Hitachi Home & Life Solution (I) Ltd., Ahmedabad V. The ACIT,(OSD) Range-4, Ahmedabad

ITA 2303/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8424 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 25-07-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 04-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business expenditure; Additional evidence; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NOS. 2303 & 2304/AHD/2015 (ASSESSMENT YEAR: 2000-01 & 2001-02) HITACHI HOME & LIFE SOLUTIONS (I) LTD., 9 TH FLOOR, ABHIJEET, MITHAKHALI SIX ROADS, ELLISBRIDGE, AHMEDABAD 380006 APPELLANT VS. ACIT(OSD), RANGE-4, AHMEDABAD RESPONDE NT & ITA NOS. 2420 & 2421/AHD/2015 (ASSESSMENT YEAR: 2000-01 & 2001-02) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), AHMEDABAD APPELLANT VS. HITACHI HOME & LIFE SOLUTIONS (I) LTD., 9 TH FLOOR, ABHIJEET, MITHAKHALI SIX ROADS, ELLISBRIDGE, AHMEDABAD 380006 RESPONDENT PAN: AABCA2392K /BY ASSESSEE : SHRI S. N. SOPARKAR & SHRI P ARIN SHAH, A.R. /BY REVENUE : SHRI V. K. SINGH, SR. D.R. /DATE OF HEARING : 22.02.2018 /DATE OF PRONOUNCEMENT : 18.04.2018 ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 2 ORDER PER BENCH THE ASSESSEE AND REVENUE HAVE FILED THEIR INSTANT CR OSS APPEALS FOR ASSESSMENT YEARS 2000-01 & 2001-02 AGAINST THE CIT(A )-2, AHMEDABADS COMMON ORDER DATED 27.05.2015 IN CASE NOS. CIT(A)-2/ 139,140/DCIT, CIR.4/2013-14, IN PROCEEDINGS U/S. 143(3) OF THE IN COME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. WE COME TO RIVAL PLEADINGS FIRST OF ALL. IT EME RGES THAT BOTH THE PARTIES RESPECTIVE GROUNDS IN THEIR INSTANT APPEAL S ARE ON IDENTICAL LINES. THE ASSESSEES SOLE GRIEVANCE IN ITS ITA NOS. 2303 & 2304/AHD/2015 CHALLENGES THE CIT(A)S ACTION CONFIRMING ASSESSMENT FINDINGS DISALLOWING ITS PROVISIONS(S) OF FIVE YEAR WARRANTY OF RS.28,29 ,848/- AND RS.52,47,094/-; RESPECTIVELY. IT THEREAFTER ALLEGES DOUBLE DISALLO WANCE OF THE SAID WARRANTY PROVISIONS AS EXPENDITURE ACTUALLY INCURRE D BUT ADJUSTED AGAINST THE RELEVANT PROVISION AS WELL. IT LASTLY AVERS THAT B OTH THE LOWER AUTHORITIES OUGHT TO HAVE APPRECIATED WORKING OF ITS FIVE YEAR WARRANTY PROVISION MADE ON AS SCIENTIFIC AND SYSTEMATIC BASIS. THE REVENUES CROSS APPEALS ITA NOS. 2420 & 2421/AHD/2015 ON THE OTHER HAND RAISE IDENTI CAL SUBSTANTIVE GROUND IN SEEKING TO REVIVE DISALLOWANCE OF SALES AND WARR ANTY COMMISSION OF RS.1,48,80,783/- AND RS.8,93,27,906/-; ASSESSMEN T YEAR-WISE. ITS LATTER SUBSTANTIVE GROUND IS THAT THE CIT(A) HAS ERR ED IN LAW AND ON FACTS IN DELETING DISALLOWANCE OF STORES AND SPARES EXPEN SES OF RS.19,40,000/-, SERVICE OPERATION EXPENSES OF RS.76,68,400/-, RS.88 ,10,000/- ON SALARY/ WAGES AND STAFF WELFARE EXPENDITURE IN FORMER AND R S.91,73,000/- OUT OF SERVICE OPERATION EXPENSES, RS.1,20,50,800/- UND ER THE HEAD SALARY AND WAGES AND STAFF WELFARE EXPENDITURE; RESPECTIV ELY IN LATTER ASSESSMENT YEAR ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 3 AFTER ADMITTING ADDITIONAL EVIDENCE THEREBY VIOLATI NG RULE 46A OF THE INCOME TAX RULES. 3. IT THUS CLEAR FROM BOTH THE PARTIES ABOVE NARRATED PLEADINGS. THE FIRST COMMON ISSUE IN ALL THESE CASES IS THAT OF CORRECTN ESS OF DISALLOWANCE OF ASSESSEES WARRANTY PROVISION(S). THE CIT(A)S DETA ILED DISCUSSION QUA THE INSTANT ISSUE READS AS FOLLOWS: 4.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. I HAVE AL SO CAREFULLY CONSIDERED THE REMAND REPORT, AND DIRECTIONS OF HONBLE I.T.A.T. THE HONBLE ITAT HAS DIRECTED UNDERSIGNED TO CONSIDER THE ISSUE OF WARRA NTY EXPENSES, IN VIEW OF DECISION OF SUPREME COURT IN CASE OF ROTORK CONTROL S INDIA P. LTD V. COMMISSIONER OF INCOME-FAX 314 ITR 62(SC), WHEREIN IT IS HELD THAT IF CLAIM OF ASSESSEE IN RESPECT OF WARRANTY PROVISION IS FOUND TO BE SCIENTIFIC, THEN NO DISALLOWANCE SHOULD BE MADE TOWARDS WARRANTY EXPENS ES. IT IS PERTINENT TO NOTE THAT, THE ASSESSING OFFICER HAS GIVEN REMAND REPORT FOR A.Y. 2000-2001 BUT FACTS INVOLVED IN BOTH THE APPEALS ARE IDENTICAL, HENCE, A. Y, 2001-02 IS ALSO ADJUDICATED CONSIDERING REMAND REPORT SUBMITTED BY ASSESSING OFFICER FOR A.Y. 2000-2001. FOR A.Y. 2000-2001, THE APPELLANT DURING THE COURSE OF REMAND PROCEEDINGS AS WELL AS SET ASIDE PROCEEDINGS EXPLAI NED THAT TOTAL DISALLOWANCE MADE TOWARDS WARRANTY EXPENSES OF RS. 7,18,64,000/- INCLUDES SALES COMMISSION OF RS 5,41,52,792/- AS WELL AS WARRANTY EXPENSES (O NE YEAR) OF RS 1,77,10,631/-. THE WARRANTY CHARGES INCURRED BY THE APPELLANT DURI NG THE YEAR UNDER CONSIDERATION ARE ONLY RS. 2,05,40,479/- WHICH CONS IST OF ONE YEAR WARRANTY EXPENSES OF RS. 1,77,10,631/- AND FIVE EAR WARRANTY EXPENSES OF RS. 28,29,848/-. THUS, IT WAS ARGUED THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF SALE COMMISSION TREATING IT AS PART OF WARRANTY EXPENDITURE. THE ASSESSING OFFICER AT PAGE 2 OF HIS REMAND REPORT RE PRODUCED HEREIN ABOVE HAS ALREADY ACCEPTED THE CONTENTION OF APPELLANT THAT E XPENDITURE OF RS.18,64,000/- (ACTUAL FIGURE IS RS.7,18,63,423/-) INCLUDES SALES COMMISSION AND ACTUAL WARRANTY EXPENSES ARE ONLY OF RS 2,05,40,479/-. CONSIDERING THESE FACTS, DISALLOWANCE OF SALES COMMISSION OF RS. 5,41,52,792/- MADE BY ASSES SING OFFICER TREATING IT AS PART OF WARRANTY EXPENSES IN ORIGINAL ASSESSMENT OR DER IS DELETED. SO FAR DISALLOWANCE OF PROVISION FOR ONE YEAR WARRA NTY CHARGES ARE CONCERNED, APPELLANT HAS ARGUED THAT SAME IS SERVIC E CHARGES TO BE PAID TO THE DEALERS FOR GENERAL CLEARING & MAINTENANCE SERVICE OFFERED TO EVERY CUSTOMER IN THE FIRST YEAR OF SALE OF AC AND FOR ATTENDING SPEC IFIC FAILURE ARISING IN FUNCTIONING OF AC. IT WAS ALSO ARGUED THAT AFTER CARRYING OUT A N DETAILED ANALYSIS OF THE VARIOUS ACTIVITIES INVOLVED IN PROVIDING 1 YEAR WAR RANTY SERVICES, ACTUAL COST ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 4 INVOLVED IN RENDERING THE VARIOUS ACTIVITIES IN PRO VISION OF SERVICE AND WORKING OUT THE PROBABILITY OF HAPPENING OF EVENTS TRIGGERI NG TO CARRY OUT SERVICES BASED ON THE PAST EXPERIENCE, HAS FIXED THE WARRANTY AMOU NT TO BE GIVEN TO ITS SALES & SERVICE DEALER FOR THE DIFFERENT MODELS SOLD BY THE COMPANY AND THUS NO ADHOC PROVISIONS IS MADE. ON THE OTHER HAND, THE ASSESSIN G OFFICER IN REMAND REPORT CONSIDERED SUCH DETAILS AND ACCEPTED THE METHOD FO LOWED FOR WORKING OF ONE YEAR WARRANTY CHARGES. HOWEVER, IT WAS ARGUED THAT APPELLANT HAS NOT PROVIDED THE FAILURE RATIO OF LAST 5 YEARS PRECEDING A.Y. 20 00-2001, WHICH COULD JUSTIFY THE SCIENTIFIC WORKING OF ONE YEAR WARRANT EXPENSES AND OBSERVED THAT APPELLANT ITSELF HAS STATED THAT IT HAS INCURRED ACTUAL EXPENDITURE OF RS 1,76,16,550/- ON ACCOUNT OF ONE YEAR WARRANT EXPENSES AND ACCORDINGLY RS.94, 080/- IS EXCESSIVE EXPENDITURE. ON CAREFUL CONSIDERATION OF ENTIRE FACTS RELATED TO THE ISSUE, IT IS OBSERVED THAT ONE YEAR WARRANTY CHARGES ACTUALLY REPRESENTS SERVICE CHARGES PAID TO DEALERS CARRYING OUT GENERAL, CLEANING & MAINTENANC E SERVICES OF AC IN FIRST YEAR OF SALE AND SUCH SERVICES ARE PROVIDED TO EACH CUSTOMER AT FREE OF COST. THE APPELLANT HAS FIXED THE WARRANTY AMOUNT TO BE GIVEN TO ITS SALES & SERVICE DEALER FOR THE DIFFERENT MODELS SOLD BY THE COMPANY AND CO NSIDERING THE NUMBER OF AC SOLD DURING THE YEAR, IT HAS CLAIMED SUCH EXPENDITU RE IN PROFIT & LOSS ACCOUNT. THE DETAILS SUBMITTED BY APPELLANT CLEARLY SUGGEST THAT NO ADHOC PROVISION IS MADE BUT (EXPENDITURE IS CLAIMED ON SCIENTIFIC BASI S. THE DETAILS SUBMITTED BY APPELLANT ARE NOT FOUND TO BE INCORRECT BY ASSESSIN G OFFICER. THE ASSESSING OFFICER HAS CONSIDERED ONLY RS. 94,080/- AS EXCESS PROVISION MADE DURING THE YEAR OUT OF TOTAL EXPENDITURE OF RS 1,77,10,631/-. CONSIDERING THE TOTALITY OF FACTS, AND THE FACT THAT EXCESS PROVISION WAS ONLY TO THE EXTENT OF RS 94,080/-, THE AMOUNT OF ONE YEAR WARRANTY CHARGES IS FOUND TO BE MADE ON ACTUAL BASIS AND ACCORDINGLY DISALLOWANCE MADE TOWARDS PROVISION MAD E FOR ONE YEAR WARRANTY CHARGES IS DELETED. IN RESPECT OF FIVE YEAR WARRANTY CHARGES, THE APPEL LANT HAS SUBMITTED THAT IT HAS MADE PROVISIONS OF SUCH EXPENDITURE ON THE B ASIS OF FAILURE RATIO OF PAST FIVE YEARS WHICH IS DETERMINED ON THE BASIS OF NUMB ER OF COMPRESSOR FAILED EACH YEAR AND NUMBER OF COMPRESSORS USED IN PREVIOUS FIV E YEARS. THE APPELLANT HAS PROVIDED PRODUCT WISE BREAK-UP OF FIVE YEAR WARRANT Y EXPENSE FOR THE F.Y. 1999- 2000 AND WORKING OF FAILURE RATIO MADE FOR A.Y 2008 -09 TO EXPLAIN ITS CONTENTION. ON THE OTHER HAND, ASSESSING OFFICER HAS SUBMITTED THAT APPELLANT HAS SUBMITTED WORKING MADE FOR A.Y. 2008-2009 TO EXPLAIN HOW THE FAILURE RATIO IS COMPUTED ON BAST EXPERIENCE TO MAKE PROVISION FOR FIVE YEAR WAR RANTY BUT NO SUCH DETAILS ARE SUBMITTED FOR YEAR UNDER CONSIDERATION, HENCE PROVI SIONS CANNOT BE TREATED AS SCIENTIFIC BASIS. ON CAREFUL CONSIDERATION OF ENTIRE FACTS, IT IS OBS ERVED THAT APPELLANT COMPANY IS PROVIDING 5 YEAR WARRANTY ON COMPRESSOR OF AC SOLD BY IT AND MAKING PROVISION OF SUCH WARRANTY IN THE YEAR IN WH ICH THE AC MACHINE IS SOLD. THE APPELLANT HAS EXPLAINED THAT IT MADE PROVISIONS FOR SUCH EXPENDITURE ON THE BASIS OF ESTIMATED FAILURE RATIO OF THE COMPRESSORS HAPPENED IN PAST AND THE PERCENTAGE OF COMPRESSOR FAILURE OR A SUBJECT YEAR IS DETERMINED AS RATIO OF NUMBER OF COMPRESSORS TURNED DEFECTIVE IN A YEAR TO CUMULATIVE POPULATION OF NUMBER OF COMPRESSORS USED IN IMMEDIATE PREVIOUS 5 YEARS. IT IS FURTHER BEEN ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 5 EXPLAINED THAT AFTER OBTAINING FAILURE RATIO, SAME IS MULTIPLIED WITH ESTIMATED COST OF REPLACEMENT OF A COMPRESSOR FOR NEXT 5 YEARS AND THE SUMMATION OF SUCH ESTIMATED COST OF REPLACEMENT OF NEXT 5 YEARS EACH MODEL WISE IS CONSIDERED AS THE RATE OF 5 YEAR WARRANTY PROVISION FOR SUCH MODE L FOR THE RELEVANT YEAR. THE ASSESSING OFFICER HAS CONTENDED THAT APPELLANT HAS PROVIDED THE WORKING FOR A.Y. 2008-2009 IN SUPPORT OF ITS CLAIM AND NO FAILURE RA TIO OF YEAR UNDER CONSIDERATION IS PROVIDED. THE CONTENTION OF THE ASSESSING OFFICE R APPEARS TO BE CORRECT AS IN SPITE OF EXPLAINING THE METHOD BY WHICH IT HAS PROV IDED FOR THE FIVE YEAR WARRANTY EXPENSES THE APPELLANT HAS NOT BEEN ABLE TO GIVE AN Y WORKING OF- THE AMOUNTS PROVIDED AS WARRANTY. THE CLAIM OF THE APPELLANT TH AI5THE ASSESSING OFFICER HAS NOT FOUND ANY DEFECTS IN METHOD OF PROVIDING 5 YEAR S WARRANTY EXPENSES INCLUDING THE WORKING FOR A.Y. 2008-2009 AS PROVIDED BY APPEL LANT IS NOT RELEVANT AS THE APPELLANT SHOULD PROVIDE THE DETAILS OF WORKING DON E BY IT FOR MAKING THE PROVISIONS FOR FIVE YEAR WARRANTY EXPENSES. THE APP ELLANT HAS CLAIMED EXPENSES IN THE PROFIT AND LOSS ACCOUNT AND IT WAS ITS ONUS TO PROVIDE THE DETAILS. THE HONOURABLE SUPREME COURT IN THE DECISION IN THE CAS E OF ROTOK CONTROL (SUPRA) HAS ALSO DIRECTED TO ALLOW WARRANTY EXPENSES ON THA T BASIS. THE HONOURABLE ITAT HAS ALSO DIRECTED THE UNDERSIGNED TO GET THE PROVIS IONS VERIFIED IN THE LIGHT OF THE DIRECTIONS GIVEN BY HONOURABLE SUPREME COURT. THE A PPELLANT MAY HAVE BEEN CONSISTENTLY FOLLOWING THE METHOD OF PROVISION OF W ARRANTY BUT IN ABSENCE OF ANY SUPPORTING EVIDENCE FOR THE CURRENT YEAR THE CLAIM CANNOT BE ALLOWED. THE SCIENTIFIC FORMULA ON THE BASIS OF WHICH THE PROVIS ION FOR FIVE YEAR WARRANTY HAS BEEN MADE BY THE APPELLANT AFTER TAKING INTO ACCOUN T THE COMPRESSOR FAILURE RATIO HAS NOT BEEN GIVEN BY THE APPELLANT. IN VIEW OF THI S DISCUSSION, I AM OF THE CONSIDERED OPINION THAT THE FIVE YEAR WARRANTY EXPE NSES CLAIMED BY THE APPELLANT CANNOT BE ALLOWED IN ABSENCE OF ANY DETAILS. THE CLAIM OF THE APPELLANT THAT NO DISALLOWANCE ON THIS ACCOUNT HAS BEEN MADE IN ANY SUBSEQUENT ASSESSMENT YEAR IS OF NO HEL P AS IT WAS THE ONUS OF THE APPELLANT TO PROVIDE THE DETAILS SHOWING THE BASIS OF PROVISION. IN THOSE YEARS WHERE NO DISALLOWANCE HAS BEEN MADE THE APPELLANT M UST HAVE PROVIDED THE DETAILS TO VERIFY WHETHER THE PROVISION WAS ON SCIE NTIFIC AND SYSTEMATIC BASIS. THEREFORE, THE CONTENTION OF THE APPELLANT IN THIS REGARD IS NOT ACCEPTED. IN VIEW OF THE ABOVE DISCUSSION, OUT OF THE DISALLO WANCE OF RS. 7,18,64,900/- MADE BY ASSESSING OFFICER IN ORIGINAL ASSESSMENT ORDER FOR SALES COMMISSION AND WARRANTY EXPENSES, THE DISALLOWANCE IN RESPECT OF FIVE YEAR WARRANTY EXPENSES OF RS. 28,29,848/- IS UPHELD AND THE REMAINING DISALLOWANCE IN RESPECT OF WARRANTY EXPENSES IS DIRECTED TO BE DELE TED. IN A.Y 2001-02, THE ASSESSING OFFICER HAS MADE SIMI LAR DISALLOWANCE OF RS.9,45,75,000/-. THE DETAILS SUBMITTED BY APPELLAN T CLEARLY SUGGEST THAT FIGURE OF RS.9,45,75,000/- INCLUDES SALES COMMISSION OF RS.6, 87,11,902/- AND SUCH COMMISSION CANNOT BE CONSIDERED AS PART OF WARRANTY EXPENSES. THE ACTUAL WARRANTY EXPENDITURE IS ONLY RS.3,11,08,478/- WHICH COMPRISES OF ONE YEAR WARRANTY EXPENSES OF RS.2,58,61,384/- AND 5 YEARS W ARRANTY EXPENSES OF RS.52,47,094/-. AS FACTS OF YEAR UNDER CONSIDERATIO N ARE IDENTICAL WITH FACTS OF A.Y. 2000-2001, FOR THE REASONS DISCUSSED IN PRECED ING PARA, ENTIRE DISALLOWANCE OF RS.52,47,094/- IS UPHELD AND THE BALANCE IS DIRE CTED TO BE DELETED . ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 6 THE GROUND OF APPEAL FOR BOTH THE YEARS ARE ACCORDI NGLY, PARTLY ALLOWED . 4. BOTH THE LEARNED REPRESENTATIVES REITERATE THEIR RESPECTIVE STANDS DURING THE COURSE OF HEARING BEFORE US. THERE IS NO DISPUT E ON THE FIRST AND FOREMOST LEGAL PRINCIPLE SETTLED IN HONBLE APEX COURTS DEC ISION IN ROTOR CONTROL CASE (SUPRA) THAT SUCH A WARRANTY PROVISION BASED ON SCI ENTIFIC ESTIMATION FOR QUANTIFICATION KEEPING IN MIND THE RELEVANT BUSINES S SALES VIS--VIS THE PRODUCT MANUFACTURED AND SOLD; IS ALLOWABLE AS A DEDUCTION. THE REVENUES CASE IS THAT ALTHOUGH THEIR LORDSHIPS HAVE HOLD SUCH A WARRANTY PROVISION TO BE ALLOWABLE IN SPECIFIED CIRCUMSTANCES, THE ASSESSEE HAS FAILED TO PLACE ON RECORD THE RELEVANT MATERIAL SUPPORTIVE OF ITS CLAIM ON FACTS. WE KEEP IN MIND THE SETTLED LEGAL PROPOSITION AND BOTH PARTIES RESPECTIVE CONTENTION S TO REVERT BACK TO THE FACTS OF THE INSTANT CASE. THE ASSESSEE ADMITTEDLY IS A MANUFACTURER OF AIR CONDITIONER COOLING UNITS. IT APPEARS TO HAVE PROV IDED FOR TWO KINDS OF WARRANTIES I.E. FIVE YEARS AND ONE YEAR. CASE FILE SUGGESTS THAT THE ABOVE LATTER WARRANTY REPRESENTS SERVICE CHARGES PAID TO DEALERS WHICH HAS GONE UNREBUTTED FROM REVENUE SIDE. FORMER FIVE YEAR WARRANTY PROVI SION APPEARS TO BE COST OF COMPRESSOR REPLACEMENT IN THE EVENT OF THE SAME BEI NG TURNING OUT TO BE A DEFECTIVE ONE. THE ASSESSEES COMPUTATION SEEMS TO BE BASED ON SOME PRODUCTS OF MODEL-WISE NUMBER OF UNITS SOLD AND PER UNIT RATE OF FIVE YEAR WARRANTY PROVISION FOR THE IMPUGNED ASSESSMENT YEAR S. COUPLED WITH THIS, IT HAS ALSO FILED BEFORE US A DETAILED COMPILATION CHA RT OF THE IMPUGNED WARRANTY PROVISIONS AS WELL AS SALES FIGURES OF FINISHED GOO DS FROM FINANCIAL YEAR 2004- 05 TO 2010-11 RELEVANT AMOUNTS INVOLVED IN TWO TYPE S OF WARRANTIES, CORRESPONDING CONSISTENT PERCENTAGE AND CORRESPONDI NG SALES OF FINISHED GOODS, MOVEMENT OF THE FORMER WARRANTY PROVISION, ITS OPEN ING BALANCE, RELEVANT PROVISIONS CREATED DURING THE YEARS, UTILIZED SUMS THEREIN, REVERSAL SUMS, CLOSING BALANCE, BREAKUP OF THE AMOUNT UTILIZED ASS ESSMENT YEAR-WISE ALONGWITH THE PARTICULARS IN QUESTION IN THE IMPUGN ED PROVISIONS READING AS UNDER: ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 7 RS IN LAKHS 2004-2005 (12MONTHS) 2005-2006 (12MONTHS) 2006-2007 (12MONTHS) 2007-2008 (12MONTHS) 2008-2009 (12MONTHS) 2009- 2010 (12MONTHS) 2010-11 (12MONTHS) SALES OF FINISHED GOODS 15,162.82 19,739.29 27,226.94 39,460.35 40,258.03 55,896.40 64,642.02 5 YEAR WARRANTY PROVISION 76.12 38.70 77.49 43.60 57.31 457.20 332.89 1 YEAR WARRANTY 561.71 539.68 558.44 961.34 930.21 1,146.60 1,093.94 PERCENTAGE TO SALES OF FG 5 YEAR WARRANTY PROVISION 0.50% 0.20% 0.28% 0.11% 0.14% 0.82% 0.51% 1 YEAR WARRANTY 3.70% 2.73% 2.05% 2.44% 2.31% 2.05% 1.69% PROVISION MOVEMENT (RS. IN LAKHS) OPG BALANCE 304.75 325.36 316.66 320.38 268.12 206.22 501.33 ADDITION 76.12 69.35 77.49 89.19 111.61 502.78 337.98 UTILISATION 41.12 51.25 73.77 95.67 118.51 161.89 191.56 REVERSAL 14.39 26.80 - 45.78 55.00 45.78 4.95 CLOSING SALARIES 325.36 316.66 320.38 268.12 206.22 501.33 642.80 ADDITIONS - YEAR WISE FY 2004-05 76.12 9.51 FY 2005-06 69.35 32.52 13.69 FY 2006-07 77.57 77.29 FY 2007-08 89.18 81.52 FY 2008-03 111.61 70.61 FY 2009-10 231.33 FY 2010-11 324.29 TOTAL (RS IN LAKHS) 76.12 69.35 77.57 89.18 111.61 502.78 337.98 UTILIZATION YEAR WISE FY 1999-00 FY 2000-01 FY 2001-02 FY 2001-03 FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 - 7.15 11.85 7.83 3.36 3.84 7.09 5.93 11.35 10.94 7.58 13.40 2.05 TOTAL - 13.08 4.83 12.12 8.98 20.24 16.96 10.43 1.22 2.94 10.48 16.35 24.54 29.73 10.42 2.68 4.22 16.57 22.25 29.41 30.50 12.88 29.25 36.51 9.98 29.11 30.62 34.37 43.81 13.99 34.62 0.37 80.75 16.71 118.71 33.71 133.90 37.19 112.48 47.83 104.52 41.80 55.79 13.95 13.95 TOTAL (RS IN LAKHS) 41.12 51.25 73.56 95.68 118.51 161.88 191.56 5. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO CONTRO VERT THE FACT THAT THE ASSESSEE HAS BEEN FOLLOWING CONSISTENT METHOD IN CR EATING SIMILAR WARRANTY PROVISION IN SUBSEQUENT ASSESSMENT YEARS AS WELL. RELEVANT ASSESSMENT ORDER IN SUCH A CASE DATED 30.04.2015 FOR ASSESSMENT YEAR 20 11-12 INDICATES THAT THERE IS NO SUCH DISALLOWANCE MADE AT THE REVENUES BEHEST. THE ASSESSEE IS ASSESSED AT THE SAME RATE THROUGHOUT. ALL THE ABOVE NARRATED FACTS THEREFORE MAKE IT CRYSTAL CLEAR THAT THE ASSESSEE H AS SATISFIED ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 8 THE RELEVANT CONDITIONS FOR CLAIMING THE IMPUGNED W ARRANTY PROVISIONS AS DEDUCTION AS ENVISAGED IN HONBLE APEX COURTS DECI SION(SUPRA). WE ACCORDINGLY ACCEPT ASSESSEES SUBSTANTIVE GROUND SE EKING TO CLAIM THE IMPUGNED WARRANTY PROVISION QUA BOTH FIVE YEARS AND ONE YEAR (SUPRA) AS COMPUTED ON SCIENTIFIC BASIS AS PER ITS FORGOING EX PERIENCE. ITS IDENTICAL SUBSTANTIVE GROUNDS IN BOTH CASES ITA NOS. 2303 & 2 304/AHD/2015 AS WELL AS THE MAIN CASES STAND ACCEPTED WHEREAS REVENUES COR RESPONDING SUBSTANTIVE GROUNDS ARE DISMISSED. 6. THIS LEAVES US WITH REVENUES LATTER GRIEVANCE SE EKING TO REVIVE DISALLOWANCE OF EXPENDITURE @10% IDENTICAL IN BOTH ASSESSMENT YEARS AS DELETED IN THE COURSE OF LOWER APPELLATE PROCEEDING S BY FOLLOWING COMMON DETAILED ADJUDICATION: 5.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. IT IS NOTE D THAT THE AO HAS GIVEN REMAND REPORT ONLY FOR A.Y. 2000-2001 BUT FACTS INVOLVED I N BOTH THE APPEALS ARE IDENTICAL AND ACCORDINGLY A. Y. 2001-02 IS ALSO ADJ UDICATED CONSIDERING REMAND REPORT SUBMITTED BY ASSESSING OFFICER IN A.Y. 2000- 2001. WHILE PASSING THE ORIGINAL ASSESSMENT ORDER FOR A.Y .2000-2001, ASSESSING OFFICER HAS MADE AD-HOC 10% DISALLOWANCE ON VARIOUS EXPENDITURE BEING STORES AND SPARES, EXPENSES ON SERVICE OPERATORS AND SALAR Y, WAGES AND STAFF WELFARE EXPENSES TREATING THEM AS USED FOR WARRANTY PERIOD FOR AIR-CONDITIONING MACHINES. DURING THE COURSE OF APPELLANT PROCEEDING S, MY PREDECESSOR CIT (A) AFTER CONSIDERING DETAILS AND BREAK-UP OF VARIOUS E XPENSES AS PER ENCLOSURE TO STATEMENT OF FACTS HAS DELETED THE DISALLOWANCE MAD E BY ASSESSING OFFICER. HOWEVER, HON'BLE AHMEDABAD ITAT HAS OBSERVED THAT T HESE DETAILS WERE NOT AVAILABLE WITH THE FILE OF ASSESSING OFFICER, HENCE , THE ISSUE WAS SET ASIDE TO THE UNDERSIGNED FOR FRESH DECISION AFTER OBTAINING REMA ND REPORT FROM ASSESSING OFFICER ON THESE ASPECTS. THE DETAILS SUBMITTED IN ORIGINAL APPELLATE PROCEEDING WERE ALSO PROVIDED BY APPELLANT IN PRESENT SET ASID E PROCEEDING AND SAME WERE FORWARDED TO ASSESSING OFFICER FOR OBTAINING HIS RE MAND REPORT. THE ASSESSING OFFICER IN REMAND REPORT HAS ACCEPTED THAT APPELLAN T HAS SUBMITTED INFORMATION, BUT HAS FAILED TO SUBMIT CORRESPONDING BILLS AND VO UCHER IN SUPPORT OF SUCH EXPENDITURE HENCE HE REQUESTED THAT DISALLOWANCE OF 10% EXPENDITURE MAY BE UPHELD. ON THE OTHER HAND, APPELLANT HAS ARGUED THA T IT HAS ALREADY SUBMITTED DETAILS PURSUANT TO DIRECTION OF HON'BLE AHMEDABAD I.T.A.T AND ASSESSING OFFICER HAS NO WHERE ASKED APPELLANT TO SUBMIT CORRESPONDIN G BILLS AND VOUCHERS. IT WAS ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 9 ALSO SUBMITTED THAT THE EXPENDITURE FOR WHICH IMPUG NED DISALLOWANCE WAS MADE ARE IN NO WAY RELATED TO WARRANTY EXPENSES. ON CAREFUL CONSIDERATION OF ENTIRE FACTS RELATED TO THE ISSUE, IT IS NOTED THAT HON'BLE I.T.A.T. HAS OBSERVED THAT BREAK UP OF VARI OUS EXPENDITURE AS PER ENCLOSURE TO STATEMENT OF FACTS FILED ALONG WITH OR IGINAL APPEAL WAS NOT AVAILABLE WITH ASSESSING OFFICER, HENCE DIRECTED UNDERSIGNED TO ADJUDICATE THE PRESENT APPEAL AFTER OBTAINING REMAND REPORT ON THIS ISSUE. THE ISSUE INVOLVE IN ORIGINAL ASSESSMENT ORDER WAS THAT ADHOC DISALLOWANCE WAS MA DE TREATING THEM AS USED FOR WARRANTY PERIOD OF AC MACHINES AND NOT PERTAINI NG TO NON-PRODUCTION OF VOUCHERS AND SUPPORTING EVIDENCES. THE BREAKUP OF S UCH EXPENDITURE WAS NOT PROVIDED TO ASSESSING OFFICER IN ORIGINAL ASSESSMEN T PROCEEDINGS BUT WAS SUBMITTED FOR VERY FIRST TIME IN APPELLATE PROCEEDI NGS. THUS, ASSESSING OFFICER1 OBSERVATION THAT APPELLANT HAS FAILED TO PROVIDE VO UCHERS FOR ABOVE EXPENDITURE, HENCE DISALLOWANCE MADE IN ORIGINAL ASSESSMENT PROC EEDING IS REQUIRED TO BE UPHELD CANNOT BE ACCEPTED. ON PERUSAL OF DETAILED B REAK-UP, IT IS CLEARLY EVIDENT THAT STORES AND SPARES EXPENSES PERTAINS TO NORMAL REPAIRS AND MAINTENANCE OF THE MANUFACTURING FACILITY OF THE APPELLANT. THE EX PENSES TOWARDS SERVICE OPERATION INCLUDE INSTALLATION CHARGES, AMC EXPENSE S ETC. FURTHER THE EXPENSES ON SERVICE CHARGES INCLUDES AMOUNT OF RS. 28.29 LAC S TOWARDS 5 YEAR WARRANTY FOR WHICH SEPARATE FINDING ARE GIVEN IN PRECEDING P ARA. THE EXPENDITURE TOWARDS SALARY, WAGES AND STAFF WELFARE ARE NOT RELATED WIT H THE WARRANTY PERIOD BUT ARE NORMAL BUSINESS EXPENDITURE SUCH AS PROVIDENT FUND, ESI, MEDICAL REIMBURSEMENT ETC. AND AS SUBMITTED BY THE APPELLAN T THE SAME ARE PERTAINING TO NORMAL BUSINESS EXPENDITURE ON MAINTENANCE OF ESTAB LISHMENT. CONSIDERING THE FACTS DISCUSSED HEREIN ABOVE. ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF 1 0% OF EXPENDITURE ON THE GROUND THAT SAME WAS USED FOR THE WARRANTY PERIOD FOR AC MACHINES. THUS, DISALLOWANCE MADE IN ORIGINAL ASSESSMENT PROCEEDINGS PERTAINING TO STORES & SPARE S FOR RS 19,40,400/-, EXPENSES ON SERVICE OPERATORS FOR RS. 76,68,400/- A ND SALARY & WAGES FOR RS 88,10,800/- IS DELETED. FURTHER IN A.Y 2001-02, THE FACTS OF THE CASE OF TH E APPELLANT ARE IDENTICAL AND THE APPELLANT HAS ALSO RELIED ON THE SAME ARGUM ENT AS MADE FOR A.Y 2000-01. CONSIDERING THE FACTS AND THE DISCUSSION MADE HEREI N ABOVE, DISALLOWANCE OF RS. 91,73,700/- TOWARDS SERVICE OPERATION AND RS. 1,20, 50,800/- OUT OF SALARY AND WAGES AND STAFF WELFARE EXPENSES ARE ALSO DIRECTED TO BE DELETED. THE GROUND OF APPEAL FOR BOTH THE ASSESSMENT YEARS ARE ACCORDINGLY, ALLOWED. 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THE FACT THAT THE ASSESSEE HAD PRODUCED ALL THE RELEVANT BILLS/VOUCHERS IN THE FIRST ROUND OF LOWER APPELLATE PROCEEDINGS (SUPRA). IT HAS ALREADY COME ON RECORD THAT THE RELEVANT ISSUE IS THAT ON NORMAL BUSINESS EXPENDITURE WHEREIN THE REV ENUE HAS NOT MADE OUT ANY ITA NOS. 2303, 2304, 2420 & 2421/AHD/15 [M/S. HITA CHI HOME & LIFE SOLUTIONS (I) LTD.] A.YS. 2000-01 & 2001-02 - 10 CASE OF CHALLENGING ITS GENUINENESS. THE CIT(A) APPE ARS TO HAVE DULY ASSOCIATED THE ASSESSING OFFICER AND SOUGHT REMAND REPORT BEFORE ACCEPTING ASSESSEES ADDITIONAL EVIDENCE AS PER TRIBUNALS EA RLIER ORDER (SUPRA). WE AFFORDED SUFFICIENT OPPORTUNITY TO THE LEARNED DEPA RTMENTAL REPRESENTATIVE TO REBUT THE CIT(A)S ABOVE EXTRACTED FINDINGS UNDER C HALLENGE DELETING THE IMPUGNED AD HOC DISALLOWANCE IN ABSENCE OF ANY QUES TION OF ALLOWABILITY AS WELL AS GENUINENESS. THERE IS NO SUCH COGENT MATERI AL ON RECORD TO UPHOLD THE ASSESSING OFFICERS CONCLUSION THEREFORE. WE THUS REJECT REVENUES CONTENTION QUA THE INSTANT ISSUE AS WELL. ITS APPEAL ITA NOS. 2420 & 241/AHD/2015 FAIL ACCORDINGLY. 8. THESE TWO ASSESSEES APPEALS ARE ALLOWED WHEREAS REVENUES BOTH APPEALS ARE DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 18 TH DAY OF APRIL , 2018.] SD/- SD/- (PRADIP KUMAR KEDIA) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD: DATED 18/04/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 / GUARD FILE. BY ORDER / . // . /0