Hitachi Home & Life Solutions(I) Limited, Ahmedabad V. The Addl.CIT., Range-4, Ahmedabad

ITA 2010/AHD/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1327 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 25-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Depreciation; Transfer pricing; International transaction; Retrospective amendment; Bad and doubtful debts; Revised return
• Section: 143(3); 92B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. AHMEDABAD PAN: AABCA2392K (APPELLANT) VS THE DCIT, CIRCLE - 4, AHMEDABAD (RESPONDENT) THE DCIT, CI RCLE - 4, AHMEDABAD (APPELLANT) VS HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. AHMEDABAD PAN: AABCA2392K (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: SHRI S.N. SOPARKAR DATE OF HEARING : 26 - 06 - 2 018 DATE OF PRONOUNCEMENT : 29 - 08 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO APPEALS FILED BY ASSESSEE AND REVENUE FOR A.Y. 2007 - 08 , AR ISE FROM ORDER OF THE CIT(A) - VIII , AHMEDABAD DATED 2 3 - 06 - 2011 , IN I T A NO . 2010 / A HD/20 11 A SSESSMENT YEAR 2007 - 08 ITA NO. 2119/AHD/2011 ASSESSMENT YEAR 2007 - 08 I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 2 PROCEEDINGS UNDER SECTION 143(3) R.W.S. 143C(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS. 22,90,495/ - ON ACCOUNT OF UPWARD ADJUSTMENT OF INTERNATIONAL TRANSACTION IN RESPECT OF ROYALTY PAYMENT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS. 31,91,000/ - ON ACCOUNT OF PROVISION FOR SLOW MOVING/OBSOLETE STOCK WITHOUT APPRECIATING FACT THAT EXPENDITURE CLAIMED WAS ON ADHOC BASIS AND NOT ASCERTAINABLE . 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,81,10,000/ - MADE BY THE AO ON ACCOUNT OF PROVISION FOR WARRANTIES WITHOUT APPRECIATING FACTS THAT THIS AMOUNT IS A PROVISION AND A CONTINGENT, UNASCERTAINED AND NON - CRYS TALLIZED LIABILITY. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW DEDUCTION OF RS. 7,35,640/ - ON WHICH TDS WAS DEDUCTED IN A.Y. 2007 - 08 AND RS. 52,40,669/ - ON WHICH PROVISION WAS REVERSED IN A.Y. 2007 - 08 WITHOUT APPRECIATING THE FAC T THAT AN ADDITIONAL CLAIMS, CAN BE MADE ONLY BY FILING REVISED RETURNS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 3 . THE BRIEF FACT OF THE CASE IS THAT T HE ASSESSEE COMPANY HAD FILED RETURN OF INCOME ON 30 TH OCTOBER, 2007 DECLARING INCOME AT RS. 17,37,74,366/ - AFTER ADJUSTI NG CARRY FORWARD LOSSES AND DEPRECIATION TOTAL INCOME WAS SHOWN AT RS. NIL. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN AIR CONDITIONERS , WASHING MACHINES AND REGENERATORS. THE ASSESSEE HAS PAID TAXES AS PER THE PROVISI ON OF SECTION 11 5JB OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 1 43(2) ON 28 TH AUGUST, 2008 . F URTHER FACTS OF THE CASE ARE DISCUSSED UNDER THE DIFFERENT GROUND S OF APPEAL FILED BY THE REVENUE AND THE ASSESSEE . GROUND NO. 1 (DELETING ADDITION OF RS. 22,90,495/ - ON ACCOUNT OF INTERNATIONAL TRANSACTION IN RESPECT OF ROYALTY PAYMENT) 4. DURING ASSESSMENT T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTERPRISE AS DEFINED U/S. 92B OF THE ACT IN RESPECT OF PURCHASE/SALE OF VARIOUS ITEMS. ACCORDINGLY , THE CASE WAS REFERRED TO TPO FOR DETERMINATION O F ARMS LENGTH PRICE IN RESPECT OF TRANSACTIONS WITH ASSOCIATED ENTERPRISES. THEREAFTER, AN ORDER U/S. 92CA(3) OF THE I NCOME TAX ACT, I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 3 1961 WAS PASSED BY TPO WHEREIN HE HA D COMPUTED UPWARD ADJUSTMENT O F INTERNATIONAL TRANSACTIONS ON ACCOUNT OF ROYALTY TO THE AMOUNT OF RS. 22 , 90 , 495/ - . CONSEQUENTLY AN ADDITION ON ACCOUNT OF UPWARD ADJUSTMENT I N INTERNATIONAL TRANSACTIONS AM OUNTING TO RS. 22 , 90 , 495/ - WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) HA D DELETED THE ADDITION STATING THAT AN IDENTICAL ISSUE WITH REGARD TO PAYMENT OF ROYALTY WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A) FOR ASSESSMENT YEAR 2005 - 06 AND 2006 - 07, THEREFORE, FOLLOWING THE S AME THE ADDITION WAS DELETED. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSING OFFICER HAS MADE UPWARD ADJUSTMENT WITH REFERENCE TO INTERNATIONAL TRANSACTION U/S. 92B IN RESPECT OF ROYALTY PAYMENT TO ASSOCIATED ENTERPRISE AS PER ORDER PASSED U/S. 92CA(3) OF THE IT ACT. IN RESPECT OF PAYMENT OF ROYALTY BY THE ASSESS TO THE ASSOCIATE CONCERNS T HE TPO HAS A PPLIED THE RATE OF ROYALTY PAYMENT 3% IN RESPECT OF COMPUTATION OF ROYALTY RATE AS AGAINST RATE OF 3.75% ADOPTED BY THE ASSESSEE. WE FIND T HAT AN IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE ITSELF WAS DECIDED BY THE CO - ORDINATE BENCH OF THE ITAT VIDE ITA NO. 182 , 216 & 1137 /AHD/2011 AGAINST THE REVENUE PERTAINING TO ASSESSMENT YEAR 2005 - 06 AND 2006 - 07. THE RELEVANT PART OF THE DECISION OF THE ITAT IS REPRODUCED AS UNDER: - 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE R ECORD. WE FIND THAT THE CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT FACTS OF T HE CASE OF THE ASSESSEE IN THIS YEAR AR E IDENTICAL TO THE EARLIER YEARS, AND HE HAD FOLL OWED THE DECISION OF HIS PREDECESSOR. WE FURTHER FIND THAT IN ITA NO. 2363/AHD/2008 FOR A.Y.2004 - 05, SIMILAR ISSUE WAS DECIDED BY THE CO - ORDINATE BE NCH OF 1TAT IN FAVOUR OF THE ASSESEE AND THE ADDITION WAS DELETED FOLLOWING THE ORD ER IN REVENUE'S APPEAL FOR A.Y.2003 - 04 IN ITA NO.2281/AHD/2007, WHILE DE CIDING THE R EVENUE'S APPEAL, THE ISSUE WAS DECIDED BY HOLDING AS UNDER: '36. WE HAVE CONSIDERED RIVED SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE REGARDING PAYMENT OF ROYALTY AT THE RATE OF3.75% 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 THE ROYALTY AT 3.75% WAS APPLIED AFTER REDUCING VARIOUS EXPENSES FROM EX - FACTORY SALE VALUE OF THE CONC ERNED PRODUCTS. IT WAS ALSO EXPLAINED BEFORE THE LEARNED CIT(A) THAT IF THE EFFECTIVE RATE IS CO NSIDERED, I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 4 THEN THE EFFECTIVE RAT E 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 DECISIVE AND EFFECTIVE RATE HAS TO BE CONSIDERED, AND WHEN THE AMOUNT OF ROYALTY PAID BY THE ASSESSEE IS CONSIDERED WITH EX - FACTORY SALE VALUE, WITHOUT DEDUCTING VARIOUS EXPENSES, SUCH AS DEALER COMMISSION, SPECIAL COMMISSION, WARRANTY ETC., AS HAS BEEN NOTED BY THE LEARNED CIT(A) AT PAGE NO.4 OF HIS ORDER, THEN THE EFFECTIVE RATE WORKED OUT IS ONLY 2.3% ON SALE, AS AGAINST 3% PAID BY OILIER GROUP ENTITIES. THIS FINDING OF THE FACT GIVEN BY LEARNED 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 ORDER OF THE LEARNED CIT(A), AND ACCORDINGLY, THE GROUND NO.5 OF THE REVENUE IS REJECTED. ' SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTICAL TO E ARLIER YEARS AS ADMITTED BY BOTH THE PARTIES, WE FIND NO REASON TO INTERFERE WITH THE O RDER OF THE CIT( A) ON THIS ISS UE, AND THUS, THIS GROUND OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH AS CITED ABOVE ON IDEN TICAL FACTS AND ISSUE INVOLVED DURING THE YEAR UNDER CONSIDERATION WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE, THEREFORE , THE SAME IS DISMISSED. GROUND NO. 2 ( ADDITION OF RS. 31,91 , 000/ - ON ACCOUNT OF PROVISION FOR SLOW MOVING/ABSOLUTE STOCK) 7. ON SCRUTINY THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS DEBITED P & L ACCOUNT BY PROVISION OF SLOW MOVING /ABSOLUTE STOCK TO THE AMOUNT OF RS. 31,91000/ - . THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS MADE PROVISION OF A D HOC NATURE WHICH IS U NASCERTAINABLE. HE HAS ALSO OBSERVED THAT ASSESSEE HAS NOT EXPLAINED CRITERIA FOR DETERMINATION OF ABSOL UTE INVENTORY IN RESPECT OF SLOW MOVING STOCK . HE WAS OF THE VIEW THAT ANY PROVISION OF AN UNASCERTAINABLE NATURE CAN NOT BE ALLOWED AS DEDUCTION IN T HE P&L A/C AS IT WILL LEAD TO AN ABSURD RESULT OF AN UNASCERTAINABLE PROFIT WHICH CAN BE VARIED MERELY ALTERING THE PROVISIONS WHICH ARE MADE WITHOUT ANY BASIS. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT PROVISION MADE IS OF CONTINGENT IN NATURE. CONSE QUENTLY THE PROVISION FOR SLOW MOVING/ABSOLUT E STOCK WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME UNDER REGULAR PROVISION AS WELL AS TO THE BOOK PROFIT CALCULATED U/S 115 JB OF THE ACT . 8. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 5 STATED THAT THE SAME ISSUE HAS BEEN DECIDED BY HIS PREDECESSOR FOR ASSESSMENT YEAR 2004 - 05 & 2007 - 08 WHEREIN TH E DISALLOWANCE MADE WAS DELETED HOLDING THAT IT WAS NOT A MERE PROVISION FOR LIABILITY BUT IT WAS ON ACCOUNT OF LOSS DETERMINED BY THE ASSESSEE IN VALUE OF STOCK. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE HAVE NOTICED THAT CO - ORDINATE BENCH OF THE ITAT IN THE CAS E OF THE ASSESSEE ITS ELF VIDE ITA NO. 182, 216, 1137 /AHD/2011 HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE ITAT IS REPRODUCED AS UNDER: - 20. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL 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 IDENTICAL TO THE EARLIER YEARS, AND HE HAD FOLLOWED THE DECISION OF HIS PREDECESSOR. WE FURTHER FIND THAT WHILE D ECIDING THE REVENUE'S 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 THE ASS ESSEE HAS CLAIMED THIS AMOUNT A S PER THE NORMAL PRACTICE OF VALUATION OF CLOSING STOCK AS PER THE AUDITED ACCOUNTS AND IT IS AN OMISSION ON THE PART OF THE AO NOT TO HAVE DEALT WI TH THIS ISSUE. THE ID. 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 ID.CIT(A) ON THIS ISSUE, BECAUSE HE HAS T AKEN PROPER CARE TO ENSURE THAT ALL THE DETAILS AND EVIDENCES ARE OBTAINED AND ARE EXAMINED BY THE AC) AND ONLY THEREAFTER, DEDUCTION IS TO BE ALLOWED, IF THE ASSESSEE IS ABLE TO ESTABLISH BE FORE THE AO THAT SUCH WRITE OFF IN RESPECT OF PROVISION FOR OBSOLESCENCE OF INVENTORY CLAIMED BY THE ASSESSEE IS IN LINE WITH THE ACCEPTED METHOD OF VALUATION OF STOCK, I.E. AT COST OR MARKET PRICE, WHICHEVER IS LOWER. HENCE, THIS GROUND NO. 4 OF THE REVEN UE IS ALSO REJECTED. ' 21. SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTICAL TO EARLIER YEARS AS CLAIMED BY BOTH THE PARTIES, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE, AND THUS, THIS GROUND OF THE REVENUE IS ALSO DISMI SSED. T HE CO - ORDINA TE BENCH OF THE ITAT ON IDENTICAL ISSUE AND FACT S IN THE CASE OF THE ASSESSEE ITSELF AS CITED ABOVE HAS DIRECT ED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE SUBJECT TO THE ASSESSEE FURNISHING THE COMPLETE PARTICULARS IN THIS REGARD, I F NECESSARY, WITH ADEQUATE PROOF. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE SUBJECT TO THE FURNISHING OF THE INFORMATION BY THE ASSESSEE AS DIRECTED IN THE ABOVE I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 6 CITED DECISION OF THE COORDINATE BENCH. THEREFORE THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 3 ( DELETING DISALLOWANCE OF RS. 1,81,10,000/ - ON ACCOUNT OF PROVISION FOR WARRANTIES) 10. THE ASSESSEE HAS DEBITED SALES AND WARRANTY COMMISSION AMOUNT ING TO RS. 9 , 41 , 74,000/ - IN THE P & L ACCOUNT. THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE COMPANY IS A MANUFACTURER OF AIR CONDITIONER AND PROVIDE WARRANTY FOR ONE YEAR ON AIR CONDITIONERS AND 5 YEARS WARRANTY ON COMPRESSORS FROM THE DATE OF COMM ISSIONING. HE OBSERVED THAT THE PERIOD OF WARRANTY EXTEND WELL BEYOND THE ACCOUNTING PERIOD AND THE ASSESSEE HAS CLAIMED WARRANTY EXPENSES WHICH DO NOT PERTAIN TO THE RELEVANT ACCOUNTING YEAR . THEREFORE, T HE ASSESSING OFFICER HAS WORKED OUT THE WARRANTY EX PENSES PERTAINING TO SUBSEQUENT YEAR BY TAKING 3 MONTHS IN RESPECT OF WARRANTY EXPENSES OF AIR CONDITIONERS PERTAINING TO SUBSEQUENT YEAR AND WARRANTY EXPENSES OF COMPRESSORS DIVIDED INTO FIVE EQUAL PARTS. CONSEQUENTLY , HE HAS RE - WORKED THE WARRANTY EXPE NSES AND DISALLOWED AN AMOUNT OF RS. 1,81,10,000/ - TREATING THE AMOUNT OF PROVISION AS UNCERTAIN LIABILITY. 11. AGGRIEVED ASSESSEE HAS FI L E D APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE STATING THAT WARRANTY WAS NO T UNASCERTAINED LIABILITY AS COMPUTATION OF WARRANTY CHARGES WERE MADE ON THE BASIS OF UNIT SOLD AND SIMILAR ISSUE HA D BEEN DECIDED IN ASSESSEE S OWN CASE IN FAVOUR OF THE ASSESSEE BY HIS PREDECESSOR FOR ASSESSMENT YEAR 2004 - 05 TO 2006 - 07. 12. WE HAVE HEAR D THE RIVAL CONTENTION AND PERUSED THE MATERIAL S ON RECORD CAREFULLY. WE HAV E NOTICED TH A T THE CO - ORDINATE BENCH OF THE ITAT VIDE ITA 2303 & 2420/AHD/2015 FOR ASSESSMENT YEAR 200 0 - 01 TO 2001 - 02 HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE CO - ORDINAT E BENCH IS REPRODUCED AS UNDER: - 5. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO CONTROVERT THE FACT THAT THE ASSESSEE HAS BEEN FOLLOWING CONSISTENT METHOD IN CREATING SIMILAR WARRANTY PROVISION IN I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 7 SUBSEQ UENT ASSESSMENT YEARS AS WELL. RELEVANT ASSESSMENT ORDER IN SUCH A CASE DATED 30.04.2015 FOR ASSESSMENT YEAR 2011 - 12 INDICATES THAT THERE IS NO SUCH DISALLOWANCE MADE AT THE REVENUE S BEHEST. THE ASSESSEE IS ASSESSED AT THE SAME RATE THROUGHOUT. ALL T HE ABOVE NARRATED FACTS THEREFORE MAKE IT CRYSTAL CLEAR THAT THE ASSESSEE HAS SATISFIED THE RELEVANT CONDITIONS FOR CLAIMING THE IMPUGNED WARRANTY PROVISIONS AS DEDUCTION AS ENVISAGED IN HON BLE APEX COURT S DECISION(SUPRA). WE ACCORDINGLY ACCEPT ASSESSE E S SUBSTANTIVE GROUND SEEKING TO CLAIM THE IMPUGNED WARRANTY PROVISION QUA BOTH FIVE YEARS AND ONE YEAR (SUPRA) AS COMPUTED ON SCIENTIFIC BASIS AS PER ITS FORGOING EXPERIENCE. ITS IDENTICAL SUBSTANTIVE GROUNDS IN BOTH CASES ITA NOS. 2303 & 2304/AHD/2015 AS WELL AS THE MAIN CASES STAND ACCEPTED WHEREAS REVENUE S CORRESPONDING SUBSTANTIVE GROUNDS ARE DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH AS CITED ABOVE WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A) , THEREFORE, THE APPEAL OF T HE REVENUE ON THIS ISSUE IS DISMISSED. GROUND NO. 4 ( DEDUCTION OF R S. 7,35 , 640/ - O N WHICH TDS DEDUCTED AND RS. 52,40,669/ - ON WHICH PROVISION REVERSED ) 13. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION AMOUNTING TO RS. 5976309/ - ( RS. 7,35,640/ - FOR TDS PAID IN ASSESSMENT YEAR 2007 - 08 AND + RS. 52 , 40 , 669/ - FOR PROVISION REVERSED IN ASSESSMENT YEAR 2007 - 08) THE ASSESSING OFFICER HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE ON THE BAS IS OF THE DECISION OF THE H ON BLE SUPREME COURT IN THE CASE OF GOETZ INDIA PVT. LTD. 14. AGGRIEVED ASSESSEE FI L E D APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF T H E ASSESSEE FOLLOWING THE DECI SI ON OF ITAT, AHMEDABAD. THE RELEVAN T PART OF T HE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 7.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE SUBMISSIONS. THE A.O. HAS NOT DISPUTED THE JUSTIFICATION OF CLAIM BUT HAS NOT ACCEPTED IT ONLY IN VIEW OF SUPREME COURT DECISION IN THE CASE OF GOETZE (INDIA) LTD. DURING THE COURSE OF APPELLATE PROCEEDINGS THE A.R. SUBMITTED THAT THE CLAIM CAN BE ENTERTAINED BY THE CIT(A), IF IT IS GOING TO THE BASIC LEGAL CLAIM OF THE ASSESSEE. IT IS SUBMITTED THAT THE CLAIM FOR PAYMENT MADE OF IDS AND CONSEQUENT DEDUCTION U/S.40(A)(IA) IS THE BASIC LEGAL ISSUE AND IS TO BE ALLOWED BY THE CIT(A). SIMILARLY TO THE PROVISION REVERSED BACK AMOUNTING TO RS.52,40,669/ - IS ALSO AN AMOUNT WHICH IS NOT ALLOWED IN THE PAST AND HENCE COULD NOT BE TAXED U/S. 41 (1) THOUGH OFFERED FOR TAX IN THE RETURN BUT CLAIMED TO BE NOT TAXABLE IN THE ASSESSMENT PROCEEDINGS. THE CIT(A) HAS POWER TO ENTERTAIN SUCH CLAIM. THIS VIEW IS SUPPORTED BY THE ITAT, AHMEDABAD DECISION IN THE CASE OF SHALBY HOSPITAL L TD. VIDE ORDER DATED 20 - 5 - 2011. I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 8 ON CONSIDERATION OF THE ABOVE, I FIND THAT IN THE CASE OF SHALBY HOSPITAL LTD. THE ITAT, AHMEDABAD HAS HELD AS UNDER: 'RELIANCE IS PLACED ON THE RECENT DECISION OF ITAT AHMEDABAD, WHEREBY THE BENCH HAS SET ASIDE THE MATTER BACK THE CIT(A) TO R E - DECIDE THE MATTER IN ACCORDANCE WITH LAW, SHALBY HOSPITALS LIMITED V. DEPUTY COMMISSIONER OF INCOME - TAX (OSD) CIRCLE - 8 - ITA NO. 24377 AHD/ 2010 - INCOME TAX APPELLATE TRIBUNAL AHMEDABAD. DATED 20.5.2011 '....5. WE HAVE HEARD BOTH TRIE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE ID. CIT(A) DRD NOT ADJUDICATE THE ISSUES RAISED IN GROUND NO.1 OF THE APPEAL BEFORE HIM ON THE BASIS OF DECISION IN GOETZE (INDIA) LTD. V. CIT [2006] 284ITR 323 (SC) .WE FIND THAT IN GOETZE INDIA LTD.(SUPRA), DEDUCTIONS CLAIMED BY WAY OF A LETTER BEFORE ASSESSING OFFICER, WAS DISALLOWED ON THE GROUND THAT THERE WAS NO PROVISION UNDER THE ACT TO MAKE AMENDMENT IN THE RETURN WITHOUT FILING A REVISED RETURN APPEAL TO THE SUPREME COURT, AS THE DECISION WAS UPHELD BY THE , TRIBUNAL AND THE HIGH COURT, WAS DISMISSED MAKING CLEAR THAT THE DECISION WAS LIMITED TO THE POWER OF ASSESSING AUTHORITY TO ENTERTAIN CLAIM FOR DEDUCTION OTHERWISE THAN BY REVISED RETURN, AND DID NOT IMPINGE ON THE POW ERS OF THE TRIBUNAL. WE FIND THAT IN THE CASE OF CHICAGO PNEUMATIC INDIA LTD, VS. DV. CIT (2007) 15 SOT 252 (MUMBAI). THE TRIBUNAL AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD, (SUPRA) HELD THAT THE AO WAS OBLIG ED TO GIVE DUE RELIEF TO THE ASSESSEE OR ENTERTAIN ITS CLAIM IF ADMISSIBLE AS PER LAW EVEN THOUGH THE ASSESSEE HAD NOT FILED REVISED RETURN. IN THEIR DECISION, THE HON'BLE APEX COURT HAVE NOT BARRED THE ASSESSEE, RAISING ITS LEGAL CLAIM BEFORE APPELLATE AU THORITIES, THE APEX COURT ITSELF CLARIFYING THAT THE ISSUE IN THAT CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DID NOT IMPINGE ON THE POWER OF THE INCOME - TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE ACT. SINCE THE ID. CIT(A) REJECTED T HE CLAIM OF THE ASSESSEE MERELY ON TECHNICAL CONSIDERATIONS WITHOUT GOING IN TO MERITS OF THE CLAIM ; WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE ID. CIT(A) AND RESTORE THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO.1 IN THEIR APPEAL, TO HIS FILE FOR DECIDING THE MATTER AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BO TH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDIRIG THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, TH E MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. WITH THESE DIRECTIONS, GROUND NO. 1 IN THE APPEAL IS DISPOSED OF.' FOLLOWING THE AFORESAID DECISION OF ITAT, AHMEDABAD I HOLD THAT THE A.O. OUGHT TO HAVE ALLOWED DEDUCTION FOR THE AFORESAID AMOUNT OF RS.7, 35,640/ - U/S. 40(A)(IA)AND FURTHER AMOUNT OF RS.52,40,669/ - WHICH WAS CREDITED TO THE PROFIT & LOSS ACCOUNT FOR PROVISION REVERSED BUT WAS NOT ALLOWED DEDUCTION IN THE PAST. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 15. DURING THE COURSE OF APPELLAT E PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS SUPPORTED THE ORDER OF CIT(A) AND ALSO PLACED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF MITESH IM PEX LTD. 270 CTR (GUJ). I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 9 16. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORDS CAREFULLY. T HE AMOUNT OF RS. 7 ,35, 640/ - WAS DISALLOWED IN ASSESSMENT YEAR 2005 - 06 ON ACCOUNT OF NON - DEDUCTION OF TAX BUT THE SAME WAS DEDUCTED DURING THE YEAR UND ER CONSIDERATION AND CLAIMED AS DEDUCTION U/S.40(A)(IA) OF THE ACT. THE SECOND AMOUNT OF RS. 52,40,669/ - REPRESENTS THE AMOUNT CREDITED ON ACCOUNT OF REVERSAL OF EXPENDITURE DEBITED IN THE ACCOUNT OF EARLIER YEAR , THE SAME WAS CONSIDERED AS PART OF PR OFIT & LOSS IN THIS Y EAR. AFTER PERUSAL OF THE DETAILED FINDING OF LD. CIT(A) HOLDING THAT THE A.O. OUGHT TO HAVE ALLOWED DEDUCTION FOR THE AFORESAID AMOUNT OF RS.7,35,640/ - U/S. 40(A)(IA)AND FURTHER AMOUNT OF RS.52,40,669/ - WHICH WAS CREDITED TO THE PROFIT & LOSS ACCOUNT FOR PROVISION REVERSED BUT WAS NOT ALLOWED DEDUCTION IN THE PAST AFTER REFERRING THE DECISION OF THE COORDINATE BENCH OF THE ITAT AHMEDABAD AS CITED ABOVE WE DO NOT FIND ANY INFIRMITY IN HIS DECISION. ACCORDINGLY THE APPEAL OF THE REVENUE I S DISMISSED. 17 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN TREATING GROUND NO. 1 OF THE APPELLANT'S APPEAL CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HIM, AS BEING GENERAL IN NATURE FOR WHICH NO ORDER NEEDED TO BE PASSED AND, ON THAT BASIS, IN OMITTING TO RENDER HIS DECISION ON THE SAME. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE APPELLANT'S CLAIM FOR DEDUCTION OF THE PROVISION FOR BAD DEBTS WRITTEN BACK OF RS 1,16,04,101/ - AND PROVISION FOR ADVANCES WRITTEN BACK OF RS. 3,79,223/ - , WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 31,91,000/ - , BEING PROVISIONS FOR SLOW MOVING / OBSOLETE STOCK, WHEN THE SAID AMOUNT REPRESENT THE ACTUAL FALL IN THE VALUE OF INVENTORY . 3.1 LD. CIT(A) OUGHT TO HAVE ALLOWED THE DEDUCTION OF THE SAID AMOUNT FROM BOOK PROFIT, WHEN HE HAS ACCEPTED THE APPELLANT'S CLAIM FOR DEDUCTION IN RESPECT OF THE SAID CLAIM UNDER THE NORMAL PROVISIONS OF THE ACT. 3.2 WITHOUT PREJUDICE TO ABOVE , IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN NOT ALLOWING THE DEDUCTION IN RESPECT OF THE AMOUNT UTILIZED OUT OF STOCK PROVISION, BEING RS. 93,77,850/ - , WHILE COMPUTING THE BOOK PROFIT U/S 115 JB OF THE ACT. 18. AT THE TIME OF HEARING LD. COUNSEL OF THE ASSESSEE DID NOT PRESS GROUND NO. 1 OF THE APPEAL , THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 10 GROUND NO. 2 ( CLAIM FOR DEDUCTION OF THE PROVISION OF BAD DEBT WRITTEN BACK OF RS. 1 , 16 , 04 ,101 / - AND PROVISION FOR ADVANCE S WRITTEN BACK OF RS . 3 , 79 , 223/ - WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT ) 19 . DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER COMPUTED THE BOOK PROFIT U/S. 115JB OF THE ACT AT THE AMOUNT OF RS. 25,85,56,391/ - .HOWEVER, THE ASSESSING OFFICER HAS NOT ALLOWED DEDUCTION IN RESPECT OF PROVISION FOR ADVANCES FOR RS. 1 , 16 , 04 ,10 1/ - AND PROVISION FOR BAD DEBT WRITTEN BACK FOR RS. 3 , 79 , 223/ - IN VIEW O F THE RETROSPECTIVE AMENDMENT TO EXPLANATION 5 OF SECTION 1115JB BY THE FINANCE AT, 2009 WITH EFFECTIVE FROM 01 - 04 - 2001. THE LD. CIT(A) HAS ALSO NOT ALLOWED THE CLAIM OF THE ASSESSEE . RELEVANT PART OF THE DECISION OF THE CIT(A) IS REPRODUCED AS UNDER : - 9.3 IN THIS CONNECTION, IT MAY BE NOTED THAT TH E FIRST CLAUSE OF SECOND LIMB OF THE EXPLANATION - 1 TO SECTION 115JB ALLOWS REDUCTION OF THE FOLLOWING AMOUNT FROM THE NET PROFIT AS SHOWN IN THE PROFIT & LOSS ACCOUNT: 'THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION (EXCLUDING A RESERVE CREATED BEFORE THE 1 ST DAY OF APRIL 1997 OTHERWISE THAN BY WAY OF DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED THE PROFIT AND LOSS ACCOUNT: PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO AN ASSESSEE IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN F ROM RESERVES CREATED OR PROVISIONS MADE IN A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL. 1997 SHALL NOT BE REDUCED FROM THE BOOK PROFIT UNLESS THE BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXPLANATION OR EXPLANATION BELOW SECOND PROVISO TO SECTION 115JA. AS THE CASE MAY BE; OR' THE ABOVE CLAUSE ALLOWS REDUCTION OF THE AMOUNT WITHDRAWN FROM ANY PROVISION, WHILE COMPUTING TH E BOOK PROFIT U/S. 115JB. HOWEVER, THE SAID REDUCTION IS SUBJECT TO FOLLOWING CONDITIONS : I THE AMOUNT WITHDRAWN FROM PROVISION HAS BEEN CREDITED TO PROFIT AND LOSS ACCOUNT; (A) THE AMOUNT IS WITHDRAWN OUT OF PROVISION MADE PRIOR TO A.Y. 1997 - 98; (B) IF THE AMOUNT IS WITHDRAWN OUT OF PROVISION MADE IN OR AFTER A.Y. 1997 - 98, THE BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE PROVISIONS UNDER THE EXPLANATION - 1. 9.4 SINCE THE AMOUNT WITHDRAWN FROM PROVISION ACCOUNT HAS BEEN CREDITED TO THE PROFI T AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31 - 03 - 2007, THE FIRST CONDITION IS SATISFIED IN THE APPELLANT'S CASE. 9.5 AS PER THE SECOND CONDITION, THE SAID AMOUNT CAN BE REDUCED, IF THE BOOK PROFIT OF THE YEAR(S) IN WHICH THE PROVISION WAS MADE, HAS BEEN INCR EASED BY THOSE PROVISIONS. IN THIS CONTEXT, IT IS SUBMITTED THAT PROVISION WHICH HAS BEEN WRITTEN BACK DURING THE YEAR UNDER CONSIDERATION WAS MADE IN THE FINANCIAL YEAR(S), WHICH FALLS AFTER THE DATE FROM WHICH THE AMENDMENT HAS BEEN MADE EFFECTIVE. AT TH IS POINT, IT MAY BE POINTED OUT THAT THE INSERTION OF CLAUSE (I) IN EXPLANATION - 1 TO SECTION 115JB HAS MADE IT COMPULSORY FOR EVERY ASSESSEE TO INCREASE THE BOOK PROFIT BY 'THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASS ET'. FURTHER, AS STATED ABOVE, SIMILAR AMENDMENT IS ALSO I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 11 MADE IN PROVISIONS OF SECTION 115JA AND THE SAID AMENDMENT IS APPLICABLE RETROSPECTIVELY FROM THE A.Y. 1997 - 98 ONWARDS. IN VIEW OF THE SAID RETROSPECTIVE AMENDMENT, THE BOOK PROFIT FOR THE YEAR IN WH ICH THE PROVISION WAS MADE, SHALL STAND INCREASED BY THE AMOUNT OF PROVISION MADE IN THE RESPECTIVE YEAR(S). ACCORDINGLY, THE CONDITION STATED IN (II)(B) GETS SATISFIED. 9.6 CONSIDERING THE ABOVE POINTS, DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT C OMPANY HAD SUBMITTED A REVISED WORKING OF ITS BOOK PROFIT IN VIEW OF THIS AMENDMENT, REDUCING RS. 1,16,6,04,101/ - AND RS. - 3,79, 223/ - FROM ITS BOOK PROFIT ON ACCOUNT O F PROVISION FOR DOUBTFUL DEBTS WRITTEN BACK AND PROVISION FOR ADVANCES WRITTEN BACK RESPEC TIVELY. THE SAME HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. 9.7 THE ABOVE VIEW OF THE APPELLANT COMPANY IS ALSO SUPPORTED BY THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF KOCHI REFINERIES LTD. V. DCIT [2010] 4 - ITR (TRIB) - 95 (MUMBAI), WHEREIN TH E TRIBUNAL HELD AS UNDER: '............ IT IS AN ADMITTED FACT THAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS WAS MADE IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 1998 - 99 AND THE SAME AMOUNT WAS ADDED BACK IN THE REGULAR COMPUTATION. BY VIRTUE OF LAW, IT IS THE DUTY OF THE ASSESSING OFF ICER TO COMPUTE THE NORMAL TOTAL INCOME AND ALSO THE BOOK PROFIT UNDER SECTION 115JA IN THAT YEAR AND THEN COMPARE AND DECIDE TO INVOKE THE NORMAL PROVISIONS OF THE ACT OR SPECIAL PROVISIONS OF BOOK PROFIT UNDER SECT ION 115JB. ONCE THE ASSESSING OFFICER INVOKES THE NORMAL PROVISIONS OF TAX, IT INDIRECTLY MEANS THAT HE HAS COMPARED THE COMPUTATION UNDER SECTION 115JA AND DECIDED THAT THE INCOME UNDER NORMAL PROVISIONS WAS MORE. IN THAT SITUATION IT IS TO BE PRESUMED TH AT THE PROVISION WAS ADDED BACK TO THE BOOK PROFIT OF THAT YEAR. EVEN BY MEANS OF EXPLANATION (G) INTRODUCED TO SECTION 115JA BY THE FINANCE (NO. 2) ACT, 2009, WITH RETROSPECTIVE EFFECT FROM APRIL 1, 1998 THE PROVISION FOR BAD AND DOUBTFUL DEBTS WOULD BE D EEMED TO HAVE BEEN ADDED BACK IN COMPUTING THE BOOK PROFIT IN THAT YEAR AND SO THE AMOUNT, NOW CREDITED TO THE PROFIT AND LOSS ACCOUNT, IS TO BE REDUCED BY VIRTUE OF THE PROVISION OF SECTION 115JB. IN VIEW OF THIS THERE IS JUSTIFICATION IN THE ASSESSEE'S C ONTENTION IN CLAIMING THE PROVISION AS DEDUCTION IN THE COMPUTATION OF BOOK PROFIT IN THIS YEAR. ON THE FACT THAT THE ASSESSEE HAD BEEN DISALLOWED IN THAT YEAR UNDER THE NORMAL COMPUTATION AND BY VIRTUE OF THE AMENDMENT NOW BROUGHT WITH RETROSPECTIVE EFFEC T FROM APRIL 1, 1998, THE PROVISION FOR BAD DEBT IS DEEMED TO HAVE BEEN ADDED BACK IN THAT YEAR WITHDRAWAL AND CREDITING INTO THE PROFIT AND LOSS ACCOUNT NOW RESULTS IN DOUBLE TAXATION. CONSEQUENTLY, THE ASSESSEE IS CORRECT IN EXCLUDING THE AMOUNT WHILE COMPUTING THE INCOME UNDER SECTION 115JB. ACCORDINGLY THE GROUND IS ALLOWED.' THUS, THE MUMBAI TRIBUNAL HAS HELD THAT THE PROVISIONS FOR DIMINUTION IN VALUE OF ANY ASSET SHALL BE DEEMED TO HAVE BEEN DISALLOWED IN VIEW OF RETROSPECTIVE AMENDMENT OF PROVISIO NS.' CONSIDERING THE ABOVE MENTIONED LEGAL POSITION, YOU ARE REQUESTED TO REDUCE THE ABOVE REFERRED AMOUNT OF RS. 1,16,04,101/ - AND RS. 3,79,223/ - FROM ITS NET PROFIT ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS WRITTEN BACK AND PROVISION FOR ADVANCES WRITTE N BACK RESPECTIVELY, WHILE COMPUTING BOOK PROFIT.' 10.2 ON CONSIDERATION OF THE ABOVE ARGUMENTS AND THE FACTS OF THE CASE, I AM OF THE VIEW THAT THE AMOUNT CREDITED AS ABOVE AT RS.116.04 LAKH AND RS.3.79 LAKH ON ACCOUNT OF PROVISION WRITTEN BACK FOR BAD DE BT AND ADVANCES WILL BE ELIGIBLE FOR DEDUCTION IN THE COMPUTATION OF BOOK PROFIT, ONCE THE PROVISION WAS MADE IN THE RESPECTIVE YEARS ARE ADDED BACK IN THE B OOK PROFIT CALCULATION. HOWEVER AT PRESENT THERE IS NO SUCH ADJUSTMENT MADE IN THE PAST IN THE BOOK PROFIT AND HENCE THIS CLAIM CANNOT BE ENTERTAINED AND IS REJECTED. THE APPELLANT MAY APPROACH A.O. IF SUCH AMOUNTS ARE ADDED BACK IN CALCULATION OF BOOK PROFIT U/S. 115JA/JB IN RESPECTIVE YEARS. I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 12 20 . WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MAT ERIAL S ON RECORD CAREFULLY. AFTER KEEPING IN V I EW THE RETROSPECTIVE AMENDMENT MADE IN THE FINANCE ACT, W.E.F. ASSESSMENT YEAR 2000 - 01, WE CONSIDER THAT AS ELABORATED IN THE FINDINGS OF THE LD.CIT(A) THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT IT HAS MADE ANY SUCH ADJUSTMENT IN THE BOOK PROFIT IN THE PAST, THEREFORE, WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A) DIRECTING THE ASSESSEE TO APPROACH THE A.O. IF SUCH AMOUNTS ARE ADDED BACK IN CALCULATION OF BOOK PROFIT U/S. 115JA/JB IN RESPECTIV E YEARS. . ACCORDINGLY , THE APPEAL OF THE ASSESSEE IS DISMISSED ON THIS ISSUE. GROUND NO. 3 (CONFIRMING THE ADDITION OF RS. 31,91,000/ - BEING PROVISIONS FOR SLOW MOVING/ABSOLUTE STOCK) 21. THE ASSESSING OFFICER HA D DISALLOWED THE CLAIM OF PROVISION S FOR SL OW MOVING/ABSOLUTE STOCK AND ADDED THE SAME TO THE BOOK PROFIT U /S. 115JB OF THE ACT WHICH WAS SUSTAINED BY THE LD. CIT (A). THE RELEVANT PART OF THE DECISION OF THE LD. CIT (A) IS REPRODUCED AS UNDER: - 11.1 APPELLANT'S SUBMISSIONS ARE AS UNDER: IT APP EARS THAT THIS ADDITION HAS BEEN MADE IN VIEW OF CLAUSE (I) OF EXPLANATION 1 OF SECTION 115JB WHICH IS INSERTED BY THE FINANCE (NO.2) ACT 2009. THIS AMENDMENT IS RETROSPECTIVE FROM ASSESSMENT YEAR 2001 - 02 BUT IT IS INSERTED AFTER THE CLAUSE OF THE YEAR UND ER CONSIDERATION. ON THIS ISSUE THE APPELLANT SUBMITS THAT IT IS NOT IN DISPUTE THAT THE AMOUNT REPRESENTS PROVISION FOR DOUBTFUL DEBT AND THUS WOULD BE COVERED BY CLAUSE (I) REFERRED TO ABOVE. BUT AT THE SAME TIME IT IS TO BE APPRECIATED THAT THIS CLAUSE IS INSERTED WITH RETROSPECTIVE EFFECT. AT THE SAME TIME IT IS ALSO TO BE SEEN THAT THE APPELLANT HAS CREDITED TO THE P & L ACCOUNT FOR THE YEAR UNDER CONSIDERATION RS.93.1 1 LAKH TOWARDS PROVISION FOR DOUBTFUL DEBT OF THE PAST. AS THIS AMOUNT IS OF THE SIM ILAR NATURE THE A.O. OUGHT TO HAVE REDUCED THE BOOK PROFIT BY THIS AMOUNT SO CREDITED CONSIDER ING THE NATURE OF THE AMENDMENT AS PER CLAUSE (I). THIS HAS BEEN EXPLAINED BY THE APPELLANT IN THE SOF IN PARA 10 ON WHICH THE APPELLANT RELIES. THE SAID SOF IS R EPRODUCED AS UNDER FOR READY REFERENCE: '10. PROVISION FOR SLOW MOVING STOCK : RS. 31,91,000 / - 10.1 IN THE CONCLUDING PART OF PARA5.3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS STATED THAT THE PROVISION FOR SLOW MOVING / OBSOLETE S TOCK AMOUNTING TO RS. 31,91,000 / - IS DISALLOWED AND ADDED TO THE BOOK PROF IT U/S 115JB AS THE S AME IS IN THE NATURE OF PROVISION FOR DIMINUTION IN THE VALUE OF ASSETS. 10.2 IN THIS CONNECTION, IT MAY BE .NOTED THAT THE ASSESSEE COMPANY IS FOLLOWING CONSISTENT METHOD OF VALUATION OF CLOSING STOCK AT 'COST OR MARKET VALUE WHICHEVER IS LOWER'. THE NON - MOVING ITEMS INCLUDE THE INVENTORY, WHICH ARE LYING FOR LONG TIME IN THE STOCK. THE COMPANY HAS IDENTIFIED ALL THOSE ITEMS WHOSE VALUES HAVE REDUCED ACCORDINGLY AND CREATED A PROVISION FOR THE SAME INSTEAD OF ADJUSTING THE SAME AGAINST THE VALUE OF INVENTORY. THIS IS THE REDUCTION IN THE VALUE OF INVENTORY AND THE MODE OF I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 13 ENTRY IS SUCH THAT THE ASSESSEE COMPANY HAS CREATED PROVISION FOR THE AMOUNT SO REDUCED, INSTEAD OF REDU CING THE CARRYING AMOUNT OF INVENTORY. 10.3 AT THIS POINT, IT MAY BE NOTED THAT THE ASSESSEE COMPANY USES ERP SYSTEMS FOR MAINTAINING ITS BOOKS OF ACCOUNTS AND INVENTORY DATA. THE SAID SYSTEM DOES NOT ALLOW CHANGE IN THE CARRYING VALUE OF INVENTORIES, WHI CH ARE HELD BY THE ASSESSEE COMPANY. WHEREAS AS PER THE METHOD OF VALUATION OF INVENTORIES REGULARLY FOLLOWED BY THE COMPANY, INVENTORIES ARE TO BE VALUED AT 'COST OR MARKET VALUE, WHICHEVER IS LESS'. IN ORDER TO RECORD THE DECLINE IN THE VALUE OF INVENTOR IES, AN ENTRY IS PASSED FOR THE DIFFERENTIAL VALUE IN THE INVENTORY AND AN ENTRY IS PASSED FOR PROVISION FOR THE SAID AMOUNT. THUS, THE AMOUNT REPRESENT THE FALL IN THE VALUE OF INVENTORIES HELD BY THE COMPANY. THE PROVISION IS MADE DUE TO THE REASON OF CO NSTRAINT OF ACCOUNTING SOFTWARE, BUT IT IS FOR THE ACTUAL REDUCTION IN THE VALUE OF INVENTORY FOR THE NON - MOVING OR SLOW - MOVING ITEMS OF * INVENTORY, AS PER METHOD OF VALUATION BEING FOLLOWED BY COMPANY. THEREFORE, THE SAME SHOULD NOT BE ADDED TO THE BOOK PROFIT. 10.4 WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTED THAT THE SAID AMOUNT OF PROVISION IS CREDITED TO THE COST OF INVENTORIES CHARGED TO THE PROFIT AND LOSS ACCOUNT, IN THE YEAR IN WHICH THE ACTUAL SALE / USE OF THE SAID INVENTORIES TAKES PLAC E. THEREFORE, THE AMOUNT CHARGED TO THE PROFIT AND LOSS ACCOUNT IS LOWER BY THE SAID AMOUNT OF PROVISION, IN VIEW OF ABOVE, IT IS SUBMITTED THAT IF THE ABOVE AMOUNT OF RS. 31,91,000/ - IS ADDED TO THE BOOK PROFIT, THE AMOUNT OF PROVISION ADJUSTED AGAINST T HE COST OF GOODS SOLD, WHICH IS CHARGED TO P & L ACCOUNT, SHOULD BE REDUCED FROM THE BOOK PROFIT. SUCH AMOUNT CREDITED DURING THE YEAR UNDER CONSIDERATION IS RS. 93,11,850/ - . THIS IS FOR THE REASON THAT THE SAID AMOUNT REPRESENTS THE CREDIT OUT OF THE PROV ISION WHICH IS NOT ALLOWED AS DEDUCTION IN COMPUTATION OF BOOK PROFIT. THE DETAILS EXPLANATION IN CONNECTION WITH THE SAME IS GIVEN IN PARA - 9 OF THIS STATEMENT OF FACTS.' 11.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE SUBMISSIO NS. IN VIEW OF THE AMENDMENT BY FINANCE (NO.2) ACT 2009 EFFECTIVE FROM 1 - 4 - 2001 I HOLD THAT THE A.O. WAS JUSTIFIED IN MAKING THE A BOVE ADJUSTMENT OF RS.31,91,000/ - TO THE BOOK PROFIT. SO FAR AS THE CLAIM F OR DEDUCTION OF RS.93, 1 1 ,850/ - IS CONCERNED, THE SAME IS NOT ADMISSIBLE AT PRESENT FOR THE REASONS GIVE N THE EARLIER PARAS. 22. WE HAVE HEARD THE CONTENTIONS AND PERUSED THE M ATERIAL ON RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE PROVISION FOR SLOW MOVING STOCK . AFTER CONSIDERING THE DETAILED FI NDING OF LD. CI T(A) , WE HAVE NOTICED THAT I T IS UNDISPUTED FACTS THAT THE ASSESSEE COMPANY HAS IDENTIFIED ALL THOSE ITEMS WHOSE VALUE HAVE REDUCED AND CREATED A PROVISION FOR THE SAME INSTEAD OF ADJUSTING THE SAME AGAINST THE VALUE OF INVENTORY. IT IS CLEA R FROM THE ABOVE FACTS THAT THE ASSESSEE COMPANY HAS CREATED THE AFORESAID PROVISION INSTEAD OF REDUCING THE AMOUNT OF INVENTORY SHOWN IN THE ASSETS OF THE COMPANY IN THE BALANCE SHEET. THESE FACTS DEMONSTRATE THAT IT IS NOT THE ACTUAL REDUCTION AS THE SA ME HAS NOT BEEN REDUCED FROM THE ACTUAL VALUE OF THE INVENTORY REFLECTING IN THE ASSET OF THE ASSESSEE COMPANY. IN THIS CONNECTION WE HAVE ALSO PERUSED THE DECISION OF THE HON BLE HIGH COURT OF KARNATKA REFERRED BY THE ASSESSEE IN THE CASE OF CIT V. I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 14 YOKOG AWA INDIA LTD. I T WAS HELD IN THIS CASE THAT IF THE DEBT OR DOUBTFUL DEBT IS REDUCED FROM THE LOANS AND ADVANCES OR THE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET THE EXPLANATION TO SECTION 115JA OR JB IS NOT AT ALL ATTRACTED. THE RELEVANT PART OF T HE ABOVE CITED DECISION IS REPRODUCED AS UNDER: - IN THE P RESENT CASE, THE DEBT IS AN AMOUNT RECEIVABLE BY THE ASSESSEE AND NOT ANY LIABILITY PAYABLE BY ASSESEE AND, THEREFORE, ANY PROVISION MADE TOWARDS IRRECOVERABILITY OF THE DEBT CANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THEREFORE IT WAS HELD THAT ITEM (C) OF THE EXPLANATION IS NOT ATTRACTED TO THE - THE CASE. ITEM (C) IN SECTION 115JA AND 115 - JB(1) ARE IDENTICAL. IN ORDER TO ATTRACT THE EXPLANATION THE DEBT WHICH IS DOUBTFUL OR BAD SHOULD SATI SFY THE REQUIREMENT CONTEMPLATED IN ITEM (C) OF THE EXPLANATION. IT IS THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISIONS MADE FOR MEETING THE LIABILITY OTHER THAN TH E ASCERTAINED LIABILITIES. IN THE INSTANT CASE ALSO THE BAD AND DOUBTFUL DEBT FOR WHICH A PROVI SION I S MADE WHICH IS IN THE NATURE OF DIMINUTION IN THE VALUE OF ANY ASSET WOULD NOT FALL WITHIN ITEM (C) O F EXPLANATION (I). IT IS IN THAT CONTEXT THE APPELLATE COMMISSIONER AS WEL L AS THE TRIBUNAL HAS GRANTED RELIEF TO THE ASSESSEE. REALISING THE FATALI TY OF THE SAID ARGUMEN T, IT IS CONTENDED NOW THAT ITEM (I) CANNOT AMOUNT TO SATISFACTION AS PROVISION FOR DIMINISHING IN THE VALUE OF ASSETS IS SUBSTITUTED, IN CAS E OF THE ASSESSEE FALLS UNDER ITEM (C). IN MEETING THE AFORESAID CASE, THE LEARNED COUNSEL FO R THE ASSESSEE B OUGHT TO OUR NOTICE THE JUDGMENT OF THE APEX COURT IN THE CASE OF VIJAYA BANK ( SUPRA) WHERE THE APEX COURT HAD AN OCCASION TO CONSIDER HIS EXPLANATION. IT ACC EPTED THE ARGUMENT ON BEHALF OF THE REV ENUE TO THE EFFECT THAT THE EXPLANATION M AKES IT VERY CLEAR THAT THERE IS A DICHOTOMY BETWEEN ACTUAL WRITE O FF ON THE ONE HAND AND PROVISION FOR BAD AND DOUBTFUL DEBT ON THE OTHER. A MERE DEBIT TO THE PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE A BAD AND DOUBTFUL DEBT, BUT IT WOULD NOT CONSTITUTE A CTUAL WRITE OFF AND THAT WAS THE VERY REASON WHY THE EXPLANATION STOOD INSERTED . PRIOR TO THE FINANCE ACT, 2001 MANY ASSESSEES USED TO TAKE THE BENEFIT OF DEDUCTION UNDER SECTION 36(1)(VII) OF THE 1961 ACT BY MERELY D EBITING THE IMPUGNED BAD DEBT TO THE PR OFIT AND LOSS ACCOUNT AND, T HEREFORE, THE PARLIAMENT STEPPED IN BY WAY OF EXPLANATION TO SAY THAT A MERE REDUCTION OF PROFITS BY DEBITING THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT PER SE WOULD NOT CONSTITUTE ACTUAL WRITE OFF. THE APEX COURT ACCEPTED THE S AID LEGAL POSITI ON. HOWEVER IT WAS CLARIFIED THAT BESIDES DEBITING THE PROFIT A ND LOSS ACCOUNT AND CREATING A PROVISION FO R BAD AND DOUBTFUL DEBT, THE ASSESSEE CORRESPONDINGLY/SIMULTANEOUSLY OBLITERATED THE SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES/DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET AND, CONSEQUENTIALLY, AT THE END OF THE YEAR, THE FIGURE IN THE LOANS AND ADVAN CES OR THE DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET WAS SH OWN AS NET OF THE PROVISION FOR THE IM PUGNED BAD DEBT. THEN THE SAID AMOUNT REPRESENTING BAD DEBT OR DOUBTFUL DEBT CANNOT BE ADDED IN ORDER TO COMPUTE BOOK PROFIT. THEREFORE, AFTER THE EXPLANATION THE AS SESSEE IS NOW REQUIRED NOT ONLY TO DEBIT THE PROFIT AND LOSS ACCOUNT BU T SIMULTANEOUSLY ALSO REDUCE THE LOANS AND ADVANCES OR T HE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET TO THE EXTENT OF THE CORRESPONDING AMOUNT SO THAT, AT THE END OF THE YEAR, THE AMOUNT OF LOANS AND ADVANCES/DEBTORS IS SHOWN AS NET OF THE PROVISIO NS FOR THE IM PUGNED BAD DEBT. THEREFORE, IN THE FIRST PLACE IF THE BAD DEBT OR DOUBTFUL DEBT IS REDUCED FROM THE LOANS A ND ADVANCES OR THE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET THE EXPLANATION TO SECTION 115 JB OR JB IS NOT AT ALL ATTRACTED. IN THAT CONTEXT EVEN IF AMENDMENT WHICH IS MADE RETROSPECTIVE THE BENEFIT GIVEN BY THE TRIBUNAL AND THE APPELLATE COMMISSIONER TO THE ASSESSEE IS IN NO WAY AFFECTED. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL. HOWEVER IN THE CASE OF THE ASSESSEE WE NOTICED THAT THE ASSESSEE HAS CREATED A PROVISION FOR THE SAME WITHOUT ADJUSTING THE SAME AGAINST THE VALUE OF I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 15 INVENTORY WHICH SHOW THAT THERE IS NO ACTUAL REDUCTION IN THE VALUE OF INVENTORY FOR THE NON - MOVING OR SLOW MOVING ITEMS OF THE INVENTORY. THEREFORE AS PER THE EXPLANATION ALSO MENTIONED IN THE FINDINGS OF THE DECISION OF THE HON BLE HIGH COURT OF KARNATKA REFERRED BY THE ASSESSEE IN THE CASE OF CIT V. YOKOGAWA INDIA LTD THE ASSESSEE IS REQUIRED NOT ONLY TO DEBIT THE PROFIT AND LO SS ACCOUNT BUT SIMULTANEOUSLY AL SO TO REDUCE ASSETS SIDE OF THE BALANCE SHEET TO THE EXTENT OF THE CORRESPONDING AMOUNT SO THAT AT THE END OF THE YEAR THE AMOUNT OF STOCK IN TRADE /CLOSING STOCK IS SHOWN AS NET OF PROVISION S FOR THE IMPUGNED BAD DEBT . IN THE LIGHT OF THE ABOVE FACTS AND LEGAL FINDINGS WE CONSIDER THAT THE LD.CIT (A) IS JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR ADJUSTMENT OF RS. 31,91000/ TO THE BOOK PROFIT AND SIMILARLY CORRECT IN NOT ADMITTING CLAIM OF DEDUCTION OF RS.93, 11,850 ON THE SAME REASONING. IN VIEW OF THE ABOVE THE FACTS OF THE CASE OF THE ASSESSEE ARE DISTINGUISHABLE THEREFORE WE DO NOT FIND MERIT IN THE GROUND OF APPEAL OF THE ASSES S EE . ACCORDINGLY THE GROUNDS OF APPEAL NO.3, 3.1 & 3.2 ARE DISMISSED. 23. IN THE RESULT, THE GROUND NUMBER 2 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND ALL THE OTHER GROUNDS OF APPEALS FILED BY REVENUE AND ASSESSEE ARE DISMISSED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 29 - 0 8 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 29 /0 8 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO S . 2010 & 2119/AHD/2011 A.Y. 2007 - 08 PAGE NO HITACHI HOME & LIFE SOLUTIONS (INDIA) LTD. VS. DCIT 16 BY ORDER/ , / ,