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2020 (3) TMI 870 - AT - Income TaxDisallowance u/s 14A - HELD THAT:- CIT(A) has already upheld the disallowance to the extent of exempt income earned by the assessee in the present year i.e., ₹ 14,000/- and as per the Tribunal order cited by learned AR of the assessee having rendered in the case of Sivan Securities [2019 (6) TMI 1109 - ITAT BANGALORE] and also the judgment of Hon’ble Delhi High Court rendered in the case of CIT v. Joint Investment Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] the disallowance under section 14A cannot the exceed the exempt income earned in the relevant year and hence, respectfully following the judicial precedence, we decline to interfere in the order of CIT(A) on this issue and accordingly revised grounds 2 to 5 raised by the Revenue are rejected. Disallowance made by the AO in respect of large increase in Tailoring and maintenance expenses - HELD THAT:- Assessee has explained about increase under the business promotion head because several new special schemes of customers / dealers were conducted and this increase in expenditure is ₹ 529.32 lakhs. The AO has made part disallowance to the extent of dip in gross-profits rate by 3.9%. This finding is also given by CIT(A) that the AO has not disputed the fact that the payments were actually made / incurred in the normal course of business of the assessee. Hence, on this issue, we find no infirmity in the order of CIT(A) and therefore, we decline to interfere. Disallowance made by the AO out of provision of warranty expenditure - Revenue submitted that the disallowance made by the AO has been deleted by CIT(A) without any valid basis and therefore, on this issue also, the order of CIT(A) should be reversed - HELD THAT:- As decided in M/S. ROTORK CONTROLS INDIA (P) LTD. [2009 (5) TMI 16 - SUPREME COURT] a liability is a present obligation arising from past events. Similarly, in para 13 of the same judgment, it is observed by Hon’ble Apex Court that a past event that leads to a present obligation is called an obligating event and the obligating event is an event that creates an obligation which results in an outflow of resources. In the same para 13, it is observed that for a liability to quality for recognition, there must be not only present obligation but also the probability of outflow of resources to settle that obligation. In the facts of the present case, it is seen that from the past history, there is no likelihood that the obligation of warranty will result into an outflow of resources. Hence, respectfully following this judgment of Hon’ble Apex Court and in view of the facts of the present case, we reverse the order of CIT(A) on this issue and restore that of the AO. - Decided in favour of revenue
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