Deputy Commissioner of Income-tax, V. Kenersys India Pvt. Ltd., Pune

ITA 2200/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6735 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 22-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK MESRAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2200/PUN/2016 / ASSESSMENT YEAR : 2010-11 DCIT, CIRCLE- 14, PUNE. ....... / APPELLANT / V/S. KENERSYS INDIA PVT. LTD., S.NO.49, INDUSTRY HOUSE, MUNDHWA, PUNE. PAN : AADCK2089H / RESPONDENT REVENUE BY : SHRI ABHISHEK MESRAN ASSESSEE BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 03.01.2019 / DATE OF PRONOUNCEMENT : .21.01.2019 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-7, PUNE DATED 30.06.2016 FOR THE ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER :- A. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN ALLOWING THAT THE DISALLOWANCE OF PROVISION FOR WARRANTY OF RS.75,00,000/- MADE BY THE ASSESSING OFFICER? B. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. C. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 3. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLY, ERECTION, INSTALLATION, OPERATIONS AND MAINTENANCE OF WIND TURBINE GENERATORS (WTG) AND OTHER ASSOCIATED 2 ITA NO.2200/PUN/2016 ACTIVITIES. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING A LOSS OF RS.17,24,43,810/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DEBITED AN AMOUNT OF RS.75,00,000/- IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF WARRANTY PROVISION. AT THE END OF THE ASSESSMENT, THE SAID WARRANTY PROVISION WAS DISALLOWED BY THE ASSESSING OFFICER AS THE ASSESSEE FAILED TO PROVIDE ANY DOCUMENTS IN SUPPORT OF THE BASIS FOR ARRIVING AT THE SAID FIGURE OF PROVISIONS OF RS.75,00,000/-. THE AO RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROL INDIA PVT. LTD. VS. CIT (2009) 314 ITR 62 (SC) 4. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE FURNISHED VARIOUS EVIDENCES AND DATA STATING THAT THE AMOUNT OF WARRANTY PROVISION CONSTITUTES ONLY 1.43% OF THE SALES. THE ASSESSEE SUBMITTED THE FINANCIAL YEAR-WISE DETAILS OF WARRANTY PROVISION AND ALSO THE DETAILS OF APPROPRIATION OF THE SAID PROVISION TOWARDS THE CLAIMS. THE SAID DATA IS EXTRACTED BY THE CIT(A) AT PARA 1.3 OF HIS ORDER IN TABULAR FORM. THE ASSESSEE FURTHER MADE A SUBMISSION THAT THE WARRANTY PROVISION WOULD BE INVOKED AFTER THE TWO YEARS FROM THE DATE OF PURCHASE OF THE ASSETS. IN OTHER WORDS, FOR THE SALE MADE IN THE FINANCIAL YEAR 2009-10, THE CONSUMER RAISES THE DEMAND FOR WARRANTY AFTER THE TWO YEARS ONLY I.E. FINANCIAL YEAR 2011-12. THE ASSESSEE FURNISHED THE RELEVANT DATA AND SUBMITTED THAT IN FINANCIAL YEAR 2011-12 THE ASSESSEE UTILIZED ENTIRE PROVISION FOR CREDITED BY THE ASSESSEE IN THE FINANCIAL YEAR 2009-10 AS WELL AS FINANCIAL YEAR 2010-11. CONSIDERING THE ABOVE ARGUMENTS AND THE DATA FURNISHED BY THE ASSESSEE, THE CIT(A) DISCUSSED THIS ISSUE IN PARA 5.3 AND ALLOWED THE GROUND RAISED BY THE ASSESSEE IN THE APPEAL. THE CIT(A) ALSO DISCUSSED THE APPLICABILITY OF THE HONBLE SUPREME COURT 3 ITA NO.2200/PUN/2016 JUDGMENT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD., (SUPRA), HONBLE DELHI HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. ERICSSION COMMUNICATIONS P. LTD., 318 ITR 340 (DELHI), HONBLE BOMBAY HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. HINDITRON SERVICES PVT. LTD., 321 ITR 263 (BOMBAY) AND THE ITAT, PUNE BENCH DECISION IN THE CASE OF KIRLOSKAR BROTHERS LTD. VS. DCIT (2016) 167 TTJ 0102 (PUNE), AND HELD THAT THE ASSESSEE CALCULATED THE WARRANTY PROVISION ON THE BASIS OF CONSIDERING THE ACTUAL EXPENDITURE. THE CIT(A) ALSO DISTINGUISHED THE DECISION CITED BY THE ASSESSING OFFICER IN HIS ORDER. EVENTUALLY, IN PARA 5.8 THE RELIEF IS GRANTED BY THE CIT(A) TO THE ASSESSEE. 5. AGGRIEVED WITH THE SAID ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE ABOVE EXTRACTED GROUNDS. 6. ON CONSIDERING THE ABOVE FACTS, WE FOCUS ON THE DATA RELATING TO THE WARRANTY PROVISION. FOR THE SAKE OF COMPLETENESS, THE DATA RELATING TO THE FINANCIAL YEARS 2009-10 TO 2012-13 FURNISHED BY THE ASSESSEE IS EXTRACTED IN PARA 1.3 OF THE ORDER OF THE CIT(A), WHICH READS AS UNDER :- PARTICULARS FINANCIAL YEAR 2009 - 10 2010 - 11 20 11 - 12 2012 - 13 OPENING BALANCE 7,500,000 7,500,000 19,593,249 42,142,596 ADDITION UTILISATION 15,888,819 41,305,567 (18,756,220) 103,707,585 (41,429,042) CLOSING BALANCE 7,500,000 19,593,24 42,142,596 104,421,139 7. FROM THE ABOVE TABULATED DATA, IT IS EVIDENT THAT IN THE FIRST TWO FINANCIAL YEARS 2009-10 AND 2010-11, THE PROVISION CREATED IS TO THE TUNE OF RS.1.96 CRORES (ROUNDED OFF) WHEREAS THE PROVISION IN FINANCIAL YEAR 2011-12 (I.E. AFTER THE END OF TWO YEARS OF WARRANTY) IS RS.1.8 CRORES (ROUNDED OFF). IN OUR VIEW, THE PROVISION CREATED AND UTILIZED IS VERY CLOSE. CONSIDERING THE SAME, WE ALSO PERUSED THE DISCUSSION GIVEN BY 4 ITA NO.2200/PUN/2016 THE CIT(A) IN HIS ORDER. WE FIND THE CONTENTS OF PARA 5.7 AND 5.8 ARE RELEVANT TO EXTRACT AND THE SAME ARE EXTRACTED AS UNDER :- 5.7 THE APPELLANT HAS RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. ERICSSION COMMUNICATION P. LTD. (SUPRA). IT HAS BEEN OBSERVED THAT IT COULD BE THAT IN PARTICULAR YEAR ACTUAL WARRANTY CLAIM MAY EXCEED THE PROVISIONS WHICH IS MADE. ASSESSEE WAS THEREFORE, ENTITLE DEDUCTION IN RESPECT OF PROVISIONS FOR WARRANTY CLAIMS. THE APPELLANT HAS RELIED ON KIRLOSKAR BORTHERS LTD. (SUPRA) WHEREIN PROVISION FOR WARRANTY WERE FULLY ALLOWED. THE CRUX OF THESE JUDICIAL PRONOUNCEMENTS ARE THAT PROVISIONS FOR WARRANTY ARE FULL ALLOWABLE. THE ONLY THING IS THAT THE ESTIMATION OF THE PROVISIONS FOR WARRANTY SHOULD BE ON SCIENTIFIC BASIS. THE APPELLANT HAS CALCULATED PROVISIONS OF WARRANTY ON THE BASIS OF WARRANTY PERIOD, ACTUAL EXPENDITURE ON WARRANTY. THE OBLIGATION OF WARRANTY STARTS AT THE POINT OF SALE ITSELF. 5.8 IN VIEW OF THE ABOVE PROVISIONS FOR WARRANTY OF RS.75,00,000/- IS ALLOWABLE AND DISALLOWABLE MADE BY THE AO CANNOT BE UPHELD. ACCORDINGLY, GROUND NO.1 OF THE APPEAL IS ALLOWED. 8. CONSIDERING THE ABOVE REASONING GIVEN BY THE CIT(A), WE FIND THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE ON THIS ISSUE AND IT DOES NOT CALL FOR ANY INTERFERENCE. THEREFORE, THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 21 ST DAY OF JANUARY, 2019. S SD/- D/- SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 21 ST JANUARY, 2019. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-7, PUNE. 4. THE CCIT, PUNE. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.