Deputy Commissioner of Income-tax, V. Kirloskar Oil Engines Ltd., Pune

ITA 691/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7163 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-11-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A S DESHPANDE
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 43B; 80HHC; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.878/PUN/2012, 614 & 615/PUN/2014 / ASSESSMENT YEARS : 2004-05, 2005-06 & 2006-07 M/S.KIRLOSKAR OIL ENGINES LTD, LAXMANRAO KIRLOSKAR ROAD, KHADKI, PUNE 411003. PAN :AAACP3590P . /APPELLANT VS. ACIT, CIRCLE-9/RANGE-9, PUNE 411 044. . / RESPONDENT . / ITA NOS. 691 & 692/PUN/2014 / ASSESSMENT YEARS : 2005-06 & 2006-07 DCIT, CIRCLE-9, PUNE 411 044. . /APPELLANT VS. M/S.KIRLOSKAR OIL ENGINES LTD, LAXMANRAO KIRLOSKAR ROAD, KADKI, PUNE 411003. PAN :AAACP3590P . / RESPONDENT ASSESSEE BY : SHRI C.H.NANIWADEKAR & SHRI A.S.DESHPANDE REVENUE BY : SHRI RAJEEV KUMAR, CIT-DR / DATE OF HEARING : 13.11.2017 / DATE OF PRONOUNCEMENT: 20.11.2017 ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 2 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 5 APPEALS UNDER CONSIDERATION INVOLVING THE CRO SS APPEALS FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 AND ASSESSEES APPEAL FOR THE A.Y 2004-05. ITA NO.878/PUN/2012 IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-V, DATED 26-03-201 2, ITA NOS. 614 AND 615/PUN/2014 ARE FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF CIT(A)-2, NASHIK DATED 27-01-2014 & 28-01-201 4 RESPECTIVELY. FURTHER, ITA NOS.691 AND 692/PUN/2014 FILED BY THE REVEN UE ARE AGAINST THE ORDERS OF CIT(A)-2, NASHIK DATED 27-01-2014 & 28-01-2014 RESPECTIVELY. THEREFORE, FOR THE SAKE OF CONVENIENCE, ALL T HESE APPEALS ARE BEING ADJUDICATED BY THIS COMPOSITE ORDER. THE APPEA L WISE ISSUES ARE ADJUDICATED AS FOLLOWS : ITA NO.878/PUN/2012 (BY ASSESSEE FOR A.Y. 2004-05) 2. BEFORE US, AT THE OUTSET, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE RAISED 3 GROUNDS IN THIS APPEAL AND T HE GROUND NO.1 RELATING TO VALIDITY OF RE-OPENING OF THE ASSESSMENT U/S.148 OF THE ACT AND GROUND NO.3 RELATING TO DEDUCTION AVAILABLE U/S.80HHC O F THE ACT, ARE NOT PRESSED. ON HEARING THE PARTIES, THE SAID GRO UND NOS.1 AND 3 ARE DISMISSED AS NOT PRESSED. THAT LEAVES GROUND NO.2 TO BE ADJUDICATED AND THE SAME READS AS UNDER : 2. THE LEARNED CIT(A) ERRED IN FACTS AND LAW IN ADD ING A SUM OF RS 3,59,65,000/- (BEING JOB WORK CHARGES RS. 19,85, 000/- , SCRAP SALE RS. 3,27,99,000/- AND SUNDRY SALE RS. 11,81,000/-) TO THE TOTAL TURNOVER FOR THE PURPOSE OF SECTION 80HHC AND REDUCING THE D EDUCTION AVAILABLE U/S 80HHC. ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 3 3. FROM THE ABOVE, IT IS EVIDENT THAT THE ABOVE GROUND RELATES TO THE MANNER OF COMPUTATION AND ALLOWABILITY OF DEDUCTION ON CERTA IN RECEIPTS FOR THE YEAR UNDER CONSIDERATION U/S.80HHC OF THE ACT. IT HAS 3 LIMBS, (I) JOB WORK CHARGES, (II) SCRAP SALES AND (III) SUNDRY SALES. 4. IT IS THE CLAIM OF THE LD.AR BEFORE US, THAT THE ISSUES RELATING TO JOB WORK CHARGES AND SUNDRY SALES AGAIN ARE NOT PRES SED. ACCORDINGLY, THAT PART OF THIS GROUND NO.2 IS DISMISSED. THAT LEAVES T HE ISSUE RELATING TO THE SCRAP SALE INCOME OF RS.3,27,99,000/- QUA THE DEDUCTION U/S.80HHC OF THE ACT. 5. RELEVANT FACTS OF THIS ISSUE RELATING TO SCRAP SALES INC LUDE THAT THE ASSESSEE EARNED THE SAID INCOME ON ACCOUNT OF SCRA P SALES AND THE SAME WAS INCLUDED IN THE TOTAL TURNOVER OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE IN THIS REGARD RELATES TO THE EXCLUSION OF T HE SAME FROM THE TOTAL TURNOVER. REFERRING TO THE IDENTICAL ISSUE THAT CAME UP FOR ADJUDICATION BEFORE THE HONBLE SUPREME COURT IN THE CAS E OF PUNJAB STAINLESS STEEL INDUSTRIES, CIVIL APPEAL NO.5592 OF 2008 ALONG WITH OTHERS, JUDGMENT DATED 05.05.2014, LD.COUNSEL SUBMITTED T HE SAID CLAIM OF THE ASSESSEE WAS JUSTIFIED BY THE SUPREME COURT IN THE SAID CASE. FOR THIS PROPOSITION, HE RELIED ON THE CONTENTS OF P ARA 29 OF THE SAID JUDGMENT. 6. ON HEARING BOTH THE PARTIES ON THIS LIMITED ISSUE OF EX CLUSION OF THE SCRAP SALES FROM THE TOTAL TURNOVER, WE PERUSED THE CONTENTS OF PARA 29 OF THE SAID APEX COURT JUDGMENT AND FIND THE SAME IS RELEVANT FOR ADJUDICATING THE PRESENT ISSUE. THE SAME READS AS UNDER : 29. FOR THE AFORESAID REASONS, WE ARE OF THE VIEW THAT THE VIEW EXPRESSED BY THE HIGH COURT IS IN CONFORMITY WITH T HE NORMAL ACCOUNTING PRACTICE FOLLOWED BY THE TRADERS, INCLUDING THE RES PONDENT-ASSESSEE AND ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 4 IT WAS JUSTIFIED IN COMING TO A CONCLUSION THAT THE SALE OF SCRAP WOULD NOT BE INCLUDED IN THE TOTAL TURNOVER. 7. ON PERUSAL OF THE ABOVE LEGAL PROPOSITION AND THE RELEVA NT FACTS, WE FIND IT RELEVANT TO DIRECT THE AO TO APPLY THE SAID LEG AL PROPOSITION OF THE APEX COURT IN THE CASE OF PUNJAB STAINLESS STEEL IND USTRIES (SUPRA) AFTER EXAMINING THE FACTS OF THE PRESENT CASE. ACCORDINGL Y, THIS PART OF THE GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. WE SHALL NOW TAKE UP THE CROSS APPEALS FOR THE A.Y.2005-06 ITA NO.614/PUN/2014 (BY ASSESSEE FOR A.Y. 2005-06 10. ASSESSEE RAISED 5 CORE ISSUES IN THIS APPEAL. REFERRIN G TO THE GROUND NOS.4 AND 5 RELATING TO THE DISALLOWANCE U/S.14A OF THE ACT AND SECTION 43B OF THE ACT, LD.COUNSEL SUBMITTED THESE GROUN DS ARE NOT PRESSED. ACCORDINGLY, ON HEARING BOTH THE PARTIES THE SAID GROUNDS ARE DISMISSED AS NOT PRESSED. THAT LEAVES THE 3 ISSUES FOR ADJUDICATION IN THIS APPEAL OF THE ASSESSEE. 11. FURTHER, REFERRING TO GROUND NO.3, LD.COUNSEL SUBMITTE D THE SAID GROUND RELATES TO DISALLOWANCES MADE BY THE AO OUT OF THE CLAIM ON ACCOUNT OF AIRCRAFT EXPENDITURE. THIS IS AN ISSUE COMING U P FOR ADJUDICATION ALMOST EVERY ASSESSMENT YEAR IN THIS CASE. AOS DISALLOWED 15% OF THE CLAIM DEBITED TO THE PROFIT AND LOSS A CCOUNT CONSISTENTLY TOWARDS THE PERSONAL USE OF THE AIRCRAFT BY THE DIRECTOR AND THEIR FAMILY MEMBERS. THE ISSUE CAME UP FOR ADJUDICATION BY THE TRIBUNAL IN EARLIER YEARS INCLUDING THAT OF ITA.NO.546/PUN/200 4 FOR THE ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 5 A.Y 2000-01 AND ITA NO.1039/PUN/2000 FOR A.Y. 1995-96. T HE ISSUE WAS DECIDED AGAINST THE ASSESSEE IN ALL THE YEARS. 12. ON HEARING BOTH THE SIDES AND CONSIDERING THE FAIR AD MISSION OF THE ISSUE BY THE LD.COUNSEL FOR THE ASSESSEE, WE ARE O F THE OPINION, THIS GROUND FOR THIS YEAR ALSO HAS TO BE DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, THE GROUND NO.3 IS DISMISSED, AND THE SAME IS IN FAVOUR OF THE REVENUE. 13. GROUND NO.1 RELATES TO THE LD CHARGES AMOUNTING T O RS.50,01,417/-DISALLOWED BY THE AO. 14. AT THE OUTSET, LD.COUNSEL SUBMITTED THAT THIS IS A CO VERED ISSUE IN FAVOUR OF THE ASSESSEE VIDE ITA.NO.857 & 884/PUN/2006 FOR THE A.Y. 2001-02. FILING A COPY OF THE SAID ORDER OF THE TRIBUNAL FOR THE A.Y 2001-02, LD.COUNSEL BROUGHT OUR ATTENTION TO PARA NO.38 TO 47 COMMENCING FROM PAGE 22 OF THE TRIBUNALS ORDER, LD.COUN SEL SUBMITTED THAT THIS ISSUE MAY BE REMANDED TO THE AOS FILE FOR EXAMINING THE FACTS AND DECIDING THE ISSUE IN THE LIGHT OF TH E SAID ORDER OF THE A.Y.2001-02. 15. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE FIND RELE VANT PARAS FROM THE SAID TRIBUNALS ORDER NEEDS TO BE EXTRACTED AN D THE SAME READ AS UNDER : 38. THE ISSUE IN GROUND OF APPEAL NO.12 IS AGAINST THE DISALLOWANCE OF LIQUIDATED DAMAGES OF RS.33,56,236/ -. 39. THE ASSESSEE HAD MADE A CLAIM UNDER THE SAID HE AD TO THE TUNE OF RS.1,99,10,567/-. AS PER THE ASSESSEE, THE LIQUIDATED DAMAGES REPRESENT THE PAYMENTS FOR LATE DELIVERY, D EFICIENCY IN QUALITY OF GOODS / MATERIAL SUPPLIED VIS-A-VIS SPEC IFICATIONS / REQUIREMENTS, ETC. THE ASSESSEE EXPLAINED THAT THE LIQUIDATED DAMAGES HAD NOTHING TO DO WITH ANY INFRACTION OF LA W. THE MAJOR RECOVERY WAS OF RS.1,56,62,034/- EFFECTED BY M/S. O IL INDIA LTD., WHO HAD MADE THE SAID RECOVERY AS THE ASSESSEE HAD FAIL ED TO COMPLETE INSTALLATION AND COMMISSIONING WITHIN THE AGREED CO NTRACT SCHEDULE. ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 6 THE ASSESSING OFFICER HELD THE SAME TO BE IN THE NA TURE OF PENALTY AND DISALLOWED THE SAME. IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF DELHI IN ROHTAK TEXTILES MILLS VS. CIT (1997) 226 ITR 485 (DEL), WHEREIN PAY MENT OF LIQUIDATED DAMAGES WERE HELD AS NON-DEDUCTIBLE. AS REGARDS THE OTHER LIQUIDATED DAMAGES, SINCE THE ASSESSEE HAD ONLY GIV EN GENERAL SUBMISSIONS, THE SAME WAS NOT ACCEPTED AND THE ENTI RE CLAIM TOWARDS LIQUIDATED DAMAGES WAS DISALLOWED. 40. BEFORE THE CIT(A), THE ASSESSEE POINTED OUT THA T IN THE PURCHASE ORDER PLACED BY MIS. OIL INDIA LTD., THERE WAS CLEA R STIPULATION OF COMPLETION DATES AND ALSO PROVISION OF LIQUIDATED D AMAGES TO BE PAID AT SPECIFIC RATES ON ACCOUNT OF DEFAULT IN DELIVERY . THE DAMAGES WERE THUS, IN THE NATURE OF BREACH OF CONTRACT. THE ASS ESSEE ALSO FILED A COPY OF LETTER DATED 20.01.2001 OF M/S. OIL INDIA L TD., WHEREIN DAMAGES OF RS.1.56 CRORES HAD BEEN WORKED OUT AND D EMANDED. THE ASSESSEE ALSO FURNISHED THE COPIES OF VOUCHERS, STATEMENTS, CORRESPONDENCE WITH THE CONCERNED PARTIES IN RESPEC T OF BALANCE LIQUIDATED DAMAGES PAID BY THE ASSESSEE. THE CIT(A) IN VIEW OF THE LETTER RECEIVED FROM MIS. OIL INDIA LTD., WHEREIN T HE ACTUAL LIQUIDATED DAMAGES WERE OF THE ORDER OF RS.1,49,97,482/-, HELD THE SAME AS ADMISSIBLE AND THE DISALLOWANCE TO THAT EXTENT WAS DELETED. THE REMAINING AMOUNT OF RS.6,64,552/- REPRESENTED INTER EST ON MOBILIZATION ADVANCE. THE CIT(A) NOTED THAT AS PER PURCHASE ORDER, MOBILIZATION ADVANCED WAS INTEREST FREE AND IT HAD TO BE SEEN AS TO WHY M/S OIL INDIA LTD. DEMANDED INTEREST ON THE SAI D MOBILIZATION ADVANCE. IN THE ABSENCE OF COMPLETE DETAILS BEING FILED BY THE ASSESSEE, THE MATTER WAS RESTORED TO THE FILE OF AS SESSING OFFICER TO CALL FOR RELEVANT PARTICULARS AND DECIDE THE SAME. 41. IN RESPECT OF BALANCE LIQUIDATED DAMAGES, THE ASSESSEE FILED EVIDENCES IN RESPECT OF CERTAIN ITEMS AND THE CIT(A ) HELD THAT IN VIEW OF THE EVIDENCES FILED FOR RS.3,41,724/-, RS.5,44,9 87/-, 1,45,0721- AND RS.5,25,067/-, ALLOWABILITY TOWARDS THE PAYMENT OF LIQUIDATED DAMAGES HAD ARISEN DURING THE RELEVANT PREVIOUS YEA R AND THE SAME WAS HELD TO BE ALLOWABLE. IN RESPECT OF LAST ITEM I .E. OF RS.20,82,1401-, THE ASSESSEE HAD ONLY MADE THE PROV ISION, EVEN BEFORE ANY DEMAND WAS RAISED BY THE CONCERNED PARTY . SINCE IT WAS NOT KNOWN AS TO WHETHER THE DEMANDS WERE ACTUALLY R ECEIVED OR NOT, THE CIT(A) HELD THAT THE ASSESSEE WAS NOT JUSTIFIED IN MAKING THE CLAIMS TOWARDS LIQUIDATED DAMAGES MERELY ON THE BAS IS OF PROVISION. HENCE, OUT OF LIQUIDATED DAMAGES OF RS.36,38,990/-, CLAIM TO THE EXTENT OF RS.20,82,139/- WAS HELD AS INADMISSIBLE A ND THE DISALLOWANCE WAS CONFIRMED TO THAT EXTENT. 42. THE ASSESSEE IS IN APPEAL VIDE GROUND OF APPEAL NO. 12. THE REVENUE IS ALSO IN APPEAL AGAINST THE ORDER OF CIT( A) IN ALLOWING LIQUIDATED DAMAGES OF RS.1 ,49,97,483/- PAID TO M/S. OIL INDIA LTD. VIDE GROUND OF APPEAL NO.7. 43. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT OUT OF LIQUIDATED DAMAGES PAID TO MIS. OIL INDIA LTD., SUM OF RS.1.49 CRORES WAS ALLOWED BY THE CIT(A), AG AINST WHICH THE REVENUE IS IN APPEAL. HOWEVER, BALANCE SUM OF RS.6, 64,552/- PAYABLE TO MIS. OIL INDIA LTD. WAS TO BE VERIFIED B Y THE ASSESSING OFFICER. HOWEVER, TILL DATE, NO SUCH APPEAL EFFECT HAS BEEN ALLOWED. HE REFERRED TO PAGE 190 OF PAPER BOOK AND POINTED O UT THAT CLAUSE (III) RELATED TO CHARGING OF INTEREST AS PER PURCHASE ORD ER AND HE FURTHER REFERRED TO PAGE 199 OF THE PAPER BOOK TO ESTABLISH THAT THE AMOUNT HAS BEEN RECOVERED BY M/S.OIL INDIA LTD. AND HENCE, THERE IS NO DISCREPANCY IN THE CLAIM OF ASSESSEE. HE, THEN, RE FERRED TO THE ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 7 PROVISION MADE ON ACCOUNT OF OTHER PARTY I.E. RS.20 ,82,140/-. HE STRESSED THAT THE SAID PROVISION WAS MADE IN RESPEC T OF SALES EFFECTED DURING THE YEAR WHICH WAS CUSTOMER-WISE AND THE SAI D PRINCIPLE WAS FOLLOWED IN RESPECT OF ALL THE PARTIES AND THE AMOU NTS WERE PAID IN THE SUCCEEDING YEAR AND IN CASE THOSE ARE NOT DEMANDED, THEN THE PROVISION WAS REVERSED. HE FURTHER STATED THAT OUT OF TOTAL SUM OF RS.20,82, 1401-, RS.6,09,543/- WAS ALREADY PAID DURING THE YEAR BY THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE ISSUE RAISED IN THE PR ESENT APPEAL IS COVERED BY THE ORDER OF PUNE BENCH OF TRIBUNAL IN T HERMAX BABCOCK & WILCOX LTD. VS. ADDL.CIT (2008) 7 DTR (PUNE) (TRIB) 162. 44. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR T HE REVENUE ON THE OTHER HAND, RELIED ON THE RATIO LAID DOWN BY THE HO N'BLE SUPREME COURT IN HAJI AZIZ AND ABDUL SHAKOOR BROS. VS. CIT (1961) 41 ITR 350 (SC), WHEREIN LIQUIDATED DAMAGES PAID WERE NOT ALLOWED. HE ALSO PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'B LE HIGH COURT OF DELHI IN ROHTAK TEXTILES MILLS VS. CIT (SUPRA), WHICH WAS RELIED ON BY THE ASSESSING OFFICER. 45. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS IN RESP ECT OF LIQUIDATED DAMAGES PROVIDED BY THE ASSESSEE IN ITS BOOKS OF AC COUNT. THE CASE OF ASSESSEE BEFORE US IS THAT IN VIEW OF IT TAKING UP TURNKEY PROJECTS AND AS PER THE CONDITIONS OF PURCHASE ORDER PLACED, THE PR OJECT HAS TO BE COMPLETED WITHIN STIPULATED PERIOD AND IN CASE THE SAME IS NOT SO COMPLETED, THEN THE ASSESSEE IS LIABLE TO PAY LIQUI DATED DAMAGES. FURTHER, IN CASE OTHER CONDITIONS OF THE PURCHASE O RDER ARE NOT COMPLIED WITH BY THE ASSESSEE, THEN ALSO AS PART OF PURCHASE ORDER ITSELF, THERE IS A CLAUSE THAT THE PURCHASER MAY AT HIS DISCRETION WIT HHOLD ANY PAYMENTS UNTIL THE WHOLE OF STORES HAS BEEN SUPPLIED AND HE MAY ALSO DEDUCT RECOVERY FROM THE SUPPLIER LIQUIDATED DAMAGES. THE MAJOR ITEM OF EXPENDITURE RELATES TO DAMAGES OF RS.1.56 CRORES CL AIMED BY AND PAID TO MIS. OIL INDIA LTD. THE ASSESSEE WAS DUTY BOUND TO COMPLETE THE SAID PROJECT WITHIN STIPULATED PERIOD AND SINCE THE ASSE SSEE COULD NOT FULFILL THE SAME, M/S. OIL INDIA LTD. VIDE LETTER DATED 20.01.2001 DEMANDE D DAMAGES OF RS.1.49 CRORES. IN VIEW OF THE UNDERSTAN DING BETWEEN THE PARTIES, THE CLAIM OF RS.1.49 CRORES ON ACCOUNT OF LIQUIDATED DAMAGES BEING RELATABLE TO CARRYING ON OF BUSINESS OF ASSES SEE, IS DULY ALLOWABLE AS EXPENDITURE IN THE HANDS OF ASSESSEE. ACCORDINGL Y, UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUND OF APPEAL NO .7 RAISED BY THE REVENUE. 46. NOW, COMING TO THE BALANCE EXPENDITURE OF RS .6,64,552/-, WHICH WAS THE INTEREST PAID ON MOBILIZATION ADVANCES. CL AUSE (III) OF CONTRACT COPY, WHICH IS PLACED AT PAGE 190 OF THE PAPER BOOK AND THE EVIDENCE OF HAVING PAID THE SAID AMOUNT AS PER DOCUMENT AT PAGE 199 OF THE PAPER BOOK, WE FIND THAT THE SAID CLAIM OF RS.6,64,552/- IS ALSO TO BE ALLOWED IN THE HANDS OF ASSESSEE. IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE EVIDENCES WHICH ARE AVAILABLE ON RECORD, WE FIND NO MERIT IN THE ORDER OF CIT(A) IN REMITTING THE ISSUE TO THE FILE OF ASSESS ING OFFICER TO CALL FOR RELEVANT PARTICULARS. ACCORDINGLY, WE REVERSE THE FINDINGS OF CIT(A) IN THIS REGARD AND DELETE THE ADDITION OF RS.6,64,552/-. 47. NOW, COMING TO BALANCE LIQUIDATED DAMAGES OF R S.20,82,140/- FOR WHICH THE ASSESSEE HAD MADE THE PROVISION IN IT S BOOKS OF ACCOUNT. THE ASSESSEE POINTS OUT THAT AFTER EFFECTI NG SALES DURING THE RELEVANT YEARS, PROVISIONS ARE MADE DURING THE YEAR CUSTOMER-WISE AND THE SAID PRINCIPLE HAS BEEN FOLLOWED BY THE ASS ESSEE FROM YEAR ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 8 TO YEAR. IN OTHER WORDS, THE ASSESSEE IS FOLLOWING THE METHOD OF ACCOUNTING, UNDER WHICH PROVISION IS MADE ON ACCOUN T OF ANY LIQUIDATED DAMAGES, WHICH THE ASSESSEE MAY HAVE TO PAY. IN CASE THE SAME ARE PAID IN THE NEXT YEAR, THEN THE SAME A RE DEBITED TO PROVISION AND IF NOT PAID, THEN THE PROVISION IS RE VERSED. THE ASSESSEE HAVING FOLLOWED THE SAID SYSTEM OF ACCOUNT ING PERSISTENTLY AND IN VIEW OF THE FACT THAT THE SALES HAVE BEEN EF FECTED DURING THE YEAR, THEN WHERE THE ASSESSEE IS AWARE OF ITS DEFIC IENCIES AND HAVING MADE THE PROVISIONS AS PER PURCHASE ORDER, T HEN SUCH PROVISION OF LIQUIDATED DAMAGES MERITS TO BE ALLOWE D IN THE HANDS OF ASSESSEE IN ENTIRETY. WE FIND NO MERIT IN THE ORDER S OF AUTHORITIES BELOW IN ALLOWING THE LIQUIDATED DAMAGES ONLY TO TH E EXTENT WHERE THE AMOUNT HAS BEEN PAID AND IN NOT ALLOWING THE BA LANCE. IN ANY CASE, THE SAID LIQUIDATED DAMAGES ARE RELATABLE TO THE BUSINESS UNDERTAKEN BY THE ASSESSEE AND ARE NOT FOR INFRACTI ON OF LAW. HENCE, THERE IS NO MERIT IN DISALLOWING ANY PART OF EXPEND ITURE. RELIANCE PLACED UPON BY THE LEARNED DEPARTMENTAL REPRESENTAT IVE FOR THE REVENUE ON THE DECISIONS OF HON'BLE SUPREME COURT A RE MISPLACED AS IN BOTH THE CASES, DAMAGES WERE PAID ON ACCOUNT OF INFRACTION OF LAW AND HENCE, WERE HELD TO BE NOT ALLOWABLE AS EXPENDI TURE IN THE HANDS OF SAID ASSESSEE. HOWEVER, IN THE PRESENT CA SE, LIQUIDATED DAMAGES ARE PAID BY THE ASSESSEE ON ACCOUNT OF VIOL ATION OF TERMS OF CONTRACT ENTERED INTO WITH THE PARTIES TO WHOM THE GOODS HAVE BEEN SUPPLIED BY THE ASSESSEE. THERE IS NO INFRACTION O F LAW IN SUCH CASES AND ACCORDINGLY, WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN THIS REGARD. REVERSING THE ORDER OF CIT(A), WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF ASSESSEE ALSO ON ACCO UNT OF PROVISION MADE OF RS.20,82,139/-. THE GROUND OF APPEAL NO.12 RAISED BY THE ASSESSEE IS THUS, ALLOWED AND THE GROUND OF APPEAL NO.7 RAISED BY THE REVENUE IS DISMISSED. 16. CONSIDERING THE ABOVE, WE ARE OF THE VIEW THAT THE M ATTER SHOULD BE REMANDED TO THE AOS FILE FOR APPLYING THE SAID LEGAL P ROPOSITION ON THE ISSUE UNDER CONSIDERATION. IN PRINCIPLE, THE GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. THE AO SHALL GRANT REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THIS GROUND IS ALLOWED FOR ST ATISTICAL PURPOSES. 17. THE ONLY FINAL ISSUE LEFT (GROUND NO.2) RELATES TO CLUB EXP ENSES OF RS.12,500/-. LD.COUNSEL SUBMITTED THAT IDENTICAL ISSUE WAS AGAIN ADJUDICATED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2001-02 (SUPRA). HE BROUGHT OUR ATTENTION TO THE RELEVA NT PARA NO.22 TO 25. ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 9 18. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE FIND AO SHOULD BE DIRECTED TO APPLY THE PRINCIPLE LAID DOWN BY US IN THE A.Y. 2001-02 AND DECIDE THE ISSUE AFRESH AFTER GRANTING REASONABLE OPPORTU NITY TO THE ASSESSEE. ACCORDINGLY, IN PRINCIPLE, THE GROUND NO 2 IS ALLOWED. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ITA NO.691/PUN/2014 (BY REVENUE FOR A.Y. 2005-06) 20. IN THIS APPEAL, REVENUE RAISED 5 CORE ISSUE THAT RELAT ES TO (I) DISALLOWANCE ON SECTION 14A OF THE ACT; (II) DEPRECIATION ON CAPITAL EXPENDITURE; (III) REMUNERATION PAID TO DIRECTORS; (IV) ADVISORY FEE PAID AND WHICH IS TREATED AS CAPITAL EXPENDITURE AND (V) ALLOWABILIT Y OF PROVISION FOR WARRANTY. 21. REFERRING TO GROUND NO.2 RELATING TO DEPRECIATION ON CAPITAL EXPENDITURE, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THE SAME IS ALLOWABLE AS REVENUE EXPENDITURE IN VIEW OF THE BINDING OF TH E TRIBUNAL IN THE ASSESSEES OWN CASE VIDE ITA NO.1641/PUN/2011 FOR A.Y 2002- 03. HE SUBMITTED THAT THE CONTENTS OF PARA NOS.104 & 105 ARE RELEVANT IN THIS REGARD. LD.COUNSEL SUBMITTED THAT THIS MATTER MA Y BE REMANDED TO THE FILE OF THE CIT(A) FOR RE-ADJUDICATION AFTER EXAMINING FACTS OF THE CASE VIS-A-VIS THE FACTS DECIDED BY THE TRIBU NAL FOR THE A.Y 2002-03. CIT(A) IS DIRECTED TO GRANT REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, WE ORDER. ACCORD INGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 22. REFERRING TO THE ISSUE RELATING TO REMUNERATION PAID TO THE DIRECTORS, (GROUND NO.3), LD.COUNSEL SUBMITTED THAT SIMILAR ISSUE CAME UP FOR ADJUDICATION BY TRIBUNAL IN THE GROUP CASE OF KIRLOSKAR ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 10 FERROUS INDUSTRIES LIMITED AND THE ITAT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE ITA NO.1059/PN/2013 FOR THE A.Y 2008- 09. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO CONTENTS OF PARA 1 4. BEFORE US, LD.COUNSEL SUBMITTED THIS ISSUE MAY BE REFERRED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION IN THE LIGHT OF THE FINDING OF THE TRIBUN AL IN THE CASE OF KIRLOSKAR FERROUS INDUSTRIES LIMITED (SUPRA). ON H EARING BOTH THE PARTIES, WE ALLOW THE PRAYER OF THE LD.COUNSEL AND DIR ECT THE CIT(A) TO ADJUDICATE THE ISSUE FRESH IN THE LIGHT OF OUR FINDING IN T HE SAID CASE AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. ACCORDINGLY, GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 23. REGARDING THE CAPITAL NATURE OF THE ADVISORY FEE (GRO UND NO.4) PAID BY THE ASSESSEE, LD.COUNSEL SUBMITTED THAT THE SAID EXPENDITURE NEVER RESULTS IN THE BENEFIT OF ANY ENDURING NATURE. THEREFORE, TH E SAME CONSTITUTES REVENUE EXPENDITURE. ACCORDING TO THE LD.AR FOR THE ASSESSEE, A SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL AN D THE TRIBUNAL HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE H OLDING SUCH EXPENSES AS REVENUE IN NATURE. RELYING ON THE ORDER O F THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 1991-92, LD.COUNSE L SUBMITTED THE SAID ISSUE WAS DECIDED IN ASSESSEES FAVOUR VIDE ITA NO.26 2/PUN/1995. AFTER GOING THROUGH THE SAME, WE FIND THIS ISSUE ALSO SHOULD RE-VISIT TO THE FILE OF CIT(A) FOR EXAMINING THE FACTS AND TO DECIDE THE S AME IN THE LIGHT OF THE ORDER OF THE TRIBUNAL FOR A.Y. 1991-92 AFTER GRA NTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED AND ALLOWED FOR STATISTICAL PURPOSES. 24. REGARDING THE ALLOWABILITY FOR PROVISION OF WAR RANTY (GROUND NO.5), LD.COUNSEL SUBMITTED THE ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE VIDE THE APEX COURT JUDGMENT IN THE CA SE OF ROTORK ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 11 CONTROLS INDIA PVT. LTD., 314 ITR 62. ACCORDING TO HIM, WH EN THE ASSESSEE CONSISTENTLY FOLLOWS A METHOD OF ACCOUNTING INVO LVING WRITE BACK OF EXCESS PROVISION BY CREDITING THE SAME TO THE PR OFIT AND LOSS ACCOUNT AS INCOME IN THE LATER YEAR, SUCH PROVISION FOR WARRANTY IS AN ALLOWABLE DEDUCTION IN THE YEAR UNDER CONSIDERATION. IT IS NOT THE CASE OF THE ASSESSEE THAT THE PROVISION SO CREATED IS SUBSTA NTIALLY EXCESSIVE OF THE AMOUNT SPENT DURING THE YEAR ON ACCOUNT OF WARR ANTY. HOWEVER, HE SUBMITTED THAT THIS ISSUE MAY BE REMANDED TO THE FILE OF THE CIT(A) FOR CONSIDERING THE SAID JUDGMENT OF THE APEX COURT AND DECIDING THE ISSUE FRESH. 25. ON HEARING BOTH THE PARTIES, WE FIND MERIT IN THE ARGUM ENT IN THE LD.COUNSEL OF THE ASSESSEE. CIT(A) IS DIRECTED TO GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY , THIS PART OF THE GROUND OF THE REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 26. COMING TO THE ISSUE OF DISALLOWANCE U/S.14A (GROUND NO.1 ) OF THE ACT, LD.COUNSEL SUBMITTED THE ASSESSMENT YEAR UNDER CO NSIDERATION IS 2005-06 AND THEREFORE, THE PROVISIONS OF RUE 8D OF THE I.T.RULES DOES NOT APPLY TO THIS ASSESSMENT YEAR. MENTIONING THAT THE AO AND THE CIT(A) ESTIMATED THE DISALLOWANCE @ 5% OF THE EXEMPT INCOME , LD.COUNSEL SUBMITTED THE SAME IS EXCESSIVE CONSIDERING TH E ABSENCE OF ANY SPECIFIC IN NEXUS BETWEEN THE EXEMPT INCOME AND THE EXPENDITURE INCURRED FOR EARNING OF THE SAID EXEMPT INCOME. THE LD.COU NSEL MENTIONED THAT THE DISALLOWANCE WAS RS.75,000/- IN THE EAR LIER YEARS AND THE SAME IS INCREASED TO 2 LAKHS IN THE YEAR UNDER CONSIDERATION. LD. AR FOR THE ASSESSEE SUBMITS THAT THE SAME NEED TO BE CONFIRMED. 27. REPLYING TO THE LD.DRS ARGUMENT FOR APPLYING THE R ATIO OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF GODREJ AGROVET LIMITED (934 OF 2011) LD.COUNSEL MENTIONED THAT THE SAME IS EXCESSIVE AND IT WILL BE UNREASONABLE TO APPLY 2% OF THE EXEMPT INCO ME TO THE PRESENT CASE. ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 12 28. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE FIND THAT THE JURISDICTIONAL HIGH COURT IN THE SAID CASE HELD IN FAVOUR OF A PPLYING THE FLAT RATE OF 2% OF THE EXEMPT INCOME OF RS.5.59 CRORES. WE FIND THE DECISION IS RELATABLE TO THE PRESENT ASSESSMENT YEAR. TH EREFORE, THE SAME IS EXTRACTED AS UNDER : 4. SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUN AL IN ITS IMPUGNED ORDER DATED 17.9.2010 WHILE APPLYING THE DECISION OF THIS COURT IN THE MATTER OF GODREJ(SUPRA) HAS DISALLOWED THE EXPENDITURE ONLY T O THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE RESPONDENT- A SSESSEE ON THE BASIS ITS ORDER DATED 27.2.2009 FOR THE ASSESSMENT YEAR 2 002-2003 AND ORDER DATED 10.9.2009 FOR THE ASSESSMENT YEARS 2003-2004 AND 2004-2005 WHEREIN DISALLOWANCE WAS RESTRICTED TO 2% OF THE EX EMPT INCOME. FURTHER; THE TRIBUNAL HAS REMANDED THE MATTER TO THE AO TO V ERIFY THE DISALLOWANCE CLAIMED AND RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT TO 2% OF THE TOTAL EXEMPT INCOME. WE FIND NO FAULT WIT H THE ORDER OF THE TRIBUNAL. 29. AS SUCH, LD. AR HAS NOT MADE OUT ANY SPECIFIC AND SUS TAINABLE CASE OR ARGUMENT WHY THE SAID RATIO CANNOT BE APPLIED T O THIS CASE. CONSIDERING THE SAME, WE ARE OF THE OPINION, THAT IT IS NOW BINDING ON OUR BENCHES THAT THE DISALLOWANCE IN THIS CASE SHOULD BE RESTRICTED TO 2% OF THE EXEMPT INCOME. THEREFORE, WE FIND IT RELEVANT TO GIVE A DIRECTION TO THE AO TO FOLLOW THE CITED DECISION IN THE CASE OF GODREJ AGROVET LTD (SUPRA) AFTER EXAMINING PECULIAR FACTS OF THE PR ESENT CASE. WITH THESE DIRECTIONS, WE REMAND THIS ISSUE TO THE FILE OF TH E CIT(A) FOR FRESH ADJUDICATION ON THIS ISSUE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 30. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 31. WE SHALL NOW TAKE UP THE CROSS APPEALS FOR THE A.Y.2006-07. ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 13 ITA NO. 615/PUN/2014 (BY ASSESSEE FOR A.Y. 2006-07) 32. ASSESSEE RAISED 5 GROUNDS IN THIS APPEAL RELATING TO (1) BAD DEBTS AND IRRECOVERABLE BALANCES WRITTEN OFF; (2) DISALLOWANCE OF LD CHARGES; (3) DISALLOWANCE OF PRIOR PERIOD EXPENSES; (4) DISALLOWANCE OF EXPENDITURE U/S.14A OF THE ACT AND (5) DISALLOWANCE U/S.43 B OF THE I.T.ACT. REFERRING TO ITEMS OF SERIAL NO.1 AND 5 ABOVE (I.E. B AD DEBTS AND DISALLOWANCE U/S.43B OF THE ACT). LD.COUNSEL SUBMITTED THE SE GROUNDS ARE NOT PRESSED. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WITHOUT GOING INTO THE MERITS, WE SUMMARILY DISMISS THESE GROUNDS AS NOT PRESSED. 33. REFERRING TO THE DISALLOWANCES ON ACCOUNT OF LD CHARG ES, LD.COUNSEL SUBMITTED THIS ISSUE WAS SUBJECT MATTER OF AD JUDICATION BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2005 -06 (GROUND NO.1 OF ITA NO.614/PUN/2014). BEFORE US, LD.COUNSEL SUBMIT TED THAT ISSUE FOR THE A.YS 2005-06 WAS SET ASIDE TO THE FILE OF T HE AO FOR ADJUDICATION AFTER FILING THE JUDGMENT OF THE TRIBUNAL IN TH E ASSESSEES OWN CASE VIDE ITA NO.857 & 884 FOR THE A.Y 2001-02. HE REFERRED TO THE PARA 38 TO 47 OF THE ORDER OF THE TRIBUNAL AND REQUESTE D FOR REMANDING TO THE FILE OF THE AO FOR APPLYING THE SAID DECISION IN THE A SSESSEES OWN CASE TO THE PRESENT APPEAL. 34. ON HEARING BOTH THE PARTIES, WE FIND THE PRESENT ISSU E FOR A.Y 2006-07 IS IDENTICAL TO THE GROUND NO.1 RAISED BY THE ASS ESSEE IN THE A.Y 2005-06. ACCORDINGLY, WE REMAND THIS FILE TO THE AO WI TH IDENTICAL DIRECTIONS. IN THE RESULT, GROUND NO.2 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 14 35. REGARDING THE DISALLOWANCE OF EXPENDITURE U/S.14A OF TH E ACT, LD.COUNSEL SUBMITTED THE SAME IS IDENTICAL TO THE GROUND NO.1 OF REVENUES APPEAL. LD.COUNSEL FAIRLY SUBMITTED THAT THIS IS SUE IS REQUIRED TO BE ADJUDICATED IN THE LIGHT OF JURISDICTION HIGH COURT JUDGMENT IN THE CASE OF GODREJ AGROVET LTD (SUPRA) WITH IDENTICAL DIRECTIONS. ACCORDINGLY, WE REMAND THIS ISSUE ALSO TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. ACCORDINGLY, THIS GROUND IS ALLO WED FOR STATISTICAL PURPOSES. OTHERWISE, ON FACTS CIT(A) RESTRICTED DISALLOWANCE 2 LAKHS ON AD-HOC BASIS AND THE TIMING OF THIS DECISION IS AN TERIOR TO THE SAID JURISDICTION HIGH COURT JUDGMENT IN THE CASE OF GODRE J AGROVET LTD (SUPRA). CIT(A) SHALL GRANT REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE S. 36. REGARDING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES , LD.COUNSEL SUBMITTED THE CIT(A) OMITTED THIS GROUND WHILE ADJUDICATION OF THE APPEAL. THEREFORE, THIS GROUND NEEDS TO RE-VISIT TO THE FILE OF THE CIT(A). FURTHER, HE SUBMITTED THE CIT(A) MAY BE DIRECTED TO ADJU DICATE THIS ISSUE IN THE LIGHT OF THE ORDERS OF THE TRIBUNAL IN THE ASS ESSEES OWN CASE FOR THE A.Y 2000-01 VIDE ITA NO.546 & 503/PUN/2004 . WE ORDER ACCORDINGLY. ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPO SES. 37. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ITA NO. 692/PUN/2014 (BY REVENUE FOR A.Y. 2006-07) 38. IN THIS APPEAL OF THE REVENUE, THERE ARE 3 ISSUES FOR ADJUDICATION BEFORE US. THEY ARE (I) DISALLOWANCE U/S.14A OF THE ACT; (II) DIS ALLOWANCE U/S.40A(2)(B) WITH REGARD TO REMUNERATION PAID TO THE DIREC TORS; AND (III) PROVISION FOR WARRANTY. LD.DR FAIRLY SUBMITTED THAT THE GROUND NO.1 ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 15 RELATING TO THE DISALLOWANCE 14A OF THE ACT NEEDS TO RE-V ISIT THE FILE OF THE CIT(A) AS THE SAME IS CONNECTED TO THE GROUND NO.4 OF THE ASSESSEES APPEAL FOR THIS ASSESSMENT YEAR. WE, ACCORDINGLY, DIRECT THE CIT(A) TO ADJUDICATE THIS GROUND ALONG WITH REVENUES GROUND NO.4. CIT(A) IS DIRECTED TO RE-ADJUDICATE THE ISSUE AFTER GRANTING REASO NABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 39. GROUND NO.2 RELATES TO THE ADDITION U/S.40A(2)(B) OF THE ACT. THIS GROUND IS ALSO IDENTICAL TO THE GROUND NO.3 OF THE RE VENUES APPEAL FOR THE A.Y 2005-06 WHERE THE SAID GROUND WAS REMANDED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION IN THE LIGHT OF THE FINDING OF THE TRIBUNAL IN A GROUP CONCERNS CASE OF KIRLOSKAR FERROUS I NDUSTRIES LIMITED (SUPRA) FOR THE A.Y 2008-09 (ITA NO.911/PUN/2013) WIT H IDENTICAL DIRECTION, WE REMAND THIS GROUND ALSO TO THE FILE OF THE CIT(A). ACCORDINGLY, THE GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 40. REGARDING GROUND NO.3 RELATING TO PROVISION FOR WARRA NTY, WE FIND SIMILAR ISSUE WAS RAISED BY THE REVENUE FOR ADJUDICATION BEFORE US FOR THE A.Y 2005-06 VIDE GROUND NO.5 OF THAT APPEAL (ITA NO.691/PUN/2014) WITH IDENTICAL DIRECTIONS, WE REMAND THIS ISS UE ALSO TO THE FILE OF THE CIT(A) FOR FRESH DECISION IN THE LIGHT OF APE X COURT JUDGMENT IN THE CASE ROTORK CONTROLS INDIA PRIVATE LTD., 314 ITR 62 WHICH IS RELEVANT FOR THE LEGAL PROPOSITION THAT THE ESTIMATED PROVIS ION IS ALLOWABLE WHEN THE EXCESS PROVISIONS IS RETURNED BACK AS AN INCOME OF THE ASSESSEE IN THE LATER YEAR. WE REMANDED THIS ISSU E AS DISCUSSED IN THE PRECEDING PARAGRAPHS ABOVE FOR THE FILE OF CIT(A). WITH IDENTICAL DIRECTIONS, WE REMAND THIS ISSUE TO THE FILE OF THE CIT(A). CI T(A) IS DIRECTED TO GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE ITA NO.878/PUN/2012, 614&615/PUN/14 M/S.KIRLOSKAR OIL ENGINES LTD 16 IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 41. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR ST ATISTICAL PURPOSES. 42. TO SUM UP, APPEALS OF THE ASSESSEE FOR A.YRS. 2004-05 , 2005-06 AND 2006-07 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEALS OF THE REVENUE FOR A.YRS. 2005-06 AND 2006-07 ARE ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF NOVEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 20 TH NOVEMBER, 2017. / / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT CIT(A) - V , PUNE & CIT(A) - 2, NASHIK CIT - V, PUNE AND CIT - 2, NASHIK , , A BENCH PUNE; / GUARD FILE.