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2017 (7) TMI 997 - AT - Income TaxDisallowance of loss without rejecting books of accounts of the assessee under provision of section 145(3) - AO disallowed the losses from the two projects merely on the ground that there was a fall in overall gross profit rate of the company as compared to the last year - Held that:- We find that the assessee has duly explained the reason for the losses. When the project is spread over more than one year and the assessee has followed percentage completion method for recognizing profit from such project, the amount of profit or loss from the project, may vary from year to year. In our opinion, when the assessee has explained the reasons for losses, the action of the AO in rejecting the losses without pointing out any defect in the explanation of the assessee, is not justified. The Assessing Officer has nowhere held that either the assessee inflated it purchases or suppressed it sales and merely the low gross profit rate cannot be basis for disallowing the losses. When the Assessing Officer failed to find any fault in the explanation of the assessee justifying the losses claimed following the percentage completion method, the action of the Assessing Officer in disallowing such losses is arbitrary and not in accordance with law. Addition on account of payment to M/s. Lurgi Life Science (LLS), Germany for drawing charges - CIT-S deleted addition - Held that:- We find that the payment for getting technical know-how in the form of drawing etc. in the year under consideration has also been made in continuation of the agreement dated 03/09/2003 between the assessee and LLS, Germany. Thus, respectfully following the decision of the Tribunal in assessee;s own case there was no independent control of the assessee over the rights. It could only used them for the purpose of business. Article 3.5 also contemplates that the rights are non-exclusive non-transferable basis and for a single use only. If all these clauses are being considered then it would reveal that assessee has not acquired the rights of technical knowhow. Independently, rather it has acquired used of such technical knowhow. There is no enduring benefit to the assessee. Learned First Appellate Authority has appreciated these clause in right perspective and we do not see any reason to interfere in the order of the learned CIT(A) on this issue. This ground of appeal is rejected Addition towards expenditure on organizing seminars for updating its engineers, held as capital expenditure - Held that:- The expenditure was for keeping its engineers updated with the latest knowledge relating to set up and install of services in the field of biodiesel and discussions held in the conference helped the technical staff in solving day-to-day problems. As submitted that in assessment year 2008-09 also the assessee made payment for membership fee and registration fee to ‘Biodiesel Association’ but the Tribunal upheld the finding of the Ld. CIT-A, holding the expenditure as revenue in nature. Thus we uphold the finding of the Ld. CIT-A in holding the expenditure as revenue in nature. Addition on account of provision for warranty - Held that:- we are of the opinion that the liability accrued and existed and there was no uncertainty as to incurring of liability as it was under contractual legal obligation. The assessee has incurred expenses in subsequent year before finalization of the financial statement. The expenses are related to the project completed in the year under consideration and the corresponding revenue has already been recognized. The assessee debited said expenses as provision of warranty in the year under consideration. In such circumstances, it is evident that while finalizing the financial statement the amount, the expenditure was ascertained. We find that the Ld. CIT-A has allowed the claim of the assessee following the judgment in the case of Rotork Controls India Private Limited (2009 (5) TMI 16 - SUPREME COURT OF INDIA ) as held provision for warranty is an ascertained liability as long as it is based on actuarial valuation. This is done on historical cost and on experience of the assessee. Thus, there can be no scope for any disallowance. Addition on account of bad debts - Held that:- Assessee has already shown above debts as income in earlier years and the Revenue has not disputed the fact of debt shown as income in earlier years. The assessee has demonstrated written off of the bad debts in the year under consideration and thus both the conditions in respect of the above bad debts are fulfilled. The Ld. CIT-A has also following the decision of the Hon’ble Supreme Court in the case of TRF Ltd Vs. CIT, (2010 (2) TMI 211 - SUPREME COURT ) accepted the claim of the assessee and allowed the ground raised by the assessee in this respect. Addition on account of disallowance of interest expenses - CIT-A allowed the claim - Held that:- In our opinion, it is well known business practice that the manufacturer ask for advance for executing orders, and thus the advance made by the assessee is part of normal business practice and in the nature of commercial expediency. Thus, the disallowance deserve to be deleted both on the account of the sufficient own capital in the hand of assessee company as well as on the ground of advance made on account of business expediency. In view of above, we are of the opinion that finding of the Ld. Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference on our part is required. Accordingly, we uphold the same Disallowance of extra depreciation on computer peripherals/accessories - Held that:- CIT-A has followed the decision of the Hon’ble Delhi High Court in the case of CIT Vs. BSES Rajdhani Powers Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT ), wherein the Hon’ble High Court has agreed with the Tribunal that computer accessories and peripherals such as printers, scanners and servers etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer, hence they are part of computer system and entitled at the higher rate of 60% depreciation. Thus, respectfully following the above decision of the Hon’ble Delhi High Court, we uphold the finding of the Ld. CIT-A on the issue. Appeal of the Revenue dismissed.
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