Assistant Commissioner of Income-tax, Pune V. Thermax Engg. Construction Co. Ltd., Pune

ITA 959/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0104 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-08-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHABANA PARVEEN
• Assessee Lawyers: R D ONKAR
• Keywords: Business expenditure; Bad and doubtful debts; Commercial expediency
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 959 /PUN/201 7 / ASSESSMENT YEAR : 20 12 - 13 ASST . COMMISSIONER OF INCOME TAX, CIRCLE 10 , PUNE ....... / APPELLANT / V/S. THERMAX ENGG. CONSTRUCTION COMPANY LTD., ENERGY HOUSE, D - II BLOCK, PLOT NO.38 & 39, MIDC AREA, CHINCHWAD, PUNE 411019 PAN : AABC T0243Q / RESPONDENT ASSESSEE BY : SHRI R.D. ONKAR REVENUE BY : MRS. SHABANA PARVEEN / DATE OF HEARING : 27 - 0 8 - 2019 / DATE OF PRONOUNCEMENT : 20 - 0 9 - 2019 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 6, PUNE, DATED 30 - 12 - 2016 FOR THE ASSESSMENT YEAR 2012 - 13. 2. THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUNDS: - 2 ITA NO .959/PUN/2017, A.Y. 2012 - 13 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)WAS JUSTIFIED IN HOLDING THAT LIABILITY OF LEAVE TRAVEL ALLOWANCE RS.4 7,379/ - & MEDICAL ALLOWANCE RS.4,38,301/ - WAS FIXED AND NOT CONTINGENCY IN NATURE SINCE THE AMOUNT WAS NOT QUANTIFIED OR PAID, UNDER MERCANTILE SYSTEM OF ACCOUNTING, THE EXPENDITURE CANNOT BE SAID TO HAVE ACCRUED OR CRYSTALLIZED & SINCE THE SCHEME IS BY WA Y OF PROVISION, WITHOUT EXACT QUANTIFICATION, THIS IS CONTINGENT IN NATURE. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF INDIAN SMELTING & REFINING CO. LTD. VS CIT 248 ITR 4 IN WHICH IT WAS HELD THAT THE CONTIN GENT LIABILITY CANNOT CONSTITUTE AN EXPENDITURE FOR THE PURPOSE OF IT ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)WAS JUSTIFIED IN DELETING THE ADDITION OF RS.25,67,000/ - ON ACCOUNT OF NEGATIVE CONTRACT IN PROGRESS WHEN THE ASSESSEE WAS ALLOWED A DEDUCTION FOR PROVISION MADE IN ACCORDANCE WITH THE HONBLE ITATS DECISION IN THE CASE OF THERMAX BABCOCK & WILCOX LTD FOR A.Y. 1990 - 91 WHEN THE PROVISION IS RECOMPUTED BY ADOPTING THE PERCENTAGE COMPLETION AS PER THE SALES INVOICE METHOD & NOT AS PER THE PERCENTAGE COMPLETION AS PER THE COSTS INCURRED DURING THE ACCOUNTING YEAR AS IN THE CASE OF THERMAX BABCOCK & WILCOX LTD FOR A,Y. 1990 - 91. 3. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE HON'BLE SUPREME COURT JUDGMENT IN T HE EASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (227 ITR 172) & BRITISH PAINTS LTD. (188 ITR 44), WHEREIN, IT HAS BEEN HELD THAT IF THE METHOD ADOPTED BY AN ASSESSEE DOES NOT GIVE THE CORRECT PICTURE OF ITS PROFITABILITY, THE SAME MAY BE REJECTED. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING DISALLOWANCE OF LIQUIDATED DAMAGES OF RS. 1,50,74,753/ - WHEN ACTUALLY THEY ARE SHORT RECEIPTS FROM CUSTOMERS WHICH HAVE NOT BEEN WRITTEN OFF AS BAD DEBTS OR SUNDRY BALANCES WRITTEN OFF. THE AMOUNTS ARE NOT COMPENSATION OR LIQUIDATED DAMAGES SINCE THEY HAVE NOT BEEN WRITTEN OFF. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING BANK GUARANTEE C HARGES OF RS.3,82,827/ - AS NOWHERE IN THE AGREEMENTS WITH THE ASSESSEE THE CLAUSE OF BANK GUARANTEE IS WRITTEN INSTEAD THE PROVISION OF WARRANTY IS MENTIONED IN EACH & EVERY AGREEMENT. 3. SHRI R.D. ONKAR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE GROUND NO.1 TO 4 RAISED IN THE APPEAL HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE CASE OF ASSESSEES GROUP CONCERN ACIT VS. THERMAX ENGG. CONST. CO. LTD. IN ITA NO.476/PUN/2014, FOR ASSESSMENT YEAR 2009 - 10, DECIDED ON 10.07.2019. THE LD. AR FURNISHED COPY OF THE ORDER OF TRIBUNAL IN ITA NO.476/PUN/2014 (SUPRA). IN RESPECT OF GROUND NO.5, THE LD. AR MADE FOLLOWING SUBMISSIONS: - THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ERECTION AND PRE - COMMISSIONING OF I NDUSTRIAL BOILERS, CO GENERAT ION PLANTS OTHER EQUIPMENTS. THE WORK INVOLVED IN THE SAID ACTIVITIES IS ERECTION AND CONSTRUCTION WORK FOR THE 3 ITA NO .959/PUN/2017, A.Y. 2012 - 13 CUSTOMERS OF THE ASSESSEE. THE VERY NATURE OF - BUSINESS OF THE ASSESSEE REQUIRES IT TO COMPLETE THE ERECTION AND PRE COMMISSIONING OF BOILERS/ EQUIPMENTS TO THE SATISFACTION OF THE CUSTOMER AS PER THE PERFORMANCE PARAMETERS LAID DOWN IN THAT REGARD IN THE CONTRACT. ASSESSEE IS THEREFORE OBLIGATED CONTRACTUALLY TO ENSURE SATISFACTORY COMPLETION OF WORK. THE ASSESS E E HAS ISSUED BANK GUARANTEE FOR M EETING THE SAID PURPOSE AS ALSO TO ENSURE SMOOTH INFLOW OF FUNDS IN THE COURSE OF EXECUTION OF CONTRACT AND HAS INCURRED GUARANTEE COMMISSION EXPENSES PURELY OUT OF COMMERCIAL EXPEDIENCY IN THE ORDINARY COURSE OF CONDUCT OF ITS BUSINESS AND WHOLLY AND EXCL USIVELY FOR ITS BUSINESS PURPOSE AND ACCORDINGLY CLAIMED THE EXPENSES U/S 37 (1) OF THE INCOME TAX ACT, 1961. LEARNED CITA HAS UPHELD THE AFORESAID CONTENTIONS AND ALLOWED THE DEDUCTION CLAIMED. IT IS PRAYED THAT THE DEDUCTION OF SAID EXPENSES BE ALLOWED . TO FURTHER SUBSTANTIATE HIS CONTENTION, THE LD. AR PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF SIVAKAMI MILLS REPORTED AS 227 ITR 465 (SC). 4 . ON THE OTHER HAND MRS. SHABANA PARVEEN REPRESENTING THE DEPARTMENT V EHEMENTLY DEFENDED THE ASSESSMENT ORDER AND PRAYED FOR REVERSING THE FINDINGS OF CIT(A). HOWEVER, THE LD. DR FAIRLY ADMITTED THAT GROUND NO.1 TO 4 RAISED IN THE APPEAL BY THE DEPARTMENT HAVE BEEN CONSIDERED BY THE TRIBUNAL IN THE CASE OF ASSESSEES GROUP CONCERN THERMAX ENGG. CONST. CO. LTD. I N ASSESSMENT YEAR 2009 - 10 (SUPRA) . 5 . W E HAVE H EARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IN GROUND NO.1 OF THE APPEAL, THE REVENUE HAS ASSAILED THE FINDINGS OF CIT(A) IN ALLOWING PROVISI ON FOR LEAVE TRAVEL ALLOWANCE (LTA) RS.47,379/ - AND MEDICAL ALLOWANCE RS.4,38,301/ - . WE FIND THAT IDENTICAL ISSUE WAS RAISED IN ITA NO.476/PUN/2014 (SUPRA). THE CO - ORDINATE BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: - 6. THE GROUND NO. 2 OF THE APPEAL IS IN RESPECT OF PROVISION TOWARDS LEAVE TRAVEL ALLOWANCE AND MEDICAL REIMBURSEMENT TO THE EMPLOYEES. WE FIND THAT THIS ISSUE HAS ALSO BEEN CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL WHILE ADJUDICATING THE APPEAL OF REV ENUE IN THE CASE OF THERMAX LIMITED IN ITA NO. 1803/PUN/2012 FOR THE ASSESSMENT YEAR 2004 - 05. HOWEVER, IN THE SAID APPEAL THE ISSUE WAS 4 ITA NO .959/PUN/2017, A.Y. 2012 - 13 CONFINED TO THE REIMBURSEMENT OF MEDICAL EXPENDITURE TO THE EMPLOYEES. THE ASSESSEE HAS FURNISHED COPY OF THE SCHEME W HICH IS COMBINED FOR MEDICAL REIMBURSEMENT AND THE LEAVE TRAVEL CONCESSION. THE SCHEME HAS BEEN REPRODUCED IN PARA 3.1 OF THE ORDER. THE CO - ORDINATE BENCH OF TRIBUNAL DELETED THE ADDITION BY FOLLOWING THE ORDER OF TRIBUNAL IN ITA NO. 1055 & 1056/PN/2009. THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNED ORDER HAS GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESSMENT YEAR 2004 - 05. THE SAME HAS NOW BEEN UPHELD BY THE TRIBUNAL IN ITA NO. 1803/PUN/2012 (SUPRA). WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, GROUND NO. 2 OF THE APPEAL IS DISMISSED. NO CONTRARY MATERIAL HAS BEEN PLACED BY THE REVENUE BEFORE US TO TAKE A DIFFERENT VIEW , ACCORDINGLY. THE GROUN D NO.1 RAISED IN THE APPEAL IS DISMISSED. 6 . THE GROUND NO.2 AND 3 OF APPEAL BY THE REVENUE ARE AGAINST THE FINDINGS OF CIT(A) IN ALLOWING ASSESSEES METHOD OF RECOGNITION OF PROFIT. WE FIND THAT THIS ISSUE WAS ALSO CONSIDERED BY THE CO - ORDINATE BENCH IN ITA NO.476/PUN/2014 (SUPRA). BOTH THE SIDES ARE UNANIMOUS IN STATING THAT THE FACTS IN THE INSTANT APPEAL AND IN ITA NO.476/PUN/2014 (SUPRA) ARE IDENTICAL. THE CO - ORDINATE BENCH DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: - 5. BOTH SID ES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE GROUND NO. 1(A), 1(B) AND 1(C) OF THE APPEAL IS WITH RESPECT TO ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NEGATIVE CONTRACT IN PROGRESS. WE FIND THAT THE CO - ORDINATE BENCH OF TRIBUNAL IN AN APPEAL FILED BY THE ASSESSEE IN ITA NO. 1765/PUN/2012 (SUPRA) HAS DECIDED THIS ISSUE. FOR THE SAKE OF COMPLETENESS THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL ON THE ISSUE ARE REPRODUCED HERE - IN - BELOW : 21. ON HEARING BOTH THE SIDES, WE FIND IN THE APPEAL OF THE ASSESSEE AND IN THE APPEAL OF THE REVENUE, THE ISSUE FOR ADJUDICATION RELATES TO THE CORRECTNESS OF THE ADJUSTMENTS MADE TO THE ESTIMATED COST QUA THE FREIGHT OUTWARD TO THE TUNE OF RS.26.55 LAKHS. THE DETAILS AND THE FACTS ARE ALREADY NARRATED IN THE PRECEDING PARAGRAPHS OF THIS ORDER. PERUSING THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003 - 04 (SUPRA), WE FIND, IN PRINCIPLE, THE INCOME RECOGNITION METHOD STANDS APPROVED BY THE ORDER OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE DISCUSSION AT PARA 11 TO 13 OF THE ORDER OF THE TRIBUNAL IS RELEVANT IN THIS REGARD AND THE SAME ARE EXTRACTED AS UNDER : - 5 ITA NO .959/PUN/2017, A.Y. 2012 - 13 11. GROUND NO.2 IS WITH RESPECT TO ADDITION MADE TO THE CONTRACT INCOME. AO NOTICED THAT ASSESSEE IS A MANUFACTURER OF INDUSTRIAL BOILERS AND HEAT TRANSFER EQUIPMENTS AND UNDERTAKES THE PROJECTS ON CONTRACT BASIS AND THE CONTRACT NORMALLY RUNS OVER A PERIOD OF MORE THAN ONE YEAR. THE ASSESSEE WAS ACCOUNTING FOR INCOME ON SUCH P ROJECTS BY FOLLOWING THE PROJECTION COMPLETION METHOD AND WAS RAISING INVOICES AS PER THE SCHEDULED PAYMENTS AGREED WITH THE CLIENTS BUT AT THE SAME TIME HAD CREATED PROVISION TOWARDS CONTRIBUTION EQUALIZATION PROVISION TO ADJUST EXCESS BILLING. DURING THE YEAR, THE PROVISION OF CONTRIBUTION EQUALIZATION DEBITED TO THE PROFIT AND LOSS ACCOUNT WAS RS.4,53,93,679/ - . AO NOTICED THAT THE EXCESS AMOUNT REALIZED AS PER THE INVOICES WAS NOT OFFERED AS REVENUE RECEIPTS AND TO THAT EXTENT PROFIT WAS NOT OFFERED AS INCOME. AO WAS OF THE VIEW THAT SINCE THE INVOICES WAS RAISED AS PER THE AGREED SCHEDULE; THE INVOICE VALUE SHOULD BE TREATED AS REVENUE RECEIPTS. HE FURTHER NOTICED THAT IDENTICAL ISSUE AROSE IN A.Y. 1997 - 98 WHEREIN IT WAS HELD THAT THE VALUE REFLECTED IN INVOICES RAISED AS PER AGREED SCHEDULE WITH THE CLIENTS WAS TO BE TREATED AS REVENUE RECEIPTS. AO THEREFORE HELD THAT THE PROVISION OF RS.4,53,93,679/ - CANNOT BE ALLOWED. HE ACCORDINGLY DISALLOWED THE SAME AND MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER : 7.2. I FIND THAT THE ISSUE HAS ELABORATELY BEEN DEALT WITH BY MY PREDECESSOR IN APPELLANTS CASE IN APPEAL FOR A.Y. 2002 - 03, WHEREIN IT WAS HELD BY HIM THAT ALTHOUGH, IN PRINCIPLE, THE APPELLANT CANNOT BE FOUND FAULT WITH FOR HAVING FOLLOWED ACCOUNTING STANDARD - 7 IN THE MATTER OF REVENUE RECOGNITION AND ACCORDINGLY, MAKING PROVISIONS FOR EQUALIZATION, ITS ACTUAL WORKING IS NOT ABOVE SCRUTINY. HE HELD THAT THE APPELLANT WAS NOT JUSTIFIED IN OMITTING TO RECOGNIZE REVENUE WHEREVER COMPLETION WAS LESS THAN 33% OF THE TOTAL PROJECT OR WHERE THE CONTRACTS WERE LESS THAN RS.25 LACS. THE LD.CIT(A) ALSO DISAPPROVED THE APPELLANTS ACT OF FURTHER SCALIN G DOWN TOWARDS CONTINGENCIES/UNFORESEEABLE LOSSES. THE FACTS OF THE CASE DURING THIS YEAR ARE IDENTICAL TO THOSE IN A.Y. 2002 - 03 AND I FIND NO REASON TO FORM A VIEW OTHER THAN THAT OF MY PREDECESSOR. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO WORK O UT THE EXCESS PROVISION IN THE LIGHT OF THE OBSERVATION MADE BY LD.CIT(A) IN A.Y.2002 - 03 AND RESTRICT THE DISALLOWANCE TO THAT EXTENT. DECIDED ACCORDINGLY. AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US. REVENUE IS ALSO AGGRIEVED BY ORDER OF CIT(A) TO THE EXTENT OF RELIEF GRANTED BY HIM AND HAS THEREFORE RAISED GROUND NO.2 IN ITS APPEAL. SINCE THE GROUNDS RAISED BY ASSESSEE AND REVENUE ARE INTER - CONNECTED, BOTH ARE CONSIDERED TOGETHER. 6 ITA NO .959/PUN/2017, A.Y. 2012 - 13 12. BEFORE US, LD. AR SUBMITTED THAT IDENTICA L ISSUE AROSE BEFORE TRIBUNAL IN ASSESSEES APPEAL FOR A.Y. 2002 - 03 AND THE ISSUE WAS DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES FAVOUR BY FOLLOWING THE TRIBUNAL ORDER IN A.YS.1997 - 98 TO 2002 - 03. HE PLACED ON RECORD THE ORDER OF TRIBUNA L FOR A.YS. 2000 - 01 TO 2002 - 03 AND POINTED TO THE RELEVANT FINDINGS OF THE TRIBUNAL. HE SUBMITTED THAT SINCE THERE ARE NO CHANGE IN THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION, THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS, THE ISSUE BE DECIDED IN FAVOUR OF THE ASSESSEE. LD. DR DID NOT CONTROVERT THE SUBMISSIONS MADE BY THE LD. AR BUT HOWEVER SUPPORTED THE ORDER OF AO. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE I N THE PRESENT GROUND IS WITH RESPECT TO INCREASING THE INCOME TO THE EXTENT OF PROVISION FOR PROFIT EQUALIZATION. WE FIND THAT IDENTICAL ISSUE OF INCREASE IN THE CONTRACT INCOME AROSE IN ASSESSEES OWN CASE IN A.YS.2000 - 01 TO 2002 - 03 AND THE COORDINATE BEN CH OF THE TRIBUNAL DECIDED THE ISSUE IN ASSESSEES FAVOUR BY FOLLOWING THE TRIBUNAL ORDER FOR A.YS. 1997 - 98 TO 2000 - 01, BY HOLDING AS UNDER: 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WI TH RESPECT TO INCREASING THE INCOME TO THE EXTENT OF PROVISION FOR PROFIT EQUALIZATION. WE FIND THAT IDENTICAL ISSUE OF INCREASE IN THE CONTRACT INCOME AROSE IN ASSESSEES OWN CASE IN A.Y. 2000 - 01 AND 2001 - 02 AND THE COORDINATE BENCH OF THE TRIBUNAL DECIDE D THE ISSUE IN ASSESSEES FAVOUR BY FOLLOWING THE TRIBUNAL ORDER FOR A.YRS. 1997 - 98, 1998 - 99 AND 1999 - 2000, BY HOLDING AS UNDER: 9. THE THIRD GROUND RAISED BY THE ASSESSEE IN APPEAL RELATES TO INCOME RECOGNITION FROM CONTRACT IN ACCORDANCE WITH ACCOUNTING STANDARD 7 OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI). THE REVENUE IN CROSS APPEAL FOR ASSESSMENT YEAR 2000 - 01 HAS ALSO RAISED THIS ISSUE AS GROUND NO.1. THE ASSESSEE IS MANUFACTURING BOILERS AND HEAT TRANSFER EQUIPMENTS ON CONTRACT BASIS. THESE CONTRACTS ARE SPREAD OVER A PERIOD OF MORE THAN ONE YEAR. THE ASSESSEE IS RECOGNIZING INCOME OF THE PROJECTS, ON PROJECT COMPLETION METHOD. THE ASSESSEE RAISES INVOICE ON THE CLIENT AS PER SCHEDULE OF PAYMENTS. THE BILLS RAISED ARE ALWAYS MORE THAN T HE REVENUE THAT SHOULD BE RECOGNIZED ON THE BASIS OF PROJECT COMPLETION METHOD. THE ADJUSTMENT IS REQUIRED TO BE MADE TO ADJUST EXCESS BILLING. THE ADJUSTMENT IS MADE IN ACCORDANCE WITH AS 7 BY CREATING A PROVISION CONTRIBUTION EQUALIZATION 7 ITA NO .959/PUN/2017, A.Y. 2012 - 13 PROVISION. THE ASSESSING OFFICER REJECTED THIS METHOD OF MAKING ADJUSTMENT BY THE ASSESSEE. IN THE FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) PARTLY ACCEPTED THE CLAIM OF THE ASSESSEE. AGAINST THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS), BOTH, THE ASSESSEE AND THE REVENUE HAVE COME IN APPEAL. 9.1 WE OBSERVE THAT SIMILAR ISSUE HAD COME UP IN THE APPEAL OF THE ASSESSEE AND THE REVENUE FOR ASSESSMENT YEARS 1998 - 99 AND 1999 - 2000. THE CO - ORDINATE BENCH DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. TH E RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL READS AS UNDER: - 22. ON THIS ASPECT, IT WAS A COMMON GROUND BETWEEN THE PARTIES THAT IN ASSESSMENT YEAR 1997 - 98, THE TRIBUNAL VIDE ITS ORDER DATED 03.09.2014 (SUPRA.) IN THE ASSESSEES OWN CASE HAS UPHELD THE STAND OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL ON A SIMILAR ISSUE IN THE CASE OF THERMAX BABCOCK & WILCOX LTD. VS. DCIT VIDE ITA NOS.157 & 158/PN/1995 DATED 11.05.2001 FOR ASSESSMENT YEARS 1990 - 91& 1991 - 92. THE TRIBUNAL IN ITS ORDER DATED 03.09.2014 (SUPRA) NOTED THAT IN THE CASE OF THERMAX BABCOCK & WILCOX LTD. (SUPRA) WHICH WAS A GROUP COMPANY OF THE ASSESSEE, THE TRIBUNAL UPHELD THE ALLOWABILITY OF PROVISION FOR PROFIT EQUALIZATION WHILE RECOGNIZING INCOMES ON APPLICA TION OF PERCENTAGE OF COMPLETION METHOD IN THE CASE OF LONG TERM CONTRACTS IN THE LIGHT OF THE AS - 7 ISSUED BY THE ICAI. IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEAR, WE DO NOT DEAL WITH THE ISSUE ANY F URTHER EXCEPT DIRECTING THE ASSESSING OFFICER TO IMPLEMENT THE ORDER OF THE TRIBUNAL DATED 03.09.2014 (SUPRA) ON THIS GROUND TOO. AS A CONSEQUENCE, WHEREAS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED THAT OF THE REVENUE IS DISMISSED. THERE HAS BEEN NO CH ANGE IN THE FACTS AND CIRCUMSTANCES IN THE PRESENT YEAR, NOR THERE IS ANY CHANGE IN THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE. WE DO NOT FIND ANY REASON TO DEVIATE FROM THE VIEW TAKEN BY THE CO - ORDINATE BENCH IN ASSESSMENT YEARS 1998 - 99 AND 1999 - 2000. ACCORDINGLY, THIS GROUND IN THE APPEAL OF THE ASSESSEE IS ACCEPTED AND THE GROUND RAISED BY THE REVENUE IN ITS APPEAL IS DISMISSED. 19. BEFORE US, SINCE BOTH THE PARTIES HAVE ADMITTED THAT THE FACTS OF THE CASE IN THE PRESENT GROUND ARE IDENTICAL TO THAT OF EARLIER YEARS AND SINCE IN EARLIER YEARS, THE ISSUE HAS BEEN DECIDED BY CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES FAVOUR, WE THEREFORE FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN 8 ITA NO .959/PUN/2017, A.Y. 2012 - 13 ASSESSEES OWN CASE FOR EARLIER YEARS AND FOR SIMILAR REASONS, ALLOW THE GROUND OF ASSESSEE AND THUS, THE ASSESSEES GROUND NO.4 IS ALLOWED AND REVENUES GROUND NO.2 IS DISMISSED. 14. BEFORE US, SINCE BOTH THE PARTIES HAVE ADMITTED THAT THE FACTS OF THE CASE IN THE PRESENT GROUNDS ARE IDENTICAL TO THA T OF EARLIER YEARS AND SINCE IN EARLIER YEARS, THE ISSUE HAS BEEN DECIDED BY CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES FAVOUR, WE THEREFORE FOLLOWING THE REASONING OF THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EA RLIER YEARS AND FOR SIMILAR REASONS, ALLOW THE GROUND OF ASSESSEE AND THUS THE ASSESSEES GROUND NO.2 IS ALLOWED AND REVENUES GROUND NO.2 IS DISMISSED. 22. FROM THE ABOVE DISCUSSION AND THE ARGUMENTS MADE OUT BY THE LD. COUNSEL FOR THE ASSESSEE, WE FIND THE AS - 7 WHICH EXISTED PRIOR TO LETTER DATED 01 ST APRIL, 2003 CONTINUES TO REMAIN THE SAME; BUT FOR MINOR CHANGES. THERE ARE MINOR CHANGES IN RELATION TO THE COMPUTATIONAL ISSUES. HOWEVER, THERE IS NO CHANGE SO FAR AS COST BASED PERCENTAGE COMPLETION METHOD IN CONCERNED. THEREFORE, THE COMPUTATION O F RECOGNITION INCOME IS CONCERNED, THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE AND THE SAME DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, RELEVANT GROUNDS STAND ALLOWED IN FAVOUR OF THE ASSESSEE. 23. FURTHER, SO FAR AS ADJUSTMENTS MADE BY THE ASSE SSING OFFICER TO THE ESTIMATED COST IS CONCERNED, THE CIT(A) ALREADY GRANTED PART RELIEF TO THE ASSESSEE. WITH REFERENCE TO THE FREIGHT OUTWARD TO BE INCLUDED IN THE ESTIMATED TOTAL COST, WE FIND IT IS A CASE OF REIMBURSEMENT OF THE ACTUAL COST INCURRED B Y THE ASSESSEE. THE INCLUSION IN THE TOTAL ESTIMATED COST WHEN THE SAME IS RETURNED HAS NO EFFECT ON THE INCOME ASPECT. THEREFORE, BEING THE CASE OF REIMBURSEMENT, THERE IS NO PROFIT ELEMENT. CONSEQUENTLY, RECOGNITION INCOME OF SUCH REIMBURSEMENT IS NOT APPROPRIATE. THEREFORE, THE ORDER OF THE CIT(A) ON THIS ISSUE REQUIRES TO BE REVERSED. ACCORDINGLY, ASSESSEE IS ENTITLED TO GET RELIEF ON THIS ISSUE ALSO. THUS, GROUND NO.2 OF THE ASSESSEE IS ALLOWED AND THE GROUND NO.1(A) AND 1(B) OF THE REVENUE IS DI SMISSED. NO MATERIAL HAS BEEN PLACED ON RECORD BY THE REVENUE TO DISTINGUISH THE FACTS IN THE PRESENT ASSESSMENT YEAR. ON PARITY OF FACTS, THE FINDINGS GIVEN BY TRIBUNAL IN ASSESSMENT YEAR 2004 - 05 WOULD MUTATIS MUTANDIS APPLY TO IMPUGNED ASSESSMENT YEAR. THUS, GROUND NO. 1(A), 1(B) AND 1(C) IN THE APPEAL BY REVENUE ARE DISMISSED BEING DEVOID OF ANY MERITS. 7 . SINCE THERE IS NO MATERIAL CONTRARY TO THE FINDINGS OF TRIBUNAL, WE FIND NO REASON TO TAKE A CONTRARY VIEW. ACCORDINGLY, GROUND NO.2 AND 3 OF AP PEAL BY THE REVENUE ARE DISMISSED BEING DEVOID OF MERIT. 8 . IN GROUND NO.4, THE REVENUE HAS ASSAILED THE FINDINGS OF CIT(A) IN ALLOWING ASSESSEES CLAIM OF LIQUIDATED DAMAGES. THE ALLOWABILITY OF LIQUIDATED DAMAGES HAS BEEN CONSIDERED BY THE TRIBUNAL IN APPEAL BY 9 ITA NO .959/PUN/2017, A.Y. 2012 - 13 REVENUE IN ITA NO.476/PUN/2014 (SUPRA). THE TRIBUNAL DECIDED THIS ISSUE BY HOLDING AS UNDER: - 7. IN GROUND NO. 3(A) AND 3(B) OF THE APPEAL THE REVENUE HAS ASSAILED DELETING OF DISALLOWANCE OF LIQUIDATED DAMAGES. THIS ISSUE HAS ALSO BEEN CONSID ERED BY THE TRIBUNAL IN APPEAL IN ITA NO. 1765/PUN/2012 (SUPRA). THE TRIBUNAL FOLLOWING THE DECISION IN ITA NO. 1055 & 1056/PN/2009 FOR ASSESSMENT YEAR 2003 - 04 DECIDED ON 12 - 03 - 2019 IN THE CASE OF THERMAX LIMITED CONCLUDED AS UNDER : 22. GROUND NO.5 OF ASSESSEES APPEAL AND GROUND NO.3 OF REVENUES APPEAL IS WITH RESPECT TO LIQUIDATED DAMAGES. 22.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD DEBITED RS 200.26 LACS UNDER THE HEAD LIQUIDATED DAMAGES. THE ASSESSEE WAS ASKED TO JUSTIFY IT TOWARDS THE ALLOWABILITY ALONG WITH THE EVIDENCES. ASSESSEE INTER - ALIA SUBMITTED THAT ASSESSEE MANUFACTURES WATER TREATMENT PLANTS, POLLUTION CONTROL EQUIPMENTS ETC AND THESE ARE MANUFACTURED AS PER THE ORDER AND REQUIREMENTS OF THE CUSTOMER S. THE CONTRACTS INVOLVES MEDIUM TO LONG TERM CONTRACTS WHICH INCLUDE ACTIVITIES LIKE PRE - DESIGN, DISCUSSION WITH THE CLIENTS, DRAWINGS, DESIGNS, PROCUREMENT, FABRICATION, ERECTION, COMMISSIONING AND INSTALLATION OF THE EQUIPMENTS WHICH IS FOLLOWED BY PER FORMANCE GUARANTEE ACCORDING TO THE AGREED CONDITIONS. THE CONTRACTS GENERALLY CONTAIN CLAUSES FOR PAYMENT OF COMPENSATION IN THE FORM OF LIQUIDATED DAMAGES WHICH ARE USUALLY PAYABLE AT STIPULATED PERCENTAGE OF THE CONTRACT VALUE. SOME - TIMES THE CONTRACTS PROVIDES FOR COMPENSATION FOR NON PERFORMANCE OR SATISFACTORY PERFORMANCE OF THE PRODUCTS SUPPLIED BY THE ASSESSEE. THE PAYMENT OF COMPENSATION/LIQUIDATED DAMAGES IS MADE TO ENSURE GOOD CUSTOMER RELATIONSHIP AND FUTURE BUSINESS. IT WAS FURTHER SUBMITTED TH AT THE CUSTOMER CAN RECOVER THE COMPENSATION IN VARIETY OF WAYS LIKE DEDUCTION FROM FUTURE PAYMENTS ETC. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE ACCOUNTS FOR THE COMPENSATION WHEN THE SAME IS ACTUALLY CLAIMED BY THE CUSTOMER OR WHEN IT IS DEDUCTED BY TH E CUSTOMER WHICHEVER IS EARLIER. IT WAS THUS SUBMITTED THAT THE NATURE OF COMPENSATION WAS NOT IN THE NATURE OF PENALTY FOR BREACH OF STATUTORY PROVISION AND THAT SUCH BREACH WAS A NORMAL INCIDENCE OF TRADE. THE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND A CCEPTABLE TO AO. AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND AFTER PERUSING THE DETAILS FURNISHED BY THE ASSESSEE NOTED THAT THE BAD DEBTS AND LIQUIDATED DAMAGES AS PER THE ASSESSEE ARE CLEARLY NOT DISTINGUISHABLE AS THEY ARE QUITE OVERLAPPING . HE FURTHER CONCLUDED THAT THE AMOUNT CLAIMED AS LIQUIDATED DAMAGES ARE SHORT RECEIPTS FROM CUSTOMERS WHICH HAVE BEEN WRITTEN OFF AS BAD DEBTS OR SUNDRY BALANCES WRITTEN OFF AND THAT IT WAS NEITHER A CASE OF COMPENSATION GIVEN BY THE ASSESSEE NOR A CASE O F LIQUIDATED DAMAGES. HE FURTHER OBSERVED THAT THE CLAIM AS WRITE OFF OF BAD DEBTS ALSO CANNOT BE ALLOWED AS THE AMOUNTS HAVE NOT BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS. HE ACCORDINGLY DENIED THE CLAIM AND MADE ADDITION OF RS 200.26 LACS. AGGRIEVED BY T HE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO IN PRINCIPLE AGREED WITH THE CLAIM OF ASSESSEE BUT HOWEVER DIRECTED THE AO TO VERIFY THE ASSESSEES CLAIM TO THE EXTENT SUPPORTED BY THE CLAUSE OF LIQUIDATED DAMAGES AS PER CONTRACT AND DECIDE A CCORDINGLY. THE RELEVANT FINDINGS OF CIT(A) ARE AS UNDER: 10 ITA NO .959/PUN/2017, A.Y. 2012 - 13 THE SUBMISSION HAS BEEN CAREFULLY CONSIDERED BY ME. THE APPELLANT COMPANY HAS ALSO FURNISHED BEFORE ME THE PARTYWISE DETAILS OF LIQUIDATED DAMAGES OF RS.200.26 LAKHS. IT HAS ALSO FILED SAMPLE COP IES OF PURCHASE ORDERS OF A FEW CUSTOMERS OF THE APPELLANT COMPANY CONTAINING CLAUSE OF LIQUIDATED DAMAGES ACCORDING TO WHICH PENALTY AT THE PRESCRIBED RATE IS LEVIABLE IN CASE OF DELAY IN SUPPLY OF GOODS ORDERED. ON PERUSAL OF THESE DOCUMENTS, IN PRINCIP LE, I AGREE WITH THE CLAIM OF THE APPELLANT COMPANY THAT THE LIQUIDATED DAMAGES, ARISING OUT OF THE TERMS OF THE PURCHASE ORDERS, SCHEDULE, ARE ALLOWABLE AS BUSINESS EXPENDITURE. THE CASES RELIED UPON BY THE ASSESSING OFFICER WHILE DISALLOWING THE LIQUIDA TED DAMAGES OF RS.200.26 LAKHS HAVE ALSO BEEN SUCCESSFULLY DISTINGUISHED BY THE APPELLANT BY EXPLAINING THE DIFFERENCE IN THE FACTS OF APPELLANTS CASE FROM THE FACTS OF THOSE CASES. IN THIS VIEW OF THE MATTER, I DIRECT THE ASSESSING OFFICER TO VERIFY AND ALLOW THE APPELLANTS CLAIM OF LIQUIDATED DAMAGES OUT OF RS.200.26 LAKHS TO THE EXTENT THE AMOUNTS DEBITED UNDER THIS HEAD ARE FOUND SUPPORTED BY THE CLAUSE OF LIQUIDATED DAMAGES. DECIDED ACCORDINGLY. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVEN UE ARE NOW IN APPEAL BEFORE US. 23. BEFORE US, LD AR REITERATED THE SUBMISSIONS MADE BEFORE AO AND CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ENGINEERING GOODS, HEAT TRANSFER EQUIPMENTS SUCH AS BOILERS, HEAT P UMPS, MANUFACTURE OF WATER TREATMENT PLANTS, WASTE WATER MANAGEMENT SYSTEM, POLLUTION CONTROL SYSTEMS ETC. SOME OF THE CONTRACTS PROVIDE FOR ANCILLARY ACTIVITIES LIKE ERECTION AND COMMISSIONING OF THE MANUFACTURED EQUIPMENTS. THE CONTRACTS WHICH THE ASSESS EE ENTERS INTO WITH THE CUSTOMERS GENERALLY CARRY A CLAUSE OF PAYMENT OF LIQUIDATED DAMAGES IN THE EVENT OF DELAY OF DELIVERIES, NON - PERFORMANCE OF SUPPLY OF GOODS ETC AND THE METHODOLOGY OF CALCULATION OF LIQUIDATED DAMAGES IS PRESCRIBED IN THE CONTRACT. BASED ON THE CLAUSE OF THE AGREEMENT, THE CUSTOMER, IN THE EVENT OF BREACH OF THE RELEVANT PROVISIONS OF THE CONTRACT, DEBITS THE AMOUNT DUE UNDER THE CONTRACT AS LIQUIDATED DAMAGES OR WITHHOLDS THE AMOUNT WHILE RELEASING PAYMENTS FOR MONIES WHICH ARE OTHE RWISE LEGALLY DUE TO THE ASSESSEE IN TERMS OF THE CONTRACT. UPON SUCH DEDUCTION/HOLDING BACK BY THE CUSTOMERS, THE ASSESSEE ACCOUNTS FOR THE SUM AND WHEREVER REQUIRED ISSUES A CREDIT NOTE TOWARDS THE LIQUIDATED DAMAGES. IN SUPPORT OF HIS CONTENTION OF THE CONTRACTS HAVING CLAUSE FOR LIQUIDATED DAMAGES, HE POINTED TO THE SAMPLE PURCHASE ORDERS PLACED IN THE PAPER BOOK. HE SUBMITTED THAT THE AOS CONCLUSION THAT THE ISSUANCE OF CREDIT NOTES DOES NOT TANTAMOUNT TO EFFECTIVE WRITE OFF IS FACTUALLY INCORRECT DES PITE THE FACT THAT A CREDIT NOTE IS ISSUED WHEREBY THE PARTYS ACCOUNT IS CREDITED WITH A CORRESPONDING DEBIT TO THE LIQUIDATED DAMAGES ACCOUNT IN THE BOOKS AND MORE SO WHEN THERE IS NO DENYING OF THE FACT THAT THERE WAS INDEED A BREACH OF CONTRACTUAL CO NDITIONS. HE FURTHER SUBMITTED THAT WITH RESPECT TO THE CLAIMS THERE HAS BEEN AN ACCRUAL OF LIABILITY AND THE CUSTOMER ENFORCING THE RIGHT VESTED BY DEDUCTING THE SUM FROM THE PAYMENTS WHICH ARE OTHERWISE DUE TO THE ASSESSEE. HE FURTHER SUBMITTED THAT AO H AS CONFUSED THE ISSUE OF CLAIM OF LIQUIDATED DAMAGES WITH THE ISSUE OF CLAIM OF BAD DEBTS AND THAT THE CLAIM OF BAD DEBTS HAS BEEN ACCEPTED BY HIM. HE FURTHER SUBMITTED THAT THE RELIANCE PLACED BY AO IN THE CASE OF N. SUNDARESWARAN VS CIT REPORTED IN 226 I TR 142 IS MISPLACED AS THE FACTS ARE DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE AS IN THAT CASE THE CONTRACT DID NOT 11 ITA NO .959/PUN/2017, A.Y. 2012 - 13 CONTAIN PROVISION FOR LIQUIDATED DAMAGES AND HAD ONLY DEALT WITH THE CASE WHERE THE MATTER WAS TO BE REFERRED TO ARBITRATION. HE FU RTHER SUBMITTED THAT THE FACTS IN THE CASE OF CIT VS. SESHASAYEE INDUSTRIES LTD.(242 ITR 691) ARE DISTINGUISHABLE AND THEREFORE NOT APPLICABLE TO THE PRESENT FACTS OF THE ASSESSEE. HE THEREAFTER SUBMITTED THAT THE EXPENDITURE HAS BEEN INCURRED DURING THE C OURSE OF BUSINESS AND IS FOR THE PURPOSE OF BUSINESS MORE SO WHEN CIT(A) HAS ACCEPTED THE ALLOWABILITY OF CLAIM OF LIQUIDATED DAMAGES AS BUSINESS EXPENDITURE. HE FURTHER SUBMITTED THAT HONBLE APEX COURT IN THE CASE OF SA BUILDERS (288 ITR 1) HAS HELD THAT TO THE EXTENT THAT THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER LEGAL OBLIGATION BUT YET IT IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT IS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. IT HAS FURTHER HELD THAT COMMERCIAL EXPEDIENCY IS A TERM OF WI DE IMPORT AND HAS BEEN HELD TO INCLUDE SUCH EXPENDITURE AS A PRUDENT BUSINESSMEN INCURS FOR THE PURPOSE OF BUSINESS. HE FURTHER SUBMITTED THAT NO DISALLOWANCE OF LIQUIDATED DAMAGES WERE MADE IN EARLIER YEARS THOUGH THE ASSESSEE WAS FOLLOWING SIMILAR METHOD OLOGY FOR ACCOUNTING. LD AR THEREAFTER SUBMITTED THAT WHEN CIT(A) HAD ACCEPTED THE ALLOWABILITY OF CLAIM FOR LIQUIDATED DAMAGES AS A BUSINESS EXPENDITURE THEN HE SHOULD HAVE NOT DIRECTED THE AO TO ALLOW DEDUCTION TO THE EXTENT THERE WERE LIQUIDATED DAMAGES CLAUSES IN THE PURCHASE ORDERS. HE THEREFORE REITERATED THAT WHEN THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND DURING THE COURSE OF BUSINESS, THE CLAIM OF ASSESSEE FOR ALLOWING THE EXPENDITURE BE UPHELD. 8. THE COMMISSIONER OF INCOME TAX (APPEALS) GRANTED RELIEF TO THE ASSESSEE IN THE IMPUGNED ORDER BY FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSMENT YEAR 2003 - 04, WHICH HAS NOW BEEN CONFIRMED BY THE TRIBUNAL. THE DEPARTMENT HAS NOT PLACED ON RECORD ANY FRESH MATERIAL TO CONTROVERT THE FINDINGS OF TRIBUNAL. HENCE, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. CONSEQUENTLY, GROUND NO. 3(A) AND 3(B) RAISED IN THE APPEAL BY DEPARTMENT ARE DISMISSED BEING DEVOID OF ANY MERITS. 9 . THE ISSUE IN PRESENT APPEAL IS IDENTICAL TO THE ONE ALREADY CONSIDERED BY THE TRIBUNAL IN ASSESSEES GROUP CONCERN. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE FINDINGS OF CIT(A) AND DISMISS THE GROUND NO.4 OF THE APPEAL. 1 0 . IN GROUND NO.5 OF THE APPEAL, THE REVENUE HAS ASSAILED THE FINDINGS OF CIT(A) IN ALLOWING BANK GUARANTEE CHARGES RS.3,82,827/ - . THE ASSESSEE IS ENGAGED IN BUSINESS OF ERECTION AND PRE - COMMISSIONING OF INDUSTRIAL BOILERS, CO GENERATION PLANT S & OTHER EQUIPMENTS . TO ENSURE TIMELY AND SATISFACTORY ERECTION / PRE - COMMISSIONING OF THE PLANT & MACHINERY, THE ASSESSEE ISSUES BANK GUARANTEE. AS IS EVIDENT FROM THE DOCUMENTS ON RECORD, THE EXPENDITURE TOWARDS BANK GUARANTEE IS WHOLLY AND EXCLUSIVELY 12 ITA NO .959/PUN/2017, A.Y. 2012 - 13 FOR THE PURPOSE OF BUSINESS AND THESE CHARGES WERE PAID BY ASSESSEE IN THE NORMAL COURSE OF BUSINESS . THE CIT(A) HAS ALLOWED ASSESSEES CLAIM BY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EKL APPLIANCES LTD. REPORTED AS (2012) 345 I TR 241 (DEL). WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF FIRST APPELLATE AUTHORITY. ACCORDINGLY, THE SAME ARE UPHELD AND THE GROUND NO.4 OF APPEAL BY THE REVENUE IS DISMISSED. 1 1 . IN THE RESULT, APPEAL BY THE REVENUE IS DISMISSED. ORDER PRON OUNCED ON F R I D A Y , THE 2 0 T H DAY OF SEPTEMBER, 2019 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 2 0 T H SEPTEMBER, 2019 GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 6 , PUNE 4. THE PR. COMMISSIONER OF INCOME TAX - 5 , PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE