TMI Blog2014 (1) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... - The liability to carry out repairs/replacements accrues on the date when the sale agreement is executed with warranty clause and such in-built liability cannot be ignored - Such liabilities are to be treated as trading expense and must be allowed - The expenses were allowed for the reason it was not a contingent liability and such liability arose as soon as assessee made the sale – Decided against Revenue. Disallowance of airfare of technicians, entry tax u/s 43B, software Expenses – Held that:- Following assessee’s own case for earlier years – Decided against Revenue. - I.T.A .No.-5073/Del/2012 - - - Dated:- 8-2-2013 - Smt. Diva singh And Shri T. S. Kapoor,JJ. For the Appellant : Shri. Ris Gill, CIT DR For the Respondent : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof. Return was filed for an income of Rs.3,90,54,67,522/- and assessment was completed at an amount of Rs.5,89,02,40,290/- after making the following additions were made :- (i) Royalty and lump sum fee Rs.1,90,88,77,843/- (ii) Provision for warranty and sales services Rs. 1,32,74,684/- (iii) Airfare of Technicians booked under technical guidance Rs. 3,77,63,814/- (iv) Entry tax Rs. 32,78,626/- (v) Software expenses Rs. 33,61,502/- 3. Dissatisfied with the orders of AO, the assessee carried the matter to Ld. CIT(A) and Ld. CIT(A) on the basis of Hon'ble Tribunal's order in assessee's own case in the earlier years deleted the additions made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since the issue involved in the year under consideration is identical to that of assessment year 2003-04 hence, following the order of the Hon'ble ITAT in the appellant's case for assessment year 2003-04 referred to above, it is held that the payment of lumpsum fees of Rs.63,29,82,000 and royalty of Rs.1,27,58,95,843 is allowable as revenue expenditure. The addition made by the AO is therefore deleted." b) Disallowance of provision of warranty and sales services The AO made the addition holding that provision of warranty claims was in fact a deferment of tax and, therefore, he made the addition. The Ld. CIT(A) after noting the findings of Tribunal in assessee's own case in earlier years held as under:- "We have heard both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the liability to carry out repairs/replacements accrues on the date when the sale agreement is executed with warranty clause and such in-built liability cannot be ignored. The Tribunal held that such liabilities are to be treated as trading expense and must be allowed. It must be mentioned that while deciding this case, the Tribunal also took into account the fact that the AO had made no efforts to find out whether the amount of provision exceeded the actual on repairs and replacement. But the fact remains that the expenses were allowed for the reason it was not a contingent liability and such liability arose as soon as assessee made the sale. 20.5 Thus, the various judgments cited above support the view that the liability was incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in assessment year 2005-06, 2006-07 and 2007-08, in which ITAT has given finding in appellant's favour therefore respectfully following the ITAT's order for those year, it is held that the expenditure of Rs.3,77,63,814 claimed by the appellant on account of air fare and travel expenses is in nature of revenue expenditure and, therefore, the addition of Rs.3,77,63,814 made by the AO is deleted." d) Entry tax u/s 43B of Income Tax Act The AO made this addition holding that liability was not ascertained tax liability. Ld. CIT(A) observed that similar disallowance was deleted by ITAT's order in assessee's own case for AY 2004-05 and he decided the disallowance vide para 10 of the order :- "I have carefully considered the submissions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d perused the order of the AO and have also considered the facts and the evidences placed on record which show that an identical issue was involved in assessment year 2007-08 and the Hon'ble ITAT, vide their order dated 15.06.2012 in ITA No-5674/Del/2011, have decided this issue in favour of the appellant. As the issue involved in the year under consideration is identical to that in assessment year 2007-08, hence, following the order of the Hon'ble ITAT in the appellant's own case for assessment year 2007-08 referred to above, it is held that the payment of expenditure incurred on the above softwares are allowable as revenue expenditure. This ground of appeal is therefore, allowed." 4. Aggrieved with the above order, the revenue filed app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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