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2017 (3) TMI 1835 - AT - Income TaxDisallowance of the provision for warranty - HELD THAT:- It is pertinent to note that in this case the assessee has acquired this business from IBM and for the first year after acquisition i.e. for the Assessment Year 2006-07, the claim of the assessee for provision of warranty was based on the historical data of IBM. Thus in view of the above facts and circumstances of the case as well as by following the decision of this Tribunal in assessee's own case [2016 (5) TMI 1524 - ITAT BANGALORE] we decide this issue in favour of the assessee and allow the claim of the assessee on account of provision for warranty which was found to be based on scientific basis and method. Transfer Pricing Adjustment - disallowance of marketing support service charges paid by the assessee to IBM - HELD THAT:- We note that an identical issue has been considered by this Tribunal in assessee's own case for the Assessment Year 2006-07 and again for the Assessment Year 2008-09 [2016 (5) TMI 1524 - ITAT BANGALORE] - It is pertinent to note that the market support service charges are paid under the same agreement as for the Assessment Yea₹ 2006-07 & 2008-09. Therefore following the decision of this Tribunal for the earlier Assessment Year as well as in the subsequent Assessment Year we decide this issue in favour of the assessee and allow the claim of the assessee. Disallowance of superannuation fund - fund was not approved by the competent authority - CIT (Appeals) has confirmed the disallowance made by the Assessing Officer on the reason that though the approval was given on 13.7.2017 w.e.f. 13.03.2007 however the payment was made on 7.4.2007 when the assessee was yet to get the approval - HELD THAT:- From finding of the CIT (Appeals) it is clear that the approval was given to the fund on 13.07.2007 with retrospective effect from 13.3.2007. Therefore the approval to the assessee was given and effective before the end of the financial year relevant to the assessment year under consideration. The assessee paid the amount to the credit of the Govt. on 7.4.2007 which is well within the limit as prescribed under Section 43B of the Act. Therefore once the assessee has paid the amount in the fund before the time period prescribed under Section 43B and the fund was approved w.e.f. 13.3.2007 then there is no plausible reason to reject the claim of deduction on this account. Accordingly, in the facts and circumstances of the case where the assessee has complied with all the requisite conditions, we allow the claim of the assessee and consequently the orders of the authorities below are set aside. Transfer Pricing Adjustment - MAM - DRP accepted the objections of the assessee regarding the CUP as MAM instead of TNMM adopted by the TPO - HELD THAT:- Cause of action to file the appeal arises only after passing order framing assessment is passed in pursuant to the directions of the DRP. If the final order is not against or prejudicial to the interest of revenue then the revenue would have no grievance against the final order as well as the directions of the DRP. Even otherwise, the interest of revenue depends upon the demand raised by the Assessing Officer as per the final order to frame the assessment in pursuant to the directions of the DRP. Thus once the TPO/A.O. has not passed the final order in pursuant to the directions of the DRP, the revenue has no cause of action and consequently has no right to file the appeal against such order as well as directions of the DRP. When the directions of DRP is binding then the TPO/A.O. is bound to give the effect to the directions of DRP irrespective of the fact whether the same are acceptable or not to the department. The remedy against the directions is available to the department to file the appeal but only when a final order is passed in pursuant to the directions of the DRP. This conduct of the TPO/A.O. is otherwise a clear defiance and disregard to the binding directions of the higher authorities. As regards the contention of the learned Departmental Representative that the DRP did not understood the order of the Tribunal in correct prospective, we are of the view that even if the directions of the DRP are not acceptable to the department and may be contrary to the precedent, the remedy is only to challenge the same in the appeal and not to refuse to give effect the same. DRP has taken an independent view and not merely followed the decision of this Tribunal. The reference of the decision of this Tribunal has been made only to fortify the finding of the DRP. We further note that the Tribunal in assessee's own case for the Assessment Yea₹ 2007-08 & 2008-09 while dealing with an identical issue [2016 (5) TMI 1524 - ITAT BANGALORE] - we delete the addition made by the TPO/A.O. on account of transfer pricing adjustment. Warranty provision as well as leave encashment while computing the book profit under Section 115JB - HELD THAT:- As regards the adjustment on account of warranty provision while computing the book profit under Section 115JB of the Act, in view of our finding on the issue of allowability of warranty provision the same cannot be treated as uncertain liability/provision. As regards the provision for leave encashment though the said claim was not allowable in view of the provision of Section 43B however in view of the decision of Hon'ble Supreme Court in the case of BEML [2000 (8) TMI 4 - SUPREME COURT] this is a certain liability though payable in future we further note that the Tribunal in assessee's own case for the Assessment Year 2011-12 we decide this ground in favour of the assessee and delete the addition made by the Assessing Officer on account of these two amounts while computing the book profit.
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