CHIMERA INDUSTRIAL AND DEVELOPMENT PRIVATE LIMITED, MUMBAI V. COMMISSIONER OF INCOME TAX (APPEALS)-NFAC, MUMBAI

ITA 2332/MUM/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3361 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-03-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 27-06-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Revised return; TDS; Set aside
• Section: 32; 147; 37; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “C” Bench, Mumbai. Before Justice (Retd.) C.V. Bhadang (President) & Shri B.R. Baskaran (AM) I.T.A. No. 2331/Mum/2023 (A.Y. 2016-17) I.T.A. No. 2332/Mum/2023 (A.Y. 2017-18) Chimera Industrial & Development Pvt. Ltd. D-Metro Estate, Behind Ichiban Honda Showroom Kalina Santacruz East Vidya Nagari Marg Mumbai-400 098. PAN : AARCS7230G Vs. ACIT, Circle 2(2)(2) Room No. 545 5 th Floor Aayakar Bhavan Maharishi Karve Road, Mumbai 400 020. (Appellant) (Respondent) Assessee by Shri Ajit Kumar Jain, Shri Shabbir Motorwala & Shri Dhirajkumar Pandey Department by Shri Ashok Kumar Kardam Date of Hearing 07.03.2024 Date of Pronouncement 19.03.2024 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed these appeals challenging the orders passed by the learned CIT(A), National Faceless Appeal Centre, Delhi and they relate to A.Ys. 2016-17 & 2017-18. Since the issues urged in both these appeals are identical in nature, they were heard together and are being disposed of by this common order, for the sake of convenience. 2. In both these appeals, following issues are contested by the assessee : a) Disallowance of depreciation on goodwill b) Disallowance of provision made for liquidated damages c) Short credit of TDS d) Incorrect levy of interest under section 234B of the Act. Chimera Industrial & Development Pvt. Ltd. 2 In AY 2016-17, the assessee has raised a ground challenging the action of Ld CIT(A) in not granting video conference hearing facility. However, at the time of hearing, the Ld A.R did not press this ground. 3. We shall first take up the appeal filed by the assessee for A.Y. 2016-17. Facts relating to the case are that the assessee is engaged in the business of manufacture and sale of petrol dispensing pumps (also known as Nozzles). They are supplied to various oil distribution companies such as IOCL, BPCL, HPCL etc. The sequence of events which led to the formation of the present assessee is discussed in brief. A company named MIDCO Ltd. was having two divisions, viz., “Engineering Division” and “other Division”. The above said MIDCO Ltd (Demerged company) demerged its Engineering Division by forming a company named “Shuffle Realtors Pvt. Limited” (Resulting company) as a ‘going concern’ basis. Consequently, the name of demerged company MIDCO Ltd. was changed into ‘Mercantile & Industrial Development Co. Limited’. After sometime, the name of the resulting company, i.e., Shuffle Realtors Pvt. Ltd. was changed into MIDCO Ltd. It can be noticed that the impugned assessment orders have been passed in the name of MIDCO Ltd only. Later on, the name of the assessee company was again changed into the present name, viz., “Chimera Industrial & Development Limited” and the Ld CIT(A) has passed the order in the above said new name only. The appointed date for demerger was 1.4.2014 and order for demerger was passed on 12.9.2014 by Hon'ble High Court of Bombay. Thus, the demerger has become effective from assessment year 2015-16 onwards. 4. The assessee filed its return of income for A.Y. 2016-17 declaring a total loss of Rs. 12.01 crores. Thereafter, the assessee filed a revised return of income on 29.3.2017 declaring the very same loss of Rs. 12.01 crores. The return of income of the assessee was taken up by the Assessing Officer for scrutiny, wherein he made following disallowances, viz., Chimera Industrial & Development Pvt. Ltd. 3 (a) Disallowance of depreciation claimed on goodwill and (b) Disallowance of Provision for liquidated damages. The Ld CIT(A) confirmed both the disallowances referred above. Hence the assessee has filed this appeal. 5. First issue relates to the disallowance of depreciation claimed on goodwill. The facts relating thereto are discussed in brief. We noticed earlier the present assessee was formed by demerging the Engineering Division (undertaking) of MIDCO Limited. The Net Asset Value of the ‘undertaking’ was Rs. 67.18 crores. However, the same was valued at Rs. 266 crores. Hence the assessee herein (resulting company) accounted the assets at the above said figure of Rs.266 crores. The difference between Value of undertaking and its the Net Asset Value, which worked out to Rs. 198.80 (Rs.266.00 crores (-) Rs.67.18 crores) was accounted as “Goodwill” by the assessee in its books of account. The Ld A.R submitted that the above said accounting is required to be made as per the relevant Accounting Standard. It is pertinent to note that all the required accounting entries were passed in the year relevant to AY 2015-16. 5.1 The assessee claimed depreciation on the goodwill amount of Rs.198.80 crores, treating the same as an ‘intangible right’ in the year of demerger, i.e. in the year relevant to A.Y. 2015-16 and the said claim was allowed in that year. In this regard, the Ld A.R furnished a copy of assessment order dated 15.12.2017 passed u/s 143(3) of the Act and also the reassessment order dated 26-03-2022 passed u/s 147 r.w.s 144B of the Act for assessment year 2015-16. The Ld A.R submitted that one of the reasons mentioned by the AO for reopening of the assessment of AY 2015-16 is that there was excess claim of depreciation on the intangible assets. The intangible assets consisted of Good Will and other Intangible assets under development. Chimera Industrial & Development Pvt. Ltd. 4 5.2 In AY 2016-17, i.e., the year under consideration, the assessee claimed depreciation on the Written Down Value (WDV) of Good will. The depreciation so claimed was Rs.37.60 crores. However, the Assessing Officer disallowed claim for depreciation on the following reasons :- i) Depreciation credited by the assessee is book entry, i.e., since the purchase consideration paid by the assessee has exceeded book value of net asset, the excess is accounted as “Good will”. The assessee has not separately acquired any goodwill by making payment. ii) Demerged company did not hold any goodwill, meaning thereby, goodwill was NIL in the hands of the demerged company. iii) As per the 5 th proviso to section 32(1) of the Act, depreciation claimed by the demerged company and resulting company shall not exceed the amount of depreciation that would have been allowed in the hands of the demerged company, had such demerger not taken place. Since the demerged company did not hold any goodwill, no depreciation would have been allowed in its hands on the NIL value of goodwill. Consequently, the depreciation claimed by the assessee on goodwill is liable to be disallowed. iv) The decision rendered by Hon'ble Supreme Court in the case of CIT Vs. Smifs Securities Limited (2012) 348 ITR 0302 holds that goodwill is included in definition of intangible asset being any other business or commercial right of similar nature. However, the issue of goodwill arising out of the valuation done for the purpose of demerger was not before Hon'ble Supreme Court. Hence the assessee cannot take support of the above said decision. v) As per Explanation (vii) to section 43(1) of the Act, the actual cost of transferred asset to the resulting company shall be taken to be the same as it would have been if the demerged company continued to hold the capital asset for the purpose of its own business. Since the goodwill was NIL in the hands of demerged company and consequently not reflected in its balance sheet, cost of Good will in the hands of the assessee, being resulting company shall be taken as NIL and consequently, the depreciation is not allowable. Chimera Industrial & Development Pvt. Ltd. 5 vi) Though the assessee has accounted for excess payment as goodwill in its books of account, yet the entries in the books of account are irrelevant for taxation purpose as held by Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Company Limited Vs. CIT (82 ITR 363). Hence, the allowability of depreciation will be governed by the provisions of Income Tax Act. vii) The assessee has not produced any credible evidence to show that it has incurred any cost for acquiring goodwill in the scheme of demerger. viii) The decision rendered by the Bangalore Bench of the Tribunal in the case of United Breweries Ltd. Vs. ACIT (ITA No. 722/ Bang/2014) supports the stand of the Assessing Officer that the depreciation allowable on the asset acquired in the scheme of amalgamation/demerging cannot exceed the amount i.e. allowable in the hands of the amalgamating company. The Ld CIT(A) also confirmed the same. 5.3 We heard rival contentions on this issue and perused the record. We notice that the demerger has taken place in the year relevant to AY 2015-16 and the intangible asset of Goodwill was accounted in the books in that year only. Further, we noticed that the claim of depreciation on Goodwill has been allowed by the AO in AY 2015-16. The present assessment year is AY 2016-17 is the second year. During second and subsequent years, the depreciation shall be allowed on the “Written Down Value” (WDV) of assets. In our view, the conditions prescribed for allowing depreciation on an asset, viz., cost of asset, its actual user for the purpose of business etc are required to be examined in the first year in which depreciation was claimed first time. This is so after the introduction of concept of “block of assets”. In this regard, we may refer to the decision rendered by Hon’ble Bombay High Court in the case of CIT vs. G R shipping (309 ITR 125)(Bom). We noticed earlier that, one of the conditions prescribed for allowing depreciation is that the relevant asset should have been used for the purpose of business. In this case, the assessee did not use a barge, since it had met with an accident. Chimera Industrial & Development Pvt. Ltd. 6 The depreciation claimed on it was disallowed by the AO. The Tribunal held that, after the introduction of concept of “block of assets”, the individual asset would lose identity after entering into the block and the user test should be applied to the block and not to the individual asset. Accordingly, the Tribunal held that the depreciation is allowable on the barge. The above view of the Tribunal was upheld by the Hon’ble Bombay High Court. 5.4 We notice that Ahmedabad bench of Tribunal has considered an identical issue in the case of Bodal Chemicals Ltd (112 taxmann.com 217)(Ahd.). In this case also, the depreciation claimed on good will in the second year was disallowed. The co-ordinate bench held that the depreciation has to be allowed in the second year under the Principle of Consistency. The decision rendered in the above said case by the Tribunal is extracted below:- “10. Now, the issue arises whether the Revenue can deny the deduction claimed by the assessee on the written down value in the year under consideration. In our view, the answer stands in favour of the assessee. It is because, the revenue once allowed the deduction for the depreciation claimed by the assessee, then it is debarred to reject the claim of the assessee in the subsequent year on the WDV carried forward from the earlier assessment year. As such, in our considered view the Revenue was required to disturb the claim of the assessee in the 1st year itself. Therefore, we are of the view that claim of the assessee should be allowed on the basis of principles of consistency. In this regard we find support and guidance from the judgment of Hon'ble Supreme Court in the case of CIT v. Excel Industries Ltd. [2013] 38 taxmann.com 100/219 Taxman 379/358 ITR 295 wherein it was held as under: '28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue. 29. In Radhasoami Satsang Saomi Bagh v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. In Chimera Industrial & Development Pvt. Ltd. 7 arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken."' In view of the above and after considering the facts in totality, we are of the view that the assessee is eligible for deduction for the depreciation under section 32 of the Act.” The Hon’ble Gujarat High Court has also followed the Principle of Consistency in the case of DCIT vs. Gujarat Narmada Valley Fertilisers Co Ltd (2014)(42 taxmann.com 438)(Guj) that where assessee’s claim for depreciation in respect of leased out assets had been allowed in earlier years, there being no change in circumstances, said claim was to be allowed in the relevant year also. 5.5 In the instant case also, we noticed that depreciation on good will has been allowed in AY 2015-16. Hence, during the year under consideration, the depreciation is required to be allowed on the WDV of assets. The WDV is arrived at by deducting the cumulative amount of depreciation allowed in earlier years from the cost of asset. It was not the case of the AO that there is some change in the circumstances for not allowing depreciation. Accordingly, we are of the view that the tax authorities are not justified in disallowing the claim of depreciation on Good will in this year. Chimera Industrial & Development Pvt. Ltd. 8 5.6 Be that as it may, we may discuss the factual aspects of this issue, since we are of the view that there is some amount of obscurity in the claim of generation of Good will. There is huge difference between Sale of an undertaking and Demerger of an undertaking. In the case of sale of an undertaking, the owner of the undertaking would sell the same for a consideration to another person. However, in the case of demerger of an undertaking, no sale actually takes place, i.e., there is no buyer or seller. The existing company, which is the owner of the undertaking would transfer the assets & liabilities of the undertaking to a newly formed company. Thus the owners (shareholders) of the undertaking both in the “demerged company” and the “resulting company” would remain the same. Since the undertaking is transferred to a newly formed company, the owners, i.e., share holders of the demerged company would be allotted shares of newly formed resulting company on account of demerger of the undertaking. 5.7 In the instant case, the existing shareholders of demerged company MIDCO Ltd would automatically become shareholders of the resulting company and they shall be issued shares of the resulting company. In the recent past M/s Reliance Industries Ltd demerged its financial services division (Jio Financial Services Ltd). As a result the shareholders of Reliance Industries Ltd got equal number of shares in Jio Financial Services Ltd. Since the transfer is by the existing shareholders to themselves in the resulting company, such kind of transfer is not regarded as “transfer” u/s 47 of the Act. It is settled proposition of law that one cannot make profit by himself and this principle has been followed in these kind of cases. What we notice in the instant case is that the “engineering division” was having net assets to the tune of Rs.67.18 crores. When the said undertaking was transferred by the process of demerger, the present assessee, being resultant company, has issued shares worth Rs.266 crores for acquiring net assets of Rs.67.18 crores. Thus there was excess payment to the tune of Rs.198.82 crores, which is profit generated by shareholders themselves. Under general Chimera Industrial & Development Pvt. Ltd. 9 principles and u/s 47 of the Act also, this profit is not taxable. However, the resulting company, i.e., the assessee herein, has treated this excess payment as “Good Will” by using the principles prescribed in the Accounting Standard. In reality, what has happened is that the value of undertaking has been revalued and the revalued amount has been accounted in the books of the assessee by issuing shares to the existing shareholders. In the hands of shareholder, the said profit is exempt from taxation in view of sec.47 of the Act. However, the excess payment, which was the profit so generated by exchanging the assets themselves, has been accounted as “Good Will” in the books of resulting company, i.e., the assessee herein and depreciation has been claimed. The question that needs examination is whether the good will so generated by exchanging assets themselves by the shareholders would be akin to the good will which was considered as “intangible rights” by the Hon’ble Supreme Court. However, as observed by us in the earlier paragraphs, this question should have been examined by the AO in Asst. Year 2015-16 and not during the year under consideration. Since we are also adjudicating the appeal relating to AY 2016-17, this question cannot be examined by us also. 5.8 In view of the foregoing discussions, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow depreciation on the WDV of Good will claimed by the assessee. 6. The next issue contested by the assessee in AY 2016-17 relates to the disallowance of Provision for liquidated damages. The AO noticed that the assessee has claimed deduction of Rs.1.29 crores towards “Provision for liquidated damages”. The assessee submitted that it has entered into ‘Annual Maintenance Contract’ (AMC) with oil companies and the said contract contains a clause for payment of liquidated damages. As per the AMC, in case the breakdown complaints of the petrol dispensing pumps (nozzles) are not attended within the specified time, a charge per day per Chimera Industrial & Development Pvt. Ltd. 10 nozzle subject to the maximum of AMC charges per nozzle will be charged by the oil marketing companies upon the assessee. Before the AO, the assessee also furnished copies of AMC entered with HPCL and BPCL in support of above said submissions. With regard to the computation of provision for liquidated damages, the assessee submitted that the same is computed on the average rate at which actual damages were incurred by the assessee as a percentage of its gross debtors throughout the year. The assessee also submitted that the excess provision, if any, is reversed in the subsequent year. The AO, however, took the view that the Provision for liquidated damages is a contingent liability. The reasoning given by the AO is summarized below:- (a) The period taken to rectify the damage cannot be predicted and hence reliable estimate cannot be made. (b) There is no basis to presume that each and every product will suffer from some type of defect. (c) The assessee comes to know about the quantum of liquidated damages only when the customer deducts the same from the payment made to the assessee. (d) the assessee has adopted different percentage for different regions of the Country, Eg. Gujarat (1%), West Bengal (3%), Karnataka (24%), Delhi (19%), J & K (36%). Hence, it cannot be said that the average rate of all such regions is scientific estimation. (e) There is huge variation between the amount of provision made and the actual amount of damages paid. (f) The decision rendered by Hon’ble Supreme Court in the case of Rotork Controls India (P) Ltd (2009)(180 Taxman 422)(SC). Accordingly, the AO disallowed the claim of ‘Provision for liquidated damages’. The Ld CIT(A) also confirmed the same. Chimera Industrial & Development Pvt. Ltd. 11 6.1 We heard rival contentions and perused the record. We notice that there is no dispute that the AMCs/purchase orders entered by the assessee with Oil marketing companies have a clause for payment of liquidated damages by the assessee to them. Thus a liability is cast upon the assessee as per the terms of the AMCs. Though the AO has accepted this fact, yet he took the view that the estimate made by the assessee to make the provision for liquidated damages is not scientific one and accordingly held that it is only a contingent liability. Accordingly, he has disallowed the Provision for liquidated damages. The assessee has tabulated the details relating to liquidated damages as under:- Particulars FY 2013-14 FY 2014-15 FY 2015-16 Total of amount actually paid during the year 3,07,26,976 3,79,04,999 6,09,45,428 Provision made at the end of the year 1,51,80,254 2,24,82,398 2,31,29,138 Provision for earlier year written back 52,63,662 1,51,80,254 2,24,82,398 Total of expense debited to P & L A/c 4,06,43,568 4,52,07,143 6,15,92,169 A perusal of the above said data would show that the actual payment made by the assessee in any of the years is very much higher than the provision made by it. This is for the reason that the provision is made at the yearend only on the expected liability by way of liquidated damages. 6.2 The deduction allowable in respect of ‘provision for expenses’ has been explained by Hon’ble Supreme Court in the case of Rotork Contros vs. CIT (supra) as under:- “10. What is a provision? This is the question which needs to be answered. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: Chimera Industrial & Development Pvt. Ltd. 12 (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources 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 not met, no provision can be recognized. 11. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. 12. A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognized as provision. For a liability to qualify for recognition there must be not only present obligation but also the probability of an outflow of resources to settle that obligation. Where there are a number of obligations (e.g. product warranties or similar contracts) the probability that an outflow will be required in settlement, is determined by considering the said obligations as a whole. In this connection, it may be noted that in the case of a manufacture and sale of one single item the provision for warranty could constitute a contingent liability not entitled to deduction under Section 37 of the said Act. However, when there is manufacture and sale of an army of items running into thousands of units of sophisticated goods, the past event of defects being detected in some of such items leads to a present obligation which results in an enterprise having no alternative to settling that obligation. In the present case, the appellant has been manufacturing and selling Valve Actuators. They are in the business from assessment years 1983- 84 onwards. Valve Actuators are sophisticated goods. Over the years appellant has been manufacturing Valve Actuators in large numbers. The statistical data indicates that every year some of these manufactured Actuators are found to be defective. The statistical data over the years also indicates that being sophisticated item no customer is prepared to buy Valve Actuator without a warranty. Therefore, warranty became integral part of the sale price of the Valve Actuator(s). In other words, warranty stood attached to the sale price of the product. These aspects are important. As stated above, obligations arising from past events have to be recognized as provisions. These past events are known as obligating events. In the present case, therefore, warranty provision needs to be recognized because the appellant is an enterprise having a present obligation as a result of past events resulting in an outflow of resources. Lastly, a reliable estimate can be made of the amount of the obligation. In short, all three conditions for recognition of a provision are satisfied in this case. 13. In this case we are concerned with Product Warranties. To give an example of Product Warranties, a company dealing in computers gives warranty for a period of 36 months from the date of supply. The said company considers following options : (a) account for warranty expense in the Chimera Industrial & Development Pvt. Ltd. 13 year in which it is incurred; (b) it makes a provision for warranty only when the customer makes a claim; and (c) it provides for warranty at 2% of turnover of the company based on past experience (historical trend). The first option is unsustainable since it would tantamount to accounting for warranty expenses on cash basis, which is prohibited both under the Companies Act as well as by the Accounting Standards which require accrual concept to be followed. In the present case, the Department is insisting on the first option which, as stated above, is erroneous as it rules out the accrual concept. The second option is also inappropriate since it does not reflect the expected warranty costs in respect of revenue already recognized (accrued). In other words, it is not based on matching concept. Under the matching concept, if revenue is recognized the cost incurred to earn that revenue including warranty costs has to be fully provided for. When Valve Actuators are sold and the warranty costs are an integral part of that sale price then the appellant has to provide for such warranty costs in its account for the relevant year, otherwise the matching concept fails. In such a case the second option is also inappropriate. Under the circumstances, the third option is most appropriate because it fulfills accrual concept as well as the matching concept. For determining an appropriate historical trend, it is important that the company has a proper accounting system for capturing relationship between the nature of the sales, the warranty provisions made and the actual expenses incurred against it subsequently. Thus, the decision on the warranty provision should be based on past experience of the company. A detailed assessment of the warranty provisioning policy is required particularly if the experience suggests that warranty provisions are generally reversed if they remained unutilized at the end of the period prescribed in the warranty. Therefore, the company should scrutinize the historical trend of warranty provisions made and the actual expenses incurred against it. On this basis a sensible estimate should be made. The warranty provision for the products should be based on the estimate at year end of future warranty expenses. Such estimates need reassessment every year. As one reaches close to the end of the warranty period, the probability that the warranty expenses will be incurred is considerably reduced and that should be reflected in the estimation amount. Whether this should be done through a pro rata reversal or otherwise would require assessment of historical trend. If warranty provisions are based on experience and historical trend(s) and if the working is robust then the question of reversal in the subsequent two years, in the above example, may not arise in a significant way. In our view, on the facts and circumstances of this case, provision for warranty is rightly made by the appellant-enterprise because it has incurred a present obligation as a result of past events. There is also an outflow of resources. A reliable estimate of the obligation was also possible. Therefore, the appellant has incurred a liability, on the facts and circumstances of this case, during the relevant assessment year which was entitled to deduction under Section 37 of the 1961 Act. Therefore, all the three conditions for recognizing a liability for the purposes of provisioning stands satisfied in this case. It is important to note that there are four important aspects of provisioning. They are - provisioning which relates to present obligation, it arises out of obligating events, it involves outflow of resources and lastly it involves reliable estimation of obligation. Keeping in mind all the four aspects, Chimera Industrial & Development Pvt. Ltd. 14 we are of the view that the High Court should not to have interfered with the decision of the Tribunal in this case.” 6.3 In the instant case, we notice that the damages amount charged by the Oil distribution companies upon the assessee is directly related to the number of days taken to rectify the defect pointed out by the dealer. If the delay is more, the damages would be correspondingly higher. The Ld A.R submitted that the assessee is having its service team in certain places and hence the number of days taken to rectify the defect would depend upon the availability of service personnel and the proximity of the service team to the place where service is required. Hence, there is variation in the percentage of damages over the sundry debtors between one State and another State. Thus, the reasoning given by the AO that there is huge variation in respect of provision between different reasons, in our view is without appreciation of factual aspects. 6.4 It is the submission of the assessee that it is following same methodology to determine the quantum of provision amount year after year. Further, it is proved that the assessee is having a present obligation to incur expenses on the damages on account of sale of nozzles. The said damage amount would result in an outflow of resources for settling the obligation. We notice that the assessee is consistently following a particular methodology for determining the quantum of provision amount and we notice the same is based on past experience. Hence it cannot be said that the same is not scientific one. Further, the table extracted above would show that the excess amount of provision is reversed in the next year. Hence the test prescribed by the Hon’ble Supreme Court, in our view, gets satisfied in the facts of the present case. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the disallowance of Provision for liquidated damages. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. Chimera Industrial & Development Pvt. Ltd. 15 7. The next issue relates to the short credit of TDS amount. It is the case of the assessee that the TDS credit granted by the AO was lesser by Rs.1,86,273/-. The ld CIT(A) rejected the above said claim observing that the assessee has not substantiated the above said claim. The Ld A.R submitted that the claim of the assessee is supported by the data available in Form No.26AS. Accordingly, he submitted that this issue may be restored to the file of AO for examining the claim of the assessee. 7.1 We heard the parties on this issue. It is the submission of the Ld A.R the TDS credit claimed by the assessee is supported by the data available in Form no.26AS. If the income relating to the TDS is offered during the year under consideration, then the corresponding TDS amount should be given credit. Since all these facts require examination at the end of the AO, we set aside the order passed by Ld CIT(A) and restore the same to the file of the AO for examining it afresh in accordance with the law. 8. The next issue urged by the assessee relates to the computation of interest u/s 234B. According to the assessee, there is an error in the computation. Since this issue also require examination at the end of AO, we set aside the order passed by Ld CIT(A) and restore the same to the file of the AO for examining it afresh in accordance with the law. 9. We shall now take up the appeal filed by the assessee for AY 2017-18. We noticed earlier that the grounds urged by the assessee in this year are identical with the grounds raised in AY 2016-17. Further, the facts relating to those issues are identical in both the years. Accordingly, the decision rendered in the case of each of the issue by us in AY 2016-17 shall be applicable in AY 2017-18 also. We order accordingly. Chimera Industrial & Development Pvt. Ltd. 16 10. In the result, both the appeals of the assessee are allowed in the terms discussed above. Order pronounced on 19.03.2024. Sd/- Sd/- [Justice (Rtd.) C.V. Bhadang] (B.R. Baskaran) President Accountant Member Mumbai.; Dated : 19/03/2024 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai. 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai