DCIT, CHENNAI V. M/s. Amco Batteries Ltd., CHENNAI

ITA 2270/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0783 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Section: 143(3); 260A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.2270/MDS/2012 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(1), CHENNAI 600 034. VS. M/S.AMCO BATTERIES LTD., 803, ANNASALAI, CHENNAI - 2. [PAN:AABCA1726F] (APPELLANT) (RESPONDENT) APPELLANT BY : DR. S. MOHARANA, CIT RESPONDENT BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 1 3 . 0 2 .201 3 DATE OF PRONOUNCEMENT : 21.02.2013 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, BANGALORE DATED 28.09.2012 IN ITA NO. 119/DC-11(1)/A-I/11-12 FOR THE ASSESSMENT Y EAR 2009-10 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVE NUE: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.2,32,47,160/- IN RESPECT OF PROVISION FOR WARRAN TY. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2270 2270 2270 2270/M/ /M/ /M/ /M/1 11 12 22 2 2 2.1. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THERE IS NO SCIENTIFIC BASIS FOR CREATION OF PROVISIONS FOR WARRANTY SINCE , DURING THIS YEAR, THE RATIO BETWEEN THE ACTUAL EXPENSES AND THE PROVISION CREATED IS AT 74:100 WHEREAS THE RATIO IN THE PREVIOUS YEAR WAS A T 50:100. 2.2. THE CIT(A) ERRED IN ALLOWING THE ASSESSEE'S C LAIM JUST RELYING ON THE ITA T'S DECISION IN THE ASSESSEE'S OWN CASE FOR THE A.Y. 2008-09, WITHOUT GOING INTO THE MERITS OF THE CASE. 2.3. THE CIT(A) FAILED TO APPRECIATE THE RATIO LAI D DOWN BY THE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA P LTD. WHEREIN IT WAS HELD THAT 'A PROVISION IS A LIABILITY WHICH CAN BE MEASURED ONLY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION. A PROVISI ON IS RECOGNIZED WHEN: (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT; (B) IT IS PROBABLE THAT AN OUTFLOW OF RESOUR CES WILL BE REQUIRED TO SETTLE THE OBLIGATION; AND (C ) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION. IF THESE CONDITIONS ARE N OT MET, NO PROVISION CAN BE RECOGNIZED'. 2.4. IT IS SUBMITTED THAT THE CONDITIONS SPECIFIED BY THE SUPREME COURT ARE NOT MET IN THE INSTANT CASE AND THEREFORE , THE CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE OF PROVISION FOR WA RRANTY. 2.5. THE CJT(A) FAILED TO APPRECIATE THAT THE ASSES SEE HAS NOT DEMONSTRATED ITS CLAIM FOR DEDUCTION ON THE BASIS O F HISTORIC DATA SYSTEMATICALLY MAINTAINED BY THE ASSESSEE, WHICH HA S BEEN LAID DOWN AS NECESSARY FOR ALLOWABILITY OF CLAIM FOR PROVISION F OR WARRANTY BY THE SUPREME COURT. 2.6. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT IN THE INSTANT CASE, THE ASSESSEE HAS MADE AN ESTIMATE OF THE PROVISION OR OBLIGATION OF THE ASSESSEE ON ACCOUNT OF WARRANTY WHICH IS FAR IN EXC ESS OF THE ACTUAL EXPENDITURE. THE PROVISION MADE TURNS OUT TO BE NEA RLY 136% OF THE ACTUAL EXPENDITURE INCURRED ON WARRANTIES, WHICH SH OWS THAT A SCIENTIFIC AND RELIABLE ESTIMATE OF THE OBLIGATION HAS NOT BEEN MADE. 2.7. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE ITAT IN THE ASSESS EE'S OWN CASE ON THIS ISSUE FOR THE ASST. YEAR 2008-09 AND AN APPEAL U/S 260A TO HON'BLE HIGH COURT HAS BEEN PREFERRED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2270 2270 2270 2270/M/ /M/ /M/ /M/1 11 12 22 2 3 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. IN SUPPORT OF THE GROUNDS, THE DR REPRESENTING REVENUE VEHEMENTLY ARGUES THAT THE CIT(A) HAS WRONGLY DELETED THE DIS ALLOWANCE OF ` .2,32,47,160/- IN RESPECT OF THE WARRANTY PROVISION IN QUESTION MADE BY THE ASSESSING OFFICER. THEREFORE, HE PRAYS THAT THE ABO VE SAID DISALLOWANCE IS LIABLE TO BE RESTORED. 4. OPPOSING THIS, THE AR AT THE BEHEST OF THE ASSE SSEE ARGUES THAT THE CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE PERTAIN ING TO WARRANTY CLAIMED BY THE ASSESSEE AS DISALLOWED BY THE ASSESSING OFFICER . HE FURTHER SUBMITS THAT THE SAME VERY ISSUE HAS ARISEN WHICH HAS BEEN DECID ED IN FAVOUR OF THE ASSESSEE BY THE ITAT, BANGALORE DECIDED VIDE ORDER 21.03.2011 FOR THE ASSESSMENT YEAR 2005-06. HE ALSO CLARIFIES THAT EAR LIER THE ASSESSEE WAS TAXED AT BANGALORE AND NOW IN CHENNAI. 5. IN REBUTTAL, THE REVENUE IS UNABLE TO POINT OUT ANY DISTINGUISHING FEATURES QUA THE CASE LAW CITED BY THE ASSESSEE. 6. WE HAVE HEARD BOTH PARTIES AND PERUSED THE ASSE SSMENT ORDER AS WELL AS CIT(A)S ORDER. THE CASE LAW CITED BY THE A SSESSEE FOR THE ASSESSMENT YEAR 2005-06 QUA THE SAME VERY ISSUE HAS ALSO BEEN GONE THROUGH. THE ONLY ISSUE IN THE ASSESSMENT PROCEEDIN G IS THAT THE ASSESSEE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2270 2270 2270 2270/M/ /M/ /M/ /M/1 11 12 22 2 4 HAD CLAIMED THE AMOUNT IN QUESTION RELATING TO PROV ISIONS FOR WARRANTY WHICH WAS DISALLOWED BY THE ASSESSING OFFICER. IN APPEAL, THE CIT(A) HAS RELIED ON THE ORDER OF THE TRIBUNAL FOR YESTER ASSESSMENT Y EAR (SUPRA) AND ACCEPTED ASSESSEES CLAIM. ON FACTS, THE REVENUE HAS FAILED TO POINT OUT DISTINGUISHING FEATURES QUA THE ISSUE INVOLVED VIS- A-VIS THE INSTANT CASE. THEREFORE, WE SEE NO REASON TO INTERFERE IN THE ORD ER OF THE CIT(A) ACCEPTING ASSESSEES CLAIM QUA THE WARRANTY IN QUESTION. 7. ACCORDINGLY, REVENUES APPEAL IS DISMISSED BEIN G DEVOID OF ANY MERITS. ORDER PRONOUNCED ON THURSDAY, THE 21 ST OF FEBRUARY, 2013 AT CHENNAI. SD/ - SD/ - (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 21.02.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.