ORDINGLY SUGGESTED AN ADJUSTMENT OF RS.16,64,667/- BEING THE PAYMENT FOR ARMS LENGTH PRICE (ALP FOR SHORT) RELATING TO THE ROYALTY. BASED ON THE ORD ER OF TPO, AO MADE ADDITION OF RS.16,64,667/-. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A), AND THE CIT(A) FOLLOWING HIS PREDECE SSORS ORDER FOR A.Y.2004-05, DELETED THE ADDITION BY HOLDING AS UNDER: 4.. IT IS SEEN THAT IN THIS CASE, ON IDENTICAL ISSUE AP PEAL HAS BEEN DECIDED BY THE CIT(A)-VIII, FOR A.Y.2004-05 VIDE APPEAL ORDER NO.C IT(A)-VIII/DC- 4/347/2006-07 DATED 19-3-2008 FOLLOWING THE EARLIER YEARS DECISION AND DELETED THE ADDITION MADE. SINCE THE FACTS ARE SIM ILAR FOR THIS YEAR, AFTER CONSIDERING THE ORDER OF THE ADDL.CIT, AS ALSO SUBM ISSIONS/EVIDENCES FILED AND FOLLOWING THE ORDER OF CIT(A)-VIII FOR A.Y.2004 -05, THE DISALLOWANCE MADE FOR RS.16,64,667/- BEING ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTION IS DIRECTED TO BE DELETED. 14. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE IS NOW IN APPEAL BEFORE US. BEFORE US, AT THE OUTSET, THE LEARNED AR SUBMI TTED THAT SIMILAR DISALLOWANCE WAS MADE IN A.Y.2004-05 AND IN APPEAL, THE HONBLE ITAT, AHMEDABAD BENCH IN ITA NO.2363/AHD/2008 ORDER DATED 24.9.2013 HAS DELE TED THE DISALLOWANCE MADE BY THE AO. HE PLACED ON RECORD COPY OF THE AFORESA ID ORDER AND POINTED TO PARA 51 DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -9- AT PAGE NO.28 OF THE ORDER. HE FURTHER SUBMITTED T HAT SINCE THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARL IER YEARS, THE ORDER OF THE CIT(A) BE UPHELD. THE LEARNED DR, ON THE OTHER HAND RELIE D ON THE ORDER OF THE AO. 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT FACTS OF THE CASE OF THE ASSESSEE IN THIS YEAR ARE IDENTI CAL TO THE EARLIER YEARS, AND HE HAD FOLLOWED THE DECISION OF HIS PREDECESSOR. WE FURTH ER FIND THAT IN ITA NO.2363/AHD/2008 FOR A.Y.2004-05, SIMILAR ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF ITAT IN FAVOUR OF THE ASSESEE AND THE ADDI TION WAS DELETED FOLLOWING THE ORDER IN REVENUES APPEAL FOR A.Y.2003-04 IN ITA NO .2281/AHD/2007, WHILE DECIDING THE REVENUES APPEAL, THE ISSUE WAS DECIDE D BY HOLDING AS UNDER: 36. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD, AND GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW. WE FIND THAT THE ISSUE REGARDING PAYMENT OF ROYALTY AT THE RATE OF 3.75% TO THE AE BY THE ASSESSEE, AS AGAINST THE ROYALTY AT THE RATE OF 3% BY OTHER GROUP ENTITIES, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE AO THAT TH E ROYALTY AT 3.75% WAS APPLIED AFTER REDUCING VARIOUS EXPENSES FROM EX-FAC TORY SALE VALUE OF THE CONCERNED PRODUCTS. IT WAS ALSO EXPLAINED BEFORE TH E LEARNED CIT(A) THAT IF THE EFFECTIVE RATE IS CONSIDERED, THEN THE EFFECTIV E RATE OF ROYALTY IS LESS THAN THE ROYALTY PAID BY OTHER AES TO HITACHI LIMITED I. E. PARENT COMPANY. IN OUR CONSIDERED OPINION, ONLY STATED RATE IS NOT DEC ISIVE AND EFFECTIVE RATE HAS TO BE CONSIDERED, AND WHEN THE AMOUNT OF ROYALT Y PAID BY THE ASSESSEE IS CONSIDERED WITH EX-FACTORY SALE VALUE, WITHOUT D EDUCTING VARIOUS EXPENSES, SUCH AS DEALER COMMISSION, SPECIAL COMMIS SION, WARRANTY ETC., AS HAS BEEN NOTED BY THE LEARNED CIT(A) AT PAGE NO.4 O F HIS ORDER, THEN THE EFFECTIVE RATE WORKED OUT IS ONLY 2.3% ON SALE, AS AGAINST 3% PAID BY OTHER GROUP ENTITIES. THIS FINDING OF THE FACT GIVEN BY L EARNED 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 O RDER OF THE LEARNED CIT(A), AND ACCORDINGLY, THE GROUND NO.5 OF THE REVENUE IS REJECTED. DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -10- SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTI CAL TO EARLIER YEARS AS ADMITTED BY BOTH THE PARTIES, WE FIND NO REASON TO INTERFERE WI TH THE ORDER OF THE CIT(A) ON THIS ISSUE, AND THUS, THIS GROUND OF THE REVENUE IS DISM ISSED. 16. THE GROUND NO.2 OF THE APPEAL OF THE REVENUE IS WITH RESPECT TO DISALLOWANCE OF RS.1,33,36,786/- ON ACCOUNT OF PROV ISION OF OBSOLESCENCE OF INVENTORY. 17. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE ASSESSEE HAS DEBITED PROVISIONS FOR SLOW MOVING/OBS OLETE STOCK AMOUNTING TO RS.1,33,36,786/-. THE ASSESSEE WAS ASKED TO SHOW C AUSE AS TO WHY THE SAME SHOULD NOT BE DISALLOWED BEING PROVISION. THE ASSE SSEE, INTER ALIA , SUBMITTED THAT NON-MOVING ITEMS INCLUDED THE INVENTORY, WHICH WERE LYING FOR LONG TIME IN THE STOCK, AND WERE VALUED AT COST OR MARKET VALUE, WH ICHEVER IS LESS, WHICH IS AS PER THE METHOD OF VALUATION REGULARLY FOLLOWED BY THE A SSESSEE-COMPANY. IT WAS FURTHER SUBMITTED THAT THE ITEMS OF INVENTORY HAVE BECOME OBSOLETE AND THE VALUE OF STOCK WAS REDUCED BELOW ITS COST, AND THEREFORE, CONSIDERING THE REDUCTION IN MARKET VALUE OF INVENTORY, A PROVISION WAS MADE. T HE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO, AS HE WAS OF TH E VIEW THAT THE PROVISION MADE BY THE ASSESSEE WAS NOT FOR ANY ASCERTAINED LIABILI TY BUT HAS MADE THE PROVISION FOR SLOW MOVING/OBSOLETE STOCK AND THAT THE PROVISION W AS CONTINGENT IN NATURE. HE ACCORDINGLY, DISALLOWED THE CLAIM OF THE ASSESSEE. 18. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A), FOLLOWING ORDER OF HIS PREDECE SSOR FOR A.Y.2004-05, DELETED THE ADDITION BY HOLDING AS UNDER: 5. ON IDENTICAL ISSUE APPEAL HAS BEEN DECIDED BY THE CIT(A)-VIII FOR A.Y.2004-05 VIDE APPEAL ORDER NO.CIT(A)-VIII/DC-4/3 47/2006-07 DATED DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -11- 19.3.2008 FOLLOWING THE EARLIER YEARS DECISION AND ALLOWED THE CLAIM OF THE APPELLANT. SINCE THE FACTS ARE SIMILAR FOR THIS YE AR, AFTER CONSIDERING THE ORDER OF THE ADDL. CIT, AS ALSO SUBMISSIONS/EVIDENC ES FILED AND FOLLOWING THE ORDER OF THE CIT(A)-VIII FOR A.Y.2004-05, THE A O IS DIRECTED TO ALLOW THE CLAIM OF THE FOR DEDUCTION ON ACCOUNT OF PROVIS ION FOR OBSOLESCENCE OF INVENTORY SUBJECT TO FURNISHING OF COMPLETE PARTICU LARS IN THAT REGARD BY THE APPELLANT. 19. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE IS IN APPEAL BEFORE US. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF TH E AO, ON THE OTHER HAND, THE LEARNED AR REITERATED THE SUBMISSIONS BEFORE THE CI T(A). HE FURTHER SUBMITTED THAT SIMILAR DISALLOWANCE WAS MADE IN A.Y.2004-05 A ND IN APPEAL, THE HONBLE ITAT, AHMEDABAD BENCH IN ITA NO.2363/AHD/2008 ORDER DATED 24.9.2013 HAS DELETED THE DISALLOWANCE MADE BY THE AO. HE PLACED ON RECORD COPY OF THE AFORESAID ORDER AND POINTED TO PARA 51 AT PAGE NO.2 8 OF THE ORDER. HE FURTHER SUBMITTED THAT SINCE THE FACTS OF THE CASE IN THE Y EAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS, THE ORDER OF THE CIT(A) BE U PHELD. 20. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT FACTS OF THE CASE OF THE ASSESSEE IN THE YEAR ARE IDENTIC AL TO THE EARLIER YEARS, AND HE HAD FOLLOWED THE DECISION OF HIS PREDECESSOR. WE FURTH ER FIND THAT WHILE DECIDING THE REVENUES APPEAL IN ITA NO.2363/AHD/2008 AND OTHERS (ITA NO.2881/AHD/2007 FOR A.Y.2003-04), SIMILAR ISSUE WAS DECIDED BY THE ITAT IN FAVOUR OF THE ASSESEE AND THE ADDITION WAS DELETED AS UNDER: 33. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY THE LEARNED CIT(A) ON THIS BASIS THAT TH E ASSESSEE HAS CLAIMED THIS AMOUNT AS PER THE NORMAL PRACTICE OF VALUATION OF CLOSING STOCK AS PER THE AUDITED ACCOUNTS AND IT IS AN OMISSION ON THE P ART OF THE AO NOT TO HAVE DEALT WITH THIS ISSUE. THE LD.CIT(A) HAS DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE SUBJECT TO THE ASSESSEE FURNISHING THE COMPLETE PARTICULARS IN THIS REGARD, IF NECESSARY, WITH ADEQUATE PROOF. HENCE, IN OUR CONSIDERED OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A) ON THIS DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -12- ISSUE, BECAUSE HE HAS TAKEN PROPER CARE TO ENSURE T HAT ALL THE DETAILS AND EVIDENCES ARE OBTAINED AND ARE EXAMINED BY THE AO A ND ONLY THEREAFTER, DEDUCTION IS TO BE ALLOWED, IF THE ASSESSEE IS ABLE TO ESTABLISH BEFORE THE AO THAT SUCH WRITE OFF IN RESPECT OF PROVISION FOR OBS OLESCENCE OF INVENTORY CLAIMED BY THE ASSESSEE IS IN LINE WITH THE ACCEPTE D METHOD OF VALUATION OF STOCK, I.E. AT COST OR MARKET PRICE, WHICHEVER IS L OWER. HENCE, THIS GROUND NO. 4 OF THE REVENUE IS ALSO REJECTED. 21. SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE ID ENTICAL TO EARLIER YEARS AS CLAIMED BY BOTH THE PARTIES, WE FIND NO REASON TO I NTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE, AND THUS, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 22. THE GROUND NO.3 OF THE REVENUES APPEAL IS WITH REGARD TO DELETION OF DISALLOWANCE ON ACCOUNT OF WARRANTY EXPENSES OF RS. 1,55,65,120/- . 23. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE ASSESSEE HAS DEBITED SALES AND WARRANTY COMMISSION AMOUNTING TO RS.6,40,41,310/- WHICH INCLUDED FIVE YEARS WARRANTY PROVISION ON COMPRESSORS AMOUNTING TO RS.76,12,205/- AND THE WARRANTY EXPENS ES AMOUNTING TO RS.5,61,70,715/-. THE AO NOTICED THAT THE WARRANTY FOR AC WAS FOR ONE YEAR AND FOR COMPRESSORS IT WAS FIVE YEARS FROM THE DATE OF COMMISSIONING OF THE ACS., AND THUS, THE PERIOD OF WARRANTY EXPENDITURE EXTENDED W ELL BEYOND THE ACCOUNTING PERIOD. THE AO, THEREFORE, WAS OF THE VIEW THAT S INCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE EXPENSES INCUR RED DURING OR RELATED TO THE RELEVANT ACCOUNTING PERIOD SHOULD ONLY BE ALLOWED. IN THE ABSENCE OF THE DETAILED WORKING OF ACTUAL WARRANTY EXPENSES INCURRED DURING THE YEAR AND FOR SUBSEQUENT YEARS BEING NOT AVAILABLE, THE AO CONSIDERED THE WA RRANTY PERIOD FOR ACS. AS THREE MONTHS FOR CALCULATING THE PROVISION FOR WARRANTY E XPENSES PERTAINING TO THE SUBSEQUENT YEARS, AND IN THE CASE OF COMPRESSOR, TH E WARRANTY EXPENSE WAS DIVIDED INTO FIVE EQUAL PARTS. THE AO ACCORDINGLY DISALLO WED WARRANTY EXPENSES OF RS.1,55,65,120/-. DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -13- 24. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A), AND THE CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE ORDER OF HIS PREDECESSOR DATED 19.3.2008 FOR THE ASSTT.YEAR 2004 -05 IN THE ASSESSEES CASE . THE REVENUE BEING AGGRIEVED, IS NOW IN APPEAL BEFOR E US. 25. BEFORE US, THE LEARNED DR RELIED ON THE ORDER O F THE AO, ON THE OTHER HAND, THE LEARNED AR REITERATED THE SUBMISSIONS BEFORE TH E CIT(A). HE FURTHER SUBMITTED THAT SIMILAR DISALLOWANCE WAS MADE IN A.Y .2004-05 AND IN APPEAL, THE HONBLE ITAT, AHMEDABAD BENCH IN ITA NO.2361/AHD/20 08 ORDER DATED 24.9.2013 HAS RESTORED THIS MATTER BACK TO THE FILE OF THE LD. CIT(A) FOR FRESH DECISIONS, IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF ROTORK CONTROL INDIA P. LTD. CIT, 314 ITR 62 (SC). HE PLA CED ON RECORD COPY OF THE AFORESAID ORDER AND POINTED TO PARA 5 AT PAGE NO.3 OF THE ORDER. HE, THEREFORE, SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FI LE OF CIT(A) WITH SUITABLE DIRECTIONS. 26. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT FACTS OF THE CASE OF THE ASSESSEE IN THE YEAR ARE IDENTIC AL TO THE EARLIER YEARS, AND HE HAD FOLLOWED THE DECISION OF HIS PREDECESSOR. WE FURTH ER FIND THAT IN ITA NO.2361/AHD/2008 FOR A.Y.2004-05, SIMILAR ISSUE WAS BEFORE THE CO-ORDINATE BENCH OF ITAT, AND THE CO-ORDINATE BENCH OF ITAT AF TER DETAILED DISCUSSION AND FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ROTORK CONTROL INDIA P. LTD., (SUPRA) SET ASIDE AND RESTORED THE I SSUE BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE SAME AFRESH. THE RELEVANT PO RTION OF THE ABOVE ITAT ORDER IS REPRODUCED BELOW: 5. REGARDING GROUND NO.2, WE FIND THAT THIS ISSUE WAS DECIDED BY THE LD.CIT(A) ON THIS BASIS THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -14- THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF IBM INDIA LTD. VS. CIT, 290 ITR 183 (AT) (BANG). B Y NOW, THIS ISSUE IS ALSO COVERED BY THE JUDGMENT OF THE HONBLE APEX CO URT RENDERED IN THE CASE OF ROTORK CONTROLS INDIA P. LTD V. COMMISSIONE R OF INCOME-TAX, 314 ITR 62 (SC). AS PER THESE JUDGMENTS OF THE HONBL E APEX COURT RENDERED IN THE CASE OF ROTORK CONTROLS INDIA P. LTD (SUPRA) , IT WAS HELD THAT THE PROVISION MADE FOR INCURRING WARRANTY EXPENSES IS A LLOWABLE ON PROVISION BASIS ALSO, IF SUCH PROVISION IS MADE BY THE ASSESS EE ON SOME SCIENTIFIC BASIS. BEFORE US, THE ASSESSEE HAS NOT FURNISHED D ETAILS REGARDING THE BASIS OF THIS PROVISION. AS PER THE JUDGMENT OF THE HON BLE APEX COURT, IT WAS HELD THAT THE ASSESSEE-COMPANY SHOULD SCRUTINISE TH E HISTORICAL TREND OF WARRANTY PROVISION MADE AND THE ACTUAL EXPENSES INC URRED AGAINST IT, AND ON THIS BASIS, A SENSIBLE ESTIMATE SHOULD BE MADE. IN THE PRESENT CASE, WE FEEL THAT THE EXPENSES PROVIDED FOR BY THE ASSESSEE IN RESPECT OF WARRANTY SHOULD BE ALLOWED TO THE EXTENT THE PROVISION IS MA DE ON A SCIENTIFIC BASIS, AS HELD BY THE HONBLE APEX COURT IN THIS JUDGMENT RENDERED IN THE CASE OF ROTORK CONTROLS INDIA P. LTD. (SUPRA). SINCE THESE DETAILS ARE NOT AVAILABLE BEFORE US, AND IT WAS NOT EXAMINED BY THE AUTHORITY BELOW ALSO, WE FEEL IT PROPER TO RESTORE THIS MATTER BACK TO THE FILE OF T HE LEARNED CIT(A) FOR FRESH DECISION AFTER EXAMINING THE DETAILS, ON THE BASIS OF WHICH, THE PROVISION HAS BEEN MADE BY THE ASSESSEE, AND IF IT IS FOUND T HAT SUCH PROVISION WAS MADE ON SCIENTIFIC BASIS, AS HAS BEEN APPROVED BY T HE HONBLE APEX COURT, IN THE JUDGEMENT RENDERED IN THE CASE OF ROTORK CON TROL INDIA P. LTD. (SUPRA), THEN NO DISALLOWANCE SHOULD BE MADE OUT OF THIS PROVISION IN RESPECT OF WARRANTY EXPENSES. BUT IF IT IS FOUND T HAT THE PROVISION IS EXCESSIVE, THEN SUCH EXCESS PROVISION, IF ANY, SHOU LD BE DISALLOWED. WITH THESE OBSERVATIONS, WE RESTORE THIS MATTER BACK TO THE FILE OF THE LD.CIT(A) FOR FRESH DECISION. THE GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSE. 27. SINCE IT IS ADMITTED BY BOTH THE PARTIES THAT T HE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS , WE RESPECTFULLY FOLLOWING THE DECISION FOR A.Y.2004-5 AND WITH SIMILAR DIRECTIONS RESTORE THE ISSUE OF WARRANTY EXPENSES FOR A.Y.2005-06 TO THE FILE OF THE LD.CIT( A) FOR DECISION AFRESH. NEEDLESS TO STATE THAT CIT(A) SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. THUS, THIS GROUND OF REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES. 28. IN THE RESULT, THE ITA NO.182/AHD/2011 OF THE R EVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -15- ITA NO.1136/AHD/2011 (A.Y.2006-2007 : REVENUES APP EAL) 30. THE FOLLOWING THREE GROUNDS ARE RAISED IN THIS APPEAL OF THE REVENUE: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.22,58,337/- ON ACCOUNT OF ADJUSTMENT IN RESPE CT OF INTERNATIONAL TRANSACTION OF ROYALTY PAYMENT, WITHOUT PROPERLY AP PRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 2 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE OF RS.1,85,59,435/- MADE BY THE AO ON ACCOUNT OF PROVISION FOR OBSOLESCENCE OF INVENTORY, WITHOUT PROPERLY APP RECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 3 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ISALLOWANCE OF WARRANTY EXPENSES OF RS.1,55,65,120/- MADE BY THE A O WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 31. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE A BOVE THREE ISSUES ARE SIMILAR TO ISSUES RAISED IN THE APPEAL OF THE REVENUE IN IT A NO.182/AHD/2011 FOR A.Y.2005-2006, AND THEREFORE, THE ABOVE GROUNDS MAY BE DECIDED ACCORDINGLY. 32. AFTER HEARING THE PARTIES, WE FIND THAT GROUNDS RAISED IN THIS APPEAL ARE IDENTICAL TO THE GROUNDS RAISED IN THE APPEAL OF TH E REVENUE FOR A.Y.2005-2006, AND FOR THE REASONS RECORDED IN THE APPEAL OF THE R EVENUE IN ITA NO.182/AHD/2011 FOR A.Y.2005-2006 IN THE FOREGOING PARAS OF THIS ORDER, WE DECIDE THE ISSUE ACCORDINGLY. 33. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.1136/AHD/2011 FOR A.Y.2006-2007 IS PARTLY ALLOWED FOR STATISTICAL PUR POSE. CO NO.148/AHD/2011 (A.Y.2006-2007 : ASSESSEES CO) DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -16- 34. THE FIRST GROUND OF THE CO OF THE ASSESSEE IS A S UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE DEPARTMENTAL AUTHORITIES ERRED IN REJECTING ASSESSEES CLAIM FOR DEDUCTION OF RS.1,58,529/- FOR THE DEBIT BALANCES WRITTEN OFF FO R THE SUMS WHICH WERE DUE FROM DIFFERENT PARTIES FOR AND ON CONNECTION WITH T HE ASSESSEES BUSINESS IN SPITE OF THE FACT THAT THE CLAIM WAS ALLOWABLE U/S. 28 OR 37. 35. THE AO, DURING THE COURSE OF ASSESSMENT, FOUND THAT THE ASSESSEE ALSO HAS WRITTEN OFF ADVANCES AMOUNTING TO RS.1,58,529/- . THIS ACCORDING TO THE AO WAS NOT ALLOWABLE AS THE ASSESSEE HAS NOT JUSTIFIED AS TO HOW THE DEBTS HAS BECOME BAD, HENCE, THE AO ADDED BACK TO THE INCOME OF THE ASSES SEE. THIS ACTION OF THE AO WAS CHALLENGED BEFORE THE CIT(A), WHO ALSO CONFIRME D THE SAME BY HOLDING THAT THE AMOUNTS OF RS.1,58,529/- REPRESENTING ADVANCE G IVEN TO DIFFERENT PARTIES WAS NOT ARISING OUT OF SALE, AND ACCORDINGLY, IT WAS NO T IN THE NATURE OF BAD DEBTS. AGGRIEVED ASSESSEE IS NOW BEFORE US. 36. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED CLAIM OF THE ASSESSEE IS ALLOWABLE UNDER SECTION 28 OR 37 AN D THAT IT IS COMMON PRACTICE IN THE BUSINESS THAT ANY SUMS EITHER NOT RECOVERED OR CEASED TO BE RECOVERABLE, ARE DEDUCTIBLE EXPENDITURE IN THE COMPUTATION OF BUSINE SS INCOME, HENCE THE CLAIM OF THE ASSESSEE BE ALLOWED. ON THE OTHER HAND, THE LE ARNED DR RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 37. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE REVENUE AUTHORITIES HA VE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS.1,58,529/- FOR THE DEB IT BALANCES WRITTEN OFF WHICH WERE DUE FROM DIFFERENT PARTIES, ON THE GROUND THAT THE SAME WERE NOT ARISING OUT OF THE SALES MADE BY THE ASSESSEE. WE FIND THAT TH ERE IS NO DISPUTE TO THE FACT THAT THE LOSS OF RS.1,58,529/- INCURRED DURING THE COURS E OF BUSINESS AND THAT THE ASSESSEE HAS WRITTEN OFF THE SAID AMOUNT FROM ITS A CCOUNTS, AS THE SAME BECAME DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -17- IRRECOVERABLE. THE HONBLE APEX COURT IN THE CASE OF T.R.F. LTD. VS. CIT, 323 ITR 397 (SC) HELD THAT IN ORDER TO OBTAIN A DEDUCTI ON IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT TH E DEBT, IN FACT, HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THIS BEING SO IN THE CAS E OF ASSESSEE, WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW ON THIS ISSUE, AND ACCORDI NGLY, THIS GROUND OF THE CO OF THE ASSESSEE IS ALLOWED. 38. THE GROUND NO.2 OF THE CO OF THE ASSESSEE IS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THIS HONBLE TRIBUNAL MAY BE PLEASED O DIRECT THE AO TO PROCESS AND CONSIDER ON MERITS THE ASSESSEES CLAIM MADE IN ITS LETTER DATED 16.2. 2011 ADDRESSED TO THE AO FOR CLAIMING FURTHER DEDUCTION RS.1,21,39,516 IN PU RSUANCE OF THE PROVISIO TO SECTION 40(A)(IA) AS AMENDED RETROSPECTIVE WITH EFFECT FROM 1.4.2005 BY THE FINANCE ACT, 2008. 39. THE ASSESSEE IN ITS WRITTEN SUBMISSIONS STATED THAT AS PER THE PROVISO TO SECTION 40(A)(IA) THE ASSESSEE CLAIMED DEDUCTION OF RS.7,26,31,338/- IN THE RETURN FOR A.Y.2006-07 FOR THE SUMS OF EXPENDITURE PERTAIN ING TO A.Y.2005-06 ON WHICH TDS WAS EFFECTED AND PAID DURING THE TIME AVAILABLE FOR A.Y.2006-07. THUS, OUT OF DISALLOWANCE EFFECTED A SUM OF RS.9,09,94,234/- DURING A.Y.2005-06 A SUM OF RS.7,26,31,338/- WAS CLAIMED AS DEDUCTION IN A.Y.20 06-07. IT IS SUBMITTED THAT ACTUALLY THERE WAS A FURTHER SUM OF RS.1,21,39,516 WHICH HAD BECOME DEDUCTIBLE BUT COULD NOT BE CLAIMED DURING THE ASSESSMENT PROC EEDINGS BEFORE THE AO. HOWEVER, THE CLAIM FOR THE SAME WAS MADE VIDE ASSES SEES LETTER DATED 16.2.2011 ADDRESSED TO THE AO, AND COPY OF WHICH IS FILED IN THE COMPILATION BEFORE THE TRIBUNAL. IN THE MEANWHILE, THE CIT(A) PASSED APPE LLATE ORDER DATED 20.1.2011 AND THE CLAIM OF THE ASSESSEE COULD NOT BE CONSIDER ED BY THE CIT(A). THE ASSESSEE, THEREFORE, SUBMITTED THAT THE TRIBUNAL TO ISSUE DIRECTION TO THE DEPARTMENT TO CONSIDER THE CLAIM OF THE ASSESSEE FO R FURTHER DEDUCTION OF DCIT VS. HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. ITA NO.182, 216 AND 1137/AHD/2011 WITH CO -18- RS.1,21,39,516. THE LEARNED DR HAS NOT OBJECTION IF THE ISSUE IS RESTORED THE FILE OF THE AO FOR CONSIDERATION OF THE ASSESSEES CLAIM . 40. AFTER HEARING BOTH THE SIDES AND CONSIDERING MA TERIAL AVAILABLE ON RECORD, WE FIND THAT THIS CLAIM OF THE ASSESSEE FOR FURTHER DEDUCTION OF RS.1,21,39,516/- WAS NOT BEFORE THE CIT(A) OR THE AO, BEFORE PASSING THEIR RESPECTIVE ORDERS. THEREFORE, WE DEEM IT FIT TO SEND THIS ISSUE TO THE FILE OF THE AO FOR CONSIDERING ADMISSIBILITY OR OTHERWISE OF THE CLAIM OF THE ASSE SSEE AS PER THE LAW. NEEDLESS TO SAY, THE ASSESSEE SHALL FURNISH ALL THE DETAILS, AS REQUIRED BY THE AO FOR DETERMINATION OF THE CLAIM OF THE ASSESSEE, AND ACC ORDINGLY, THIS GROUND OF THE CO OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 41. THUS, THE CO OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSE. 42. IN THE RESULT, THE APPEALS OF THE ASSESSEE BEIN G ITA NO.216/AHD/2011 IS PARTLY ALLOWED, THE ITA NO.182 AND 1136/AHD/2011 OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE, AND THE CO OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( % % % % /KUL BHARAT) ' ' ' ' /JUDICIAL MEMBER ( / ANIL CHATURVEDI) ! ' ! ' ! ' ! ' /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD