TMI Blog2012 (2) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. Adv. with Ms. Suveni Banerjee and Mr. Arijit Chakravarty, Advs. ORDER This appeal by Revenue pertains to the assessment year 2002-03. As separate issues arise for consideration, they are being deal with separately. Issue Nos. 1 and 2 Whether on the facts and circumstances of the case, Ld ITAT erred in deleting the addition of ₹ 2,25,38,920 (AY 2001-02 and AY 2003-04 each) and ₹ 2,44,98,574/- (AY 2002-03) made by the AO on account of provision for warranty for the purposes of computation of income? Whether provision for future warranty expenses is contingent liability or allowable under section 37 of the Income Tax Act, 1961? Whether on the facts and in the circumstances of the case, the Ld ITAT erred in directing the AO to exclude the ?provision for warranty while computing book profits under section 115 JB of the Income Tax Act, 1961?? These issues are covered against the Revenue and in favour of the assessee by the decision of the Supreme Court in Rotork Controls India (P) Ltd. Vs. CIT, (2009) 314 ITR 62 (SC). We may note that there is no dispute that the provision of warranty? has been made on the basis of past experience and on scienti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the same should be disallowed. There is no dispute that the expenditure has been incurred by the respondent-assessee. The benefit of incurring the said expenditure is availed of and was for the business of the respondent-assessee. It helped generate public interest, awareness and increase sales. Revenue submits that the Japanese principal has also benefited. A similar contention was raised in Commissioner of Income Tax, Delhi-I Vs. Adidas India Marketing (P.) Ltd. [2010] 195 TAXMAN 256 (DELHI). This Court had rejected the contention holding as under:- 4. We find from the order of the ITAT that the Tribunal has discussed in detail the terms of Technical Assistant Agreement dated 14-2-1997, as per which the assessee was provided the technical know-how and was also allowed to use the brand name 'Adidas' on the products manufactured by the assessee, which are to be sold in India, Nepal and Bhutan. The Tribunal observed that merely because the assessee was paying royalty at the rate of 5 per cent to M/s. AIPL would not mean that the assessee could not incur the expenditure on advertisement to popularize the products dealt with by it in Indian market. No doubt, bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertising the product which were being sold by him arc certainly to come within the expression wholly and exclusively incurred for the purpose of business , which is to be considered and looked into having regard to the realities of business from the point of view of a prudent businessman and not from the point of view of a tax collector. 20. In the light of the discussions made above and having found that since the assessee had incurred the advertisement and publicity expense with a view to promote its sale of products under the brand name Adidas which were sold by the assessee, the advertisement expenses incurred by the assessee are to be held as incurred to facilitate the assessee's business, and would thus be eligible for deduction while computing the assessee's profit from business. At this stage, it is also pertinent to note that the expression wholly and exclusively used in section 37 of the Act would not mean necessarily . It is for the assessee to decide whether any expenditure should be incurred to facilitate its business activities. It is also well-settled that even such expenditure incurred voluntarily and not for any necessity by are incurred for pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, the sale consideration, in the form of foreign exchange proceeds, was received. The assessee credited the exchange proceeds in the books of accounts. The exchange proceeds were converted as per the exchange rate prevailing on the date when proceeds were received. The difference between the exchange rate prevailing when the invoices were raised and when exchange proceeds were received was adjusted. Accordingly, the assessee accounted for the difference either as gain or loss and the same was treated as income earned from export. We do not agree with the contention of the Revenue that the difference in exchange rate cannot be treated as a part of export turnover. A similar issue was raised in ITA72/2012 tilted as CIT v. Ramsons Organics Ltd. decided on 7.2.2011 in which it has been held as under:- 4. We fail to understand as to why the aforesaid amount either as addition or subtraction cannot be assessed as business income/loss as it directly arises from the business transaction. We do not agree with the contention of the Revenue that the aforesaid income/loss is not income/loss derived from exports. The assessee was required and has made book entries. The book entries ..... X X X X Extracts X X X X X X X X Extracts X X X X
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