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2013 (11) TMI 358 - AT - Income TaxDisallowance of warranty provision - CIT allowed warranty provision to extent of 0.2% - Held that:- reversal of provision in the subsequent year cannot justify the provision maid in the year under consideration, the correctness of which is to be decided mainly on the basis of past data relating to expenditure actually incurred on warranty - once the deduction on account of provision is not allowed to the extent it is found to be excess, the reversal of provision in the subsequent year to that extent cannot give rise to any income and if the assessee has offered such income in the subsequent years, it can seek appropriate relief from the A.O. who shall allow the same in accordance with law - provision made by the assessee for warranty was rightly allowed by the ld. CIT(A) only to the extent of 0.2% of the value completed in the year under consideration being fair and reasonable - Decided against Revenue. Disallowance of provision for warranty while computing the income of the assessee u/s 115JB - CIT(A) sustained to the extent of 0.20% of the value of work completed - Held that:- said provision to that extent alone can be said to be the ascertained liability of the assessee and the balance provision, which is found to be excessive on the basis of past data clearly represents unascertained liability which is liable to be added back while computing the book profit of the assessee u/s 115JB of the Act. Disallowance of advance billing - accrual of income on progressive billing - Held that:- difference in the amount of progress billing and revenue recognized by the assessee in relation to three contracts shows as “amount due to customers” was explained by the assessee before the A.O. as well as before the ld. CIT(A) by filing a detailed written submission. It appears that neither of them however has been able to appreciate the same in the correct prospective. As explained by the assessee, progress billing was done not only for the amount of work done but also for mobilization and other advances receivable by it as per the terms of the relevant contract. The revenue from the said contracts was recognized by the assessee by following the percentage of completion method and the said method as well as the basis adopted by the assessee to ascertain the percentage of work done was accepted by the department in the earlier years. The mobilization and other advances received by the assessee by raising progress billings did not represent income of the assessee at the time of raising the progress bills and the same therefore had no effect whatsoever on the income of the assessee, which was recognized by following consistently a well recognized method of percentage of completion. As rightly submitted on behalf of the assessee before the authorities below as well as before us, the entire revenue from the contracts executed by the assessee was finally recognized on the completion of the relevant contracts as per the method consistently followed by the assessee and the mobilization and other advances received by the assessee as per progress billings were liable to get adjusted on such completion - The amount due to the customers as shown by the assessee thus was nothing but receipt of advance before accrual of income - Following decision of CIT v. Punjab Tractors Co-Operative Multi-Purpose Society Ltd. [1997 (8) TMI 37 - PUNJAB AND HARYANA High Court] - Decided against Revenue. Disallowance u/s 14A - held that: - investment in shares and mutual funds was made by the assessee out of its own funds and there being no utilization of borrowed funds to make the said investment, the disallowance u/s 14A of the Act out of interest is not called for - Following decision of CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - Decided against Revenue.
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