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TMI Blog2013 (5) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment and trading of bought out products. The Assessing Officer made two disallowances while making the order u/s 143(3) of the Act, one u/s 14A and the other for provision for warranty expenses. The CIT (A) granted the relief to the assessee on both the issues. Now, the revenue is in appeal before us by taking the following grounds :- "1. The Ld. CIT (A) has erred on facts and in law in deleting addition made by the A.O. amounting to Rs.36,32,968/- u/s 14A of the I.T. Act, 1961. 2. The Ld. CIT (A) has erred on facts and in law in deleting addition made by the A.O. amounting to Rs.23,25,339/- on account of disallowance of provision for warranty expenses. 3. The appellant craves leave for reserving the right to amend, modify, alter, ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Assessing Officer has simply applied Rule 8D of Income-tax rules without bringing any cogent material on record relating to exempted income. Ld. AR also submitted that Rule 8D can be made applicable only when certain specific conditions are fulfilled. The Assessing Officer has to be not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. 6. We have heard both the sides on this issue. Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT - [2011] 203 Taxmann 364 (Delhi) in paras 41 & 42 has held as under :- "41. Sub-section (2) of section 14A, as we have seen, stipulates that the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the correctness of the claim of the assessee with regard to such expenditure. If he is satisfied that the assessee has correctly reflected the amount of such expenditure, he has to do nothing further. On the other hand, if he is satisfied on an objective analysis and for cogent reasons that the amount of such expenditure as claimed by the assessee is not correct, he is required to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment. It would be appropriate to recall the words of the Supreme Court in Walfort (supra) to the following effect:- "The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14A." So, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims that no expenditure was incurred for earning dividend income and on the other hand, disallows suo moto Rs.1 lac towards earning such income. The Assessing Officer has to reject the claim of assessee and apportion the expenditure on reasonable and acceptable method. In our considered view, this issue required to be restored to the file of the Assessing Officer to decide afresh. We order accordingly. In the result, this ground of revenue's appeal is allowed for statistical purposes. 7. The ground no.2 is against the deletion of addition made by Assessing Officer of Rs.23,25,339/- on account of provision for warranty expenses. 8. Ld. DR relied on the order of the Assessing Officer and also submitted that the provision has been made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the agreement for the period of warranty. Thus, the liability is capable of being construed in definite terms and has arisen on the sales effected in the accounting year. Since the assessee is maintaining books of accounts on the mercantile system basis, this liability has been accrued though it shall be discharged at a future date. Therefore, such claim has to be considered while working out the profit and gain of the business for the year under consideration. He relied on the decision of CIT (A). 10. We have heard both the sides on the issue. The assessee company is doing the business of computer software and trading of bought out products. The company also produces softwares to its customers as per their specifications. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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