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TMI Blog2015 (11) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee has also claimed miscellaneous expenditure of Rs. 1,34,54,426/-. It seems during the course of assessment proceedings, assessee was unable to produce evidence in support of the above claim. He disallowed the above claim of expenditure totalling to Rs. 4,44,00,931/-. Aggrieved, assessee moved in appeal before the CIT (A). 04. Argument of the assessee before the CIT (A) was that it had all supporting evidence for the claim of maintenance and miscellaneous expenditure. CIT (A) sought a remand report from the AO. In such remand report, AO stated that assessee had produced the ledger accounts and certain bills / invoices in support of the transactions. As per the AO, every entry in the ledger reflected transactions arising out of a bunch of bills / invoices. AO tested one of such entries and found that in relation to a claim for plant and machinery repairs, assessee could produce bills only to the extent of Rs. 1,56,122/-, whereas the relevant entry was for Rs. 2,01,524/-. Similarly for other repairs also, there was an entry for Rs. 2,49,166/-, but the primary documents were available only for Rs. 2,48,142/-. Further, as per the AO, there were a number of bills / inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,01,524/- under the head "Supra computers/labour ch/aprOl" was selected. Copies of bills / invoices in respect of this entry were filed on 14.03.2011. In its letter dated 09.03.2011, the assessee admits that it is able to furnish the copies of bills only to the extent of Rs. 1,56,122/-. During the course of the hearing, it was argued for the assessee that it is due to the efflux of time that it is not possible to furnish copies of all the bills/invoices. Thus to the extent of verification made and subject to the difference as mentioned above, the assessee's claim appears to be in order. 3.1 Othe r Repai r s : The amount di sal lowed unde r thi s head i s Rs. 2,68,82,282/- As in the case of plant and machinery, there was a-small gap in the bills / invoices produced. In respect of electricity maintenance charges dated 20.04.2001 amounting to Rs. 2,49,166/- the assessee could produce bills / invoices to the extent of Rs. 2,48,142/-. Similarly, with regard to "Natraj / corrugated boxes" dated 25.06.2001 amounting to Rs. 2,01,958/-, copies of bills / invoices produced were for Rs. 1,88,043/-. Even here the time gap is stated to be the reason for the difference. Therefore to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the disallowance of 15% sustained by the CIT (A) was reasonable. We do not find any reason to interfere in the order of CIT (A) in this regard. Ground 1 of the Revenue stands dismissed. 09. Vide its ground 2 grievance of the Revenue is that CIT (A) directed allowance of depreciation on assets given by assessee under finance lease. AO had denied the claim of depreciation on assets which were leased out by the assessee on financial lease. 10. Facts apropos are that assessee had given certain assets on finance lease and following Accounting Standard 19 of ICAI did not capitalise the value of such assets in its books. However, the interest component received from lessees were credited to the profit and loss account. Nevertheless while filing its return, assessee relying on CBDT circular No.2, dt.09.02.2001, claimed depreciation. In other words, assessee capitalised the assets given on lease for tax purposes. AO was of the opinion that the lease being financial in nature, depreciation could not be allowed to the assessee. As per the AO, after termination of the lease, ownership of the assets got transferred to the lessee. However, assessee pointed out the clauses in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving an equipment on lease by itself can be considered as a business. We are of the opinion that by virtue of the decision of Hon'ble Apex Court in I. C. D. S (supra), assessee having capitalised the assets in ITA.1136 & 1134/Bang/2014 Page - 10 its books was eligible for claiming depreciation thereon. We do not find any reason to interfere. Ground.2 of the Revenue stands dismissed. 15. Vide its ground 3, grievance is that CIT (A) directed the AO to allow the warranty provisioning done by the assessee. 16. Facts apropos are that assessee had debited a sum of Rs. 74,54,02,531/- towards warranty expenditure. AO found that the said sum consisted of a provision of Rs. 23,72,84,914/-. AO put the assessee on notice why this should not be considered as an unascertained liability. Assessee explained that the products sold by it carried a warranty of one to three years and there was a necessity to make a provision in the books to meet the liability arising out of such warranty. As per the assessee, the provisions were made on a scientific basis, considering the actual warranty expenses incurred by it. AO was however not impressed. According to him, there was a sudden jump in the warranty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical data. When assessee had furnished all scientific details, as per the Ld. AR there was no reason why the Revenue should be given another innings. 20. We have perused the orders and heard the rival contentions. Hon'ble Apex Court in the judgment in the case of Rotork Controls India P. Ltd (supra) had held as under at para 13 of its judgment : "13. A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that are recognized as provision. For a liability to qualify for recognition there must be not only present obligation but also the probability of an outflow of resources to settle that obligation. Where there are a number of obligations (e.g., product warranties or similar contracts) the probability that an outflow will be required in settlement, is determined by considering the said obligations as a whole. In this connection, it may be noted that in the case of a manufacture and sale of one single item, the provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there has been a change in the methodology of computing the warranty cost, which has been explained below. * In the earlier years, warranty cost ratio was computed only on the basis of the standard cost of the spare parts consumed. * In the current year, the cost component has been enlarged to include other elements of cost such as warranty related labour cost, customs duty, other logistic charges, etc. * Based on such total cost, the ratio of Current Year Warranty Expense to total Sales of the previous year has been determined for making a provision. * This revised methodology has been applied for the computation of warranty cost to be provided. To summarise, the variance in the warranty provision in the current year, as compared to the previous year is on account of the following: a) Change in methodology of computation of warranty cost (as explained in Paragraph 5.4 above) b) Statistical /Scientific method of computation, as explained in paragraph 5.2 above For the reasons stated in our earlier submissions, and relying on the specific judicial precedence on this issue, we wish to reiterate that the provision for warranty expenses computed, based on statistical in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected to the rigors of Section 40(a)(i) of the Act. 26. Now before us, Ld. DR strongly assailing the order of CIT (A) submitted that unless the deducted tax as remitted prior to the time prescribed in sub-section (1) of Section 200 of the Act, assessee could not claim deduction of the amount on which such tax was deducted, while computing its income under the head 'profit and gains of income or profession.' 27. Ld. AR supported the order of CIT (A). 28. We have perused the orders and heard the rival contentions. The impugned assessment year being 2002-03, the law as it stood prior to the substitution of the said sub-section through Finance (No.2) Act, 2004 applied. The said provision as it applied at the relevant point of time read as under : (a) in the case of any assessee-- (i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act which is payable outside India, on which tax has not been paid or deducted under Chapter XVIIB: Provided that where in respect of any such sum, tax has been paid or deducted under Chapter XVII-B in any subsequent y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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