M/s. Toyota Kirloskar Motors Private Limited, Ramanagara V. Deputy Commissioner Of Income Tax, LTU, Circle- 1, Bangalore

ITA 223/BANG/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1953 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 18-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR CIT BENGALURU
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: TDS; Set aside
• Section: 143(3); 144C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER IT A NO . 223/BANG/2020 ASSESSMENT YEAR : 2008 - 09 TOYOTA KIRLOSKAR MOTORS PVT. LTD., PLOT NO.1, BIDADI INDUSTRIAL AREA, BIDADI, RAMANAGARA DIST. 562 109. PAN: AAACT 5415B VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU CIRCLE 1, BENGALURU. APPELLANT RESPONDENT APPELLANT BY : S HRI PADAMCHAND KHINCHA, CA RESPONDENT BY : SHRI PRADEEP KUMAR, C IT (DR)(ITAT ), BENGALURU. DATE OF HEARING : 25 . 02.2021 DATE OF PRONOUNCEMENT : 02 .0 3 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 11.12.2019 OF THE CIT(APPEALS), BENGALURU-10 FOR TH E ASSESSMENT YEAR 2008-09. 2. THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE A SSESSEE ARE AS FOLLOWS:- 2. GROUNDS RELATING TO DISALLOWANCE OF WARRANTY PR OVISION OF RS. 1,67,32,832 2.1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF PROVISION FOR WARRANTY AMO UNTING TO RS. 1,67,32,832. ON FACTS AND IN THE CIRCUMSTANC ES OF ITA NO.223/BANG/2020 PAGE 2 OF 6 THE CASE AND LAW APPLICABLE, PROVISION FOR WARRANTY AMOUNTING TO RS. 1,67,32,832/- IS TO BE FULLY ALLOW ED AS /DEDUCTION AS CLAIMED IN THE RETURN OF INCOME. 2.2. THE LEARNED AO AND CIT(A) HAVE ERRED IN NOT APPRECI ATING THAT, AS THERE WAS A SHIFT IN THE BASIS OF WARRANTY CLAIM FROM PAYMENT BASIS TO PROVISION BASIS, THE DIFFEREN CE BETWEEN CUMULATIVE PROVISION AND CUMULATIVE PAYMENT PERTAINING TO EARLIER YEARS WAS CLAIMED DURING THE YEAR UNDER CONSIDERATION IN ORDER TO ENSURE UNIFORMITY. 2.3. THE LEARNED AO AND CIT(A) HAVE ERRED IN CONCLUDING THAT SINCE THE IMPUGNED CLAIM OF PROVISION FOR WARRANTY DID NOT RELATE TO THE YEAR UNDER CONSIDERATION, THE SAME IS NOT ALLOWABLE. 2.4. THE LEARNED CIT(A) HAS ERRED IN CONCLUDING THAT THE IMPUGNED DEDUCTION CAN BE CLAIMED ONLY BY FILING RE VISED RETURNS OF INCOME FOR RESPECTIVE YEARS, BY RELYING ON THE DECISION OF THE APEX COURT IN GOETZE (INDIA) LTD V CIT 284 ITR 323. 3. GROUNDS RELATING TO REVERSAL OF PROVISION IN SU BSEQUENT YEARS 3.1. THE LEARNED AO AND CIT(A) HAVE ERRED IN NOT A PPRECIATING THE FACT THAT IMPUGNED PROVISION DISALLOWED IS SUBSEQUENTLY REVERSED TO THE EXTENT OF RS. 1,63,40, 806 IN FINANCIAL YEAR 2009-10 WHICH HAS SUFFERED TAX IN TH E SAID YEAR. THEREFORE, ONLY THE BALANCE AMOUNT OF PROVISI ON OF RS. 3,92,026 [RS. 1,67,32,832 LESS RS. 1,63,40,806] SHOULD BE CONSIDERED FOR DISALLOWANCE, IF ANY. 3.2. THE LEARNED CIT(A) HAS ERRED IN CONCLUDING TH AT THE REVERSAL OF PROVISION MADE IN THE FINANCIAL YEAR 20 09-10 IS NOT RELATABLE TO THE IMPUGNED PROVISION FOR WARRANT Y CLAIMED DURING THE YEAR UNDER CONSIDERATION. 3.3. ASSUMING WITHOUT ADMITTING THAT THE PROVISION FOR WARRANTY AMOUNTING TO RS. 1,67,32,832/- IS TO BE DISALLOWED, THE REVERSAL OF PROVISION FOR WARRANTY AND ITA NO.223/BANG/2020 PAGE 3 OF 6 OFFERED TO TAX IN THE AY 2010-11 AMOUNTING TO RS. 1,63,40,806 SHOULD NOT BE ASSESSABLE TO TAX. 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CAS E ASSESSMENT U/S 143(3) R.W.S. 144C WAS COMPLETED ON 16.10.2012. SUB SEQUENTLY, THE CIT (LTU) BANGALORE VIDE ORDER U/S 263 DATED 26.03.2015 FOUND THE ORDER U/S 143(3) ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE THE AO HAD ALLOWED AN AMOUNT OF RS.1,67,32,832 CLAIMED AS WARRANTY PROVISION BY THE ASSESSEE FOR THE AY 2008-09 WHICH OTHERWISE REL ATED TO EARLIER YEARS. ACCORDINGLY, THE CIT SET ASIDE THE ORDER U/S 143(3) DATED 16.10.2019. THE AO CONCLUDED THE ASSESSMENT U/S 143(3) R.W.S. 263 O N 28.09.2015 MAKING ADDITION OF RS.1,67,32,832 ON ACCOUNT OF CLAIM OF E XCESS WARRANTY PROVISION. 4. WHILE COMPUTING THE INCOME, THE AO MADE THE FOLL OWING COMPUTATION:- PARTICULARS AMOUNT IN RS. AMOUNT IN RS. TOTAL INCOME AS PER ORDER DATED 16/10/2012 462,90,59,697 ADD: CLAIM OF EXCESS WARRANTY PROVISION 1,67,32,832 REVISED TOTAL INCOME 464,57,92,529 TAX T HEREON @ 30% 139,37,37,759 SURCHARGE @ 10% 13,93,73,776 EDUCATION CESS @ 3% 4,59,93,346 TOTAL TAX PAYABLE 157,91,04,880 LESS: RELIEF 2,20,588 T AX PAYABLE 157,88,84,292 LESS: TDS 22,81,86,447 ADVANCE TAX 85,30,27,000 108,12,13,447 5. NOW THE CONTENTION OF THE LD. AR BY WAY OF GROUN DS 2 & 3 IS THAT AO SHOULD HAVE STARTED COMPUTATION IN THE ASSESSMENT O RDER PASSED U/S. 143(3) R.W.S. 263 DATED 28.9.2015 AFTER GIVING EFFE CT TO THE ORDER OF THE ITAT, SINCE IN THIS ASSESSMENT YEAR THE ASSESSEE WE NT IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ASSESSMENT ORDER WHERE IN CERTAIN RELIEF HAS ITA NO.223/BANG/2020 PAGE 4 OF 6 BEEN GRANTED BY THE TRIBUNAL. THE AO SHOULD HAVE C ONSIDERED THIS WHILE PASSING THE GIVING EFFECT ORDER TO THE 263 ORDER. ACCORDINGLY, THE LD. AR STATED THAT THE AO HAS NOT CONSIDERED THE RELIEF GR ANTED BY THE APPELLATE AUTHORITY ON EARLIER OCCASION AND STARTED COMPUTATI ON AS PER THE ASSESSMENT ORDER DATED 16.10.2012. THIS HAS CREATE D A HIGHER DEMAND OF TAX. 6. THE LD. DR RELIED ON THE ORDER OF CIT(APPEALS). 7. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. IN THIS CASE, THE AO WHEN HE PASSED THE GIVING EFFECT ORDER U/S. 143(3) R.W.S. 263 OF THE ACT ON 28.9.2015 THE TRIBUNAL ORDER HAD NOT BEEN PASSED. HENCE THE AO STATED COMPUTATION IN THE 143(3) R.W.S . 263 ORDER DATED 28.9.2015 FROM THE TOTAL INCOME AS PER THE ORIGINAL ASSESSMENT ORDER DATED 16.10.2012 @ RS.462,90,59,697, WHEREIN HE HAS NOT G IVEN THE BENEFIT OF TP ADJUSTMENT WHICH WAS REDUCED TO RS.14,18,47,658 VIDE ASSESSMENT ORDER GIVING EFFECT TO ITAT ORDER FOR AY 2008-09 ON 20.1.2016. HOWEVER, SINCE THE ORDER GIVING EFFECT TO ITAT ORDER FOR AY 2008-09 WAS NOT PASSED AT THE TIME OF PASSING THE ORDER GIVING EFFECT TO 2 63 ORDER ON 28.9.2015, THE AO HAD NOT CONSIDERED IT. HOWEVER, THIS WAS NOTICE D BY THE CIT(APPEALS) AND HE HAS GIVEN A DIRECTION TO REDUCE THE ORIGINAL TP ADJUSTMENT FROM RS.97,82,11,238 TO RS.14,18,47,658. IN OTHER WORDS , THE AO IS DIRECTED BY THE CIT(A) TO START THE COMPUTATION OF TOTAL INCOME AS MENTIONED IN ORDER GIVING EFFECT TO THE ITAT ORDER DATED 20.1.2016. 8. WITH REGARD TO DISALLOWANCE OF WARRANTY PROVISIO N OF RS.1,67,32,832, WE FIND THAT THE CIT(APPEALS) IN HIS ORDER PASSED U /S. 263 OBSERVED THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSE E HAS CLAIMED EXCESS DEDUCTION OF RS.1,67,32,832. IT WAS FOUND T HAT THE PROVISION IS NOT CREATED DURING THE YEAR, BUT IT PERTAINS TO PROVISI ONS CREATED IN THE EARLIER ITA NO.223/BANG/2020 PAGE 5 OF 6 YEARS WHICH HAS BEEN ALLOWED IN THE RESPECTIVE ASSE SSMENT YEARS. IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE EXCESS PROVISI ON OF RS.167,32,832 CLAIMED IN THE AY 2008-09 AS EXCESS PROVISION FOR E ARLIER YEARS REPRESENTS PROVISION FOR WARRANTY VOLUNTARILY DISALLOWED IN EA RLIER YEARS LESS THE ACTUAL PAYMENTS/REVERSAL MADE FOR WARRANTY EXPENSES. IT W AS POINTED OUT BY CIT(A) POINTED OUT THAT FROM AY 2004-05, THE ASSESS EE STARTED CLAIMING THE PROVISION CRATED IN THE BOOKS AS DEDUCTION WHICH WA S RESTRICTED BY THE AO TO THE ACTUAL PAYMENT AND ALLOWED IN EARLIER YEARS. FROM THE AY 2004-05 ONWARDS, THE WHOLE OF THE PROVISION IS ALLOWED BASE D ON THE APPELLATE ORDERS OF ITAT / HIGH COURT. SINCE UPTO AY 2003-04 , THE ACTUAL EXPENSES BEING ALLOWED, THERE CANNOT BE ANY REVERSALS ON INC URRING OF THE PROVISION AMOUNT. FROM THE AY 2004-05 ONWARDS SINCE THE PROV ISION IS ALLOWED, THE EXCESS PROVISION OVER AND ABOVE THE ACTUAL EXPENSES WAS BROUGHT TO TAX. THERE CANNOT BE ANY UNCLAIMED EXPENSES UPTO AY 2003 -04 AND FROM AY 2004-05 ONWARDS, THERE CANNOT BE ANY PROVISION DISA LLOWED WHICH THE ASSESSEE COULD CLAIM IN THE SUBSEQUENT YEARS. AS S UCH, THE CLAIM AS ASSESSEE AT RS.167,32,832 WHICH WAS CLAIMED AS EARL IER PROVISION FOR WARRANTY DURING THIS AY 2008-09 WAS DIRECTED TO BE DISALLOWED BY THE CIT(APPEALS) IN HIS ORDER U/S. 263 DATED 26.3.2015. THE SAME WAS COMPLIED BY THE AO IN HIS ORDER GIVING EFFECT TO TH E 263 ORDER PASSED US/. 143(3) R.W.S. 263 DATED 28.9.2015. NOW THE CONTENT ION OF THE LD. AR IS THAT IF IT IS DISALLOWED IN AY 2008-09, THE SAME SHOULD BE ALLOWED IN AY 2010-11 ON THE GROUND THAT IT HAS OFFERED THE AMOUNT IN AY 2011-12. 9. THE CONTENTION OF THE LD. DR IS THAT THE ASSESSE E HAD NOT FURNISHED REQUISITE DETAILS BEFORE THE LOWER AUTHORITIES FOR CLAIMING SUCH DEDUCTION IN AY 2010-11. 10. ADMITTEDLY, THIS DEDUCTION CANNOT BE ALLOWED IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS WARRANTY PROVISION WAS ALLOW ED ON ACTUAL BASIS. HOWEVER, THE ACTUAL CLAIM OF ASSESSEE THAT IT SHOUL D BE ALLOWED AS A ITA NO.223/BANG/2020 PAGE 6 OF 6 DEDUCTION IN AY 2010-11 ON THE GROUND THAT IT WAS O FFERED TO TAX IN AY 2011-12, REQUIRES EXAMINATION OF THE RECORDS BY THE AO ON PRODUCTION OF THE SAME BY THE ASSESSEE IN THE RELEVANT AY 2010-1 1. THIS CLAIM OF ASSESSEE CANNOT BE CONSIDERED IN THE PRESENT AY 20 08-09, AS THE AY 2010-11 OR 2011-12 IS NOT BEFORE US FOR ADJUDICATIO N. THE ASSESSEE MAY TAKE APPROPRIATE REMEDIAL ACTION IN THE RELEVANT AS SESSMENT YEAR, IF SO ADVISED. WITH THESE OBSERVATIONS, WE DISMISS THE G ROUND RELATION TO ALLOWABILITY OF WARRANTY PROVISIONS IN THIS ASSESSM ENT YEAR. 11. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS D ISMISSED.. PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF MARCH, 2021. SD/- SD/- ( N V VASUDEV AN ) ( CHANDRA POOJARI ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 02 ND MARCH, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.