M/s. WARTSILA INDIA LTD., MUMBAI V. DCIT Rg. - 3(3), MUMBAI

ITA 2162/MUM/2006

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3811 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 06-09-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 05-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: JEHANGIR D MISTRI
• Keywords: Bad and doubtful debts
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO.: 2162/MUM/2006 ASSESSMENT YEAR: 2002-03 M/S WARTSILA INDIA LIMITED 76, FREE PRESS HOUSE, 7 TH FLOOR, NARIMAN POINT, MUMBAI 400 021 PAN : AAACW 0345 D DEPUTY COMMISSIONER OF INCOME TAX, RANGE 3(3), AAYAKAR BHAVAN, MUMBAI (APPELLANT) VS. (RESPONDENT) ITA NO.: 2459/MUM/2006 ASSESSMENT YEAR: 2002-03 DEPUTY COMMISSIONER OF INCOME TAX, RANGE 3(3), ROOM NO. 609, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20 M/S WARTSILA INDIA LIMITED 76, FREE PRESS HOUSE, 7 TH FLOOR, NARIMAN POINT, MUMBAI 400 021 PAN : AAACW 0345 D (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI JEHANGIR D. MISTRI RESPONDENT BY : SHRI P.K. SHUKLA DATE OF HEARING : 12.02.2013 DATE OF PRONOUNCEMENT : 10.04.2013 ORDER PER DR. S.T.M. PAVALAN, JM : THESE CROSS APPEALS FILED BY THE ASSESSEE AND REVE NUE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) XXXII, MUMBAI DATED 31.01.2006 FOR THE ASSESSMENT YEAR 2002-03. BOTH THESE APPEALS ARE DIS POSED BY THE COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.: 2162 & 2459/MUM/2006 M/S WARTSILA INDIA LIMITED ASSESSMENT YEAR: 2002-03 2 2. GROUND NO. A OF THE ASSESSEES APPEAL RELATES TO THE DISALLOWANCE OF PROVISION FOR TRADE GUARANTEES OF RS.2,55,65,091 MA DE BY THE AO AND THE SAME CONFIRMED BY THE LD.CIT(A). 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E, A COMPANY ENGAGED IN THE BUSINESS OF ERECTING AND INSTALLING POWER PLANT S HAD CLAIMED A DEDUCTION OF RS.2,55,65,091/- IN RESPECT OF PROVISIONS MADE FOR PERFORMANCE GUARANTEE OBLIGATION UNDERTAKEN BY IT ON SUPPLY OF PRODUCTS. IN THE ASSESSMENT FRAMED U/S 143(3), THE AO HAD ALLOWED THE DEDUCTION OF ACTUAL EXPENDITURE INCURRED TO THE TUNE OF RS.1,52,80,721 AND ALSO GIVEN CREDIT FOR GU ARANTEES WRITTEN BACK TO THE TUNE OF RS.1,50,57,672, REDUCED AN AMOUNT OF RS.47, 73,302 FROM THE TOTAL INCOME RETURNED BY THE ASSESSEE. 3.1 ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION O F THE AO BY OBSERVING THAT NO DISALLOWANCE WAS MADE BY THE AO ON ACCOUNT OF PR OVISION CREATED FOR TRADE GUARANTEES BUT IN FACT THE HE ALLOWED DEDUCTION OF RS.47,73,302. AGGRIEVED BY THE IMPUGNED DECISION, THE ASSESSEE HAS RAISED THIS GROUND IN THE APPEAL BEFORE US. 3.2 AT THE OUTSET, IT HAS BEEN SUBMITTED BY THE LEA RNED AR THAT THE ISSUE PERTAINING TO THE PROVISION FOR TRADE GUARANTEE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE ASS ESSEES OWN CASE FOR SEVERAL EARLIER YEARS [1990-91 TO 2003-04 EXCEPTING THE YEA R UNDER CONSIDERATION] AND A COMPILATION CONSISTING OF COPIES OF THE TRIBUNALS ORDERS HAS ALSO BEEN SUBMITTED. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT B Y THE LEARNED DR OF THE REVENUE, WE FIND NO REASON TO TAKE A DIFFERENT VIEW IN THIS YEAR AND HENCE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 4. SINCE GROUND NO. B & D OF THE ASSESSEES APPEAL ARE NOT PRESSED BY THE LEARNED AR, THESE GROUNDS REQUIRE NO ADJUDICATION. 5. GROUND NO. C OF THE ASSESSEES APPEAL RELATES TO THE DISALLOWANCE ON ACCOUNT OF HYPOTHESIS AMOUNTING TO RS.18,16,090/- M ADE BY THE AO AND THE SAME CONFIRMED BY THE LD.CIT(A). ITA NO.: 2162 & 2459/MUM/2006 M/S WARTSILA INDIA LIMITED ASSESSMENT YEAR: 2002-03 3 5.1 BRIEFLY STATED, THE ASSESSEE HAD CLAIMED AN AMO UNT OF RS.78,78,110/- AS DIVIDEND INCOME FROM INVESTMENTS IN THE UNITS OF UT I MUTUAL FUNDS AS EXEMPT U/S 10(33) OF THE INCOME TAX ACT. HOWEVER, IN THE ASSES SMENT FRAMED U/S 143(3), THE AO MADE A PROPORTIONATE DISALLOWANCE OF RS.18,1 6,090/- AS BEING ATTRIBUTABLE TO THE DIVIDEND INCOME CLAIMED EXEMPT U/S 10(33). O N APPEAL, THE LD.CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. AGGRIEVE D BY THE IMPUGNED DECISION, THE ASSESSEE HAS RAISED THIS GROUND IN THE APPEAL B EFORE US. 5.2 AT THE OUTSET, IT HAS BEEN SUBMITTED BY THE LEA RNED AR THAT THE ISSUE PERTAINING TO THE PROVISION FOR TRADE GUARANTEE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE ASS ESSEES OWN CASE FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 IN ITA NOS. 79 26/MUM/2004 AND 8794/MUM/2004 RESPECTIVELY AND THE COPIES OF THE SA ID ORDERS HAVE ALSO BEEN SUBMITTED. SINCE NO DIFFERENCE IN FACTS COULD BE PO INTED OUT BY THE LEARNED DR OF THE REVENUE, WE FIND NO REASON TO TAKE A DIFFERENT VIEW IN THIS YEAR AND HENCE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 6. APROPOS THE APPEAL OF THE REVENUE, GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS.2,36,341/- MADE BY THE AO BEING THE EXPENDITURE INCURRED BY THE ASSESSEE ON PAYMENTS TO THE CLUBS AND THE SAME DELETED BY THE LD.CIT(A). THE LD.AR OF THE ASSESSEE HAS POINTED OUT THAT SIMI LAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEARS 2001-02, 2003-04 AND 2004-05 IN ITA NOS. 8794/MUM/2004, 4740/MUM/200 8 AND 1278/MUM/2009 RESPECTIVELY. AS THE FACTS AND CIRCUMSTANCES ARE TH E SAME, THE COUNSEL PLEADED THAT THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OW N CASE SHOULD BE FOLLOWED. 6.1 WE HAVE CAREFULLY PERUSED THE SAID ORDERS AND S INCE NO DISTINGUISHING FACTS HAVING BEEN BROUGHT ON RECORD FOR THE YEAR UNDER CO NSIDERATION, FOLLOWING THE FINDINGS OF THE TRIBUNAL, WE HAVE NO HESITATION IN CONFIRMING THE ORDER OF THE LD.CIT(A) DELETING THE ADDITION OF RS.2,36,341/- ON ACCOUNT OF THE EXPENDITURE ON PAYMENTS TO CLUBS. 7. GROUND NO. 2 OF THE REVENUES APPEAL RELATES TO THE DISALLOWANCE OF RS.66,58,662/- ON ACCOUNT OF BAD DEBTS AND LIQUIDAT ED DAMAGES MADE BY THE AO ITA NO.: 2162 & 2459/MUM/2006 M/S WARTSILA INDIA LIMITED ASSESSMENT YEAR: 2002-03 4 AND THE SAME DELETED BY THE LD.CIT(A). THE LD.AR HA S POINTED OUT THAT SIMILAR ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN ITS OWN CASES FOR THE ASSESSMENT YEARS 2000-01, 2001-02, 2003-04 AND 2004-05 IN ITA NOS. 7926/MUM/2004, 8794/MUM/2004, 4740/MUM/2008 AND 127 8/MUM/2009 RESPECTIVELY AND COPIES OF THE SAID ORDERS HAVE ALS O BEEN SUBMITTED. SINCE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE ON THE SAID ORDERS BY THE ITAT, WE DO NOT SEE ANY REASON FOR TAKING A DIF FERENT VIEW ON THIS ISSUE IN THE ABSENCE OF ANY MATERIAL CHANGE IN THE FACTS OF THE CASE AND THUS THE ORDER OF THE LD.CIT(A) ON THIS COUNT IS UPHELD. 8. GROUND NO. 3 OF THE REVENUES APPEAL RELATES TO THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DEDUCTION CLAIMED U/S 80HHC AN D THE DIRECTION GIVEN BY THE LD.CIT(A) TO EXCLUDE 90% OF THE NET HIRE CHARGES AN D NOT GROSS HIRE CHARGES FOR THE PURPOSE OF DEDUCTION U/S 80HHC. IT IS PERTINENT TO MENTION THAT THIS ISSUE HAS ALSO BEEN COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 IN ITA NOS. 7926/MUM/2004 AND 8794/MUM/2004 RESPECTIVELY. IN VIEW OF THE MATTER THAT THERE IS N O DISTINGUISHING FACTS BROUGHT ON RECORD BY THE REVENUE DURING THE YEAR UNDER CONSIDE RATION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) THIS COUNT AND THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF APRIL, 2013. SD/- SD/- (D.KARUNAKARA RAO) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 10.04.2013 RASIKA* ITA NO.: 2162 & 2459/MUM/2006 M/S WARTSILA INDIA LIMITED ASSESSMENT YEAR: 2002-03 5 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T., CONCERNED MUMBAI 4. CIT (A) CONCERNED MUMBAI 5. THE DR, I - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI