DCIT Corporate Circle 2(1), CHENNAI V. FL Smidth Minerals India Pvt Ltd., CHENNAI

ITA 2860/CHNY/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8940 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 27-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANAN
• Assessee Lawyers: S SRINIRANJANI

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !', $ '% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2860/CHNY/2017 ' (' / ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI - 600 034. V. M/S FL SMIDTH MINERALS INDIA PVT. LTD., NO.34, RAJIV GANDHI SALAI, EGATOOR, KELAMBAKKAM, CHENNAI - 600 103. PAN : AAACF 1122 D (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI M. MATHIVANAN, JCIT ,-*+ . / / RESPONDENT BY : MS. S. SRINIRANJANI, ADVOCATE 0 . 1$ / DATE OF HEARING : 06.12.2018 23( . 1$ / DATE OF PRONOUNCEMENT : 19.12.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -6, CHENNAI, D ATED 14.09.2017 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THERE WAS A DELAY OF 6 DAYS IN FILING THIS APPEA L BY THE REVENUE. THE REVENUE HAS FILED A PETITION FOR CONDONATION OF DELAY. WE HAVE 2 I.T.A. NO.2860/CHNY/17 HEARD THE LD. D.R. AND THE LD.COUNSEL FOR THE ASSES SEE. WE FIND THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE APPEA L BEFORE THE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT TH E APPEAL. 3. WE HEARD SHRI M. MATHIVANAN, THE LD. DEPARTMENTA L REPRESENTATIVE AND MS. S. SRINIRANJANI, THE LD.COUN SEL FOR THE ASSESSEE. DURING THE COURSE OF HEARING, IT WAS BROUGHT TO THE NOTICE OF THE TRIBUNAL THAT IN THE ASSESSEE'S OWN CASE, FOR ASSESSMENT YEA RS 2005-06 AND 2007-08, THE ISSUE OF PROVISION MADE BY THE ASSESSE E FOR WARRANTY WAS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT Y EARS 2005-06 AND 2007-08. THIS TRIBUNAL HAS REMITTED BACK THE MATTE R TO THE FILE OF THE ASSESSING OFFICER. IN FACT, THE TRIBUNAL AT PARA 4 .2 OF ITS ORDER DATED 03.08.2017 OBSERVED AS FOLLOWS:- WITH REGARD TO DISALLOWANCE MADE ON THE PROVISION FOR WARRANTY IN ASSESSMENT YEAR 2005-06, THE DR SUBMITTED THAT THE CIT(A) OUGHT HAVE APPRECIATED TH AT AS PER APEX COURTS DECISION RELIED ON, THE PROVISION T OWARDS WARRANTY ARRIVED AT ON A SCIENTIFIC BASIS IS ONLY A LLOWABLE AND NOT ANY LUMP SUM PROVISION (UNCERTAIN LIABILITY ), THE PROVISION MADE BY THE ASSESSE IS NOT SCIENTIFICALL Y ARRIVED FIGURE AND IT SHOULD HAVE SATISFIED THE IMPORTANT A SPECTS OBSERVED BY THE HONBLE SUPREME COURT VIZ, (I) PROVISIONING WHICH RELATES TO PRESENT OBLIGA TION (II) IT ARISES OUT OF OBLIGATING EVENTS (III) IT INVOLVES OUTFLOW OF RESOURCES AND LASTLY 3 I.T.A. NO.2860/CHNY/17 (IV) IT INVOLVES RELIABLE ESTIMATION OF OBLIGATION. THE AR SUBMITTED THAT THE JURISDICTIONAL HIGH COURT IN ITS OWN CASE IN TCA NO. 30 OF 2010 DATED 03.06.2013 SET ASIDE THE ORDER OF THE TRIBUNAL AND ALLOWED THE ASSESSEE S APPEAL. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE T HROUGH THE ORDERS. THE ASSESSEE HAD MADE PROVISION FOR WA RRANTY AT RS. 7,50,41,484/- IN THE BOOKS OF ACCOUNT AND THE AO REFUSED TO ALLOW IT FOR THE REASON THAT THIS PROVIS ION FOR WARRANTY WAS CREDITED WITHOUT ANY SCIENTIFIC REASON S. THUS, THE CONTENTION OF THE ASSESSEE IS THAT THE PROVISIO N IS AN ASCERTAINED LIABILITY, WHEREAS, THE REVENUE OBSERVE D IT AS CONTINGENT LIABILITY. IT IS CLEAR FROM THE ASSESSM ENT ORDER THAT THE ASSESSEE COULD NOT EXPLAIN THE METHODOLOGY AND CALCULATION OF THE PROVISIONS ON THE BASIS OF THE S ATISFACTORY ASPECTS OF APEX COURT IN THE CASE OF ROTORK CONTROLS INDIA LTD. (SUPRA). IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE MATTER HAS TO BE RE-EXAMINED AS TO WHETHER THE METHODOLOGY ADOPTED FOR CREATING PROVISION IS IN TH E LIGHT OF THE OBSERVATIONS MADE BY THE SUPREME COURT. THEREF ORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THIS ISSUE TO THE FILE OF THE AO FOR RE-EXAMINATION AFTER AFFORDIN G ADEQUATE OPPORTUNITY FOR BEING HEARD TO THE ASSESS EE. THUS, THE REVENUES CROSS APPEAL IS TREATED AS ALLO WED FOR STATISTICAL PURPOSES. 4. IN VIEW OF THE ABOVE, SINCE THE ISSUE IS IDENTIC AL IN NATURE, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE MATTER IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDER ATION. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. 4 I.T.A. NO.2860/CHNY/17 ORDER PRONOUNCED IN THE COURT ON 19 TH DECEMBER, 2018 AT CHENNAI. SD/- SD/- (. !') ( . . . ) (S. JAYARAMAN) (N.R.S. GANE SAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 19 TH DECEMBER, 2018. KRI. . ,167 87(1 /COPY TO: 1. *+/ APPELLANT 2. ,-*+/ RESPONDENT 3. 0 91 () /CIT(A)-6, CHENNAI 4. PRINCIPAL CIT- 2, CHENNAI 5. 7: ,1 /DR 6. ' ; /GF.