TMI Blog2011 (4) TMI 1344X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer observed that the assessee has claimed an expense of ₹ 1,41,92,093/ on account of provision for trade guarantee. From the perusal of the method of arriving at such trade guarantee provision, the Assessing Officer noted that there was no consistency and there was no scientific method to arrive at such values of provision for trade guarantee. Therefore, according to the Assessing Officer, it appears that prima facie, the assessee has claimed contingent liabilities. He, therefore, asked the assessee to explain as to why the provision for such trade guarantee should not be disallowed. 2.2 Rejecting the various explanations given by the assessee, he came to the conclusion that provision created by the assessee is purely irrational and adhoc basis and therefore, is in the nature of contingent liability, which is not an allowable deduction in view of the provisions of the Act. The liability in this particular case has not accrued. It is the irrational belief of the assessee that such and such amount of liability may accrue on account of repairs during the warranty period. Since the method followed by the assessee is not evident, from the wide discrepancy in the figure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined at the level of the Assessing Officer since the period of warranty is not known. He, accordingly submitted that the matter may be set aside to the file of the Assessing Officer for quantification. 6 We have considered the rival submissions made by both the parties, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. After hearing both the parties, we find the issue stands covered in favour of the assessee by the consistent decisions of the Coordinate Benches of the Tribunal in assessee s own case from Assessment Years 1990-91 till 2001-02 and Assessment Year 2004-05. In view of the decisions of the Tribunal in assessee s own case for Assessment Year 2004-05 where the Tribunal after considering the decision in the case of the assessee for earlier years has allowed the claim and in absence of any contrary material brought to our notice by the ld DR, this ground by the assessee is allowed. 7 Grounds of appeal no.2 relates to disallowance of bad debts of Rs,. 1,32,009/- made by the Assessing Officer and confirmed by the CIT(A). 7.1 Facts of the case, in brief, are that during the course of assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt, then it has to be allowed as trading loss u/s 37(1) of the I T Act. 9.1 The ld DR, on the other hand relied on the orders of the Assessing Officer and the CIT(A). 10 After hearing both the sides, we find the CIT(A) sustained an amount of ₹ 1,32,009/- as bad debt claimed by the assessee on the ground that this bad debt amount has not been taken into account while computing the income of the earlier years. It is the submission of the ld counsel for the assessee that since the assessee has paid service tax but not collected the same from the clients; therefore, if the same is not allowed as bad debt, it should be allowed as trading loss u/s 37(1) of the I T Act. Since admittedly, provisions of sec. 36(2) has not been fulfilled in the case of the assessee; therefore, the same cannot be allowed as bad debt. 10.1 As regards the submission of the ld counsel for the assessee that the same has to be allowed as trading loss u/s 37(1), we are of the opinion that the same can be allowed as trading loss provided the assessee can prove the same before the Assessing Officer by filing the details that the service tax has been paid during this year. Under these circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , claim of the appellant is partly allowed. 13 Aggrieved by such order of the CIT(A), the assessee is in appeal here before us. 14 The ld counsel for the assessee, referring to the decision of the jurisdictional High Court in the case of Godrej Boyce Mfg P Ltd vs ACIT reported in 328 ITR 81 submitted that Rule 8D being perspective in nature is not applicable to the impugned assessment year. However, as regards the disallowance of administrative expenses, he submitted that reasonable amount may be disallowed. 14.1 The ld DR on the other hand submitted that the issue should go back to the file of the Assessing Officer in the light of the decision of the jurisdictional High Court in the case of Godrej Boyce Mfg P Ltd (supra) for determination of the expenditure to be disallowed. 15 We have considered the rival submissions made by both the parties, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the decision of the jurisdictional High Court cited supra. Since the assessment year involved in the instant case is Assessment Year 2005-06; therefore, in view of the decision of the jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not permissible. He, accordingly disallowed the claim of the assessee relating to set off of brought forward loss of ₹ 98,13,766/- under the head capital gains 17 Before the CIT(A), the decision of the Hon ble Supreme Court in the case of CIT vs Shah Sadiq and Sons reported in 166 ITR 102 was cited. It was also submitted that an identical issue has arisen in the case of the assessee for AY 2004-05 and the claim of the assessee was rejected. 17.1 Based on the arguments advanced by the assessee, the CIT(A) dismissed the ground raised by the assessee by holding as under: I have considered the claim of the appellant vis-a-vis the case law cited by him. As per sec. 74(1)(b) of the Act which was amended w.e.f 1.4.2003 i.e. AY 2003-04, any long term capital loss brought forward from earlier year can be set off only against the income under the head capital gains assessable in respect of any other capital asset not being a short term capital asset. Hence, the appellant is not entitled to the set off as claimed. In the case of CIT vs Shah Sadiq and Sons 166 ITR 102, the subject matter was completely different, where the question was regarding set off of brought forwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. He submitted that no estoppels is applicable and as per the provisions of sec. 50, gain that arises on sale of depreciable asset is short term capital gain and therefore, the same cannot be set off against brought forward long term capital loss. 19.4 The ld counsel for the assessee, in his rejoinder submitted that the Hon ble Supreme Court in the case of Shah Sadiq and Sons (supra) has considered the decision of the Hon ble Calcutta High Court in the case or Reliance Jute Mills Co Ltd vs CIT reported in 86 ITR 570. 19 Referring to the decision of the Hon ble Madras High Court in the case of CIT vs S S C Shoes Ltd reported in 259 ITR 674, he submitted that vested right had accrued in favour of the assessee which is not taken away either expressly or by necessary implication by the deletion of section 80VVA. Following the same ratio and also in view of the decision of the jurisdictional High Court in the case of Ace Builders Ltd (supra), he submitted that the issue has to be decided in favour of the assessee. 20 We have considered the rival submissions made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the order has held as under: The Tribunal in ITA No.6386/Mum/1998 relating to AY 1990-91 in assessee s own case, vide order date 1st July, 2005 had held that the provisions made on account of trade guarantees is an ascertained liability as the sale proceeds collected by the assessee company also included an appropriate amount against such anticipated expenditure on account of after sales service. The Tribunal accordingly directed the AO to allow the deduction on account of such expenditure. The ld AR for the assessee pointed out that identical issues thereafter arose in AY 1991-92 to 1997-98 and the Tribunal consistently allowed the claim of the assessee from year to year. The ld AR further pointed out that the assessee had claimed the expenditure on actual basis also and it was directed by the Tribunal that the AO shall withdraw any such allowance allowed to the assessee on the basis of actual payment. The issue before us is also similar to the issue which arose before the Tribunal in assessee s own case in the earlier years. Respectfully following the decision of coordinate Benches, we direct the AO to allow the claim of the assessee on account of provision made fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of six parties have been claimed, the appellant allegedly furnished only a copy of agreement with some of these parties. However, no further details of parties and settlement amount in respect thereof were furnished. The appellant has simply quoted the amounts in respect of these parties. It is also not told as to how the amounts of such damages were computed, if any, claimed by these parties. Hence, the Assessing Officer relying upon the judgments in the cause of Calcutta Agency Ltd 19 ITR 191 (SC), Transport Corporation of Ind Ltd 256 ITR 701 (A)) and Imperial Chemical Industries (India) P Ltd, 74 ITR 17(AP) disallowed this claim. Before the undersigned, the appellant has stated that such damages claimed in earlier years have been allowed by CIT(A) consistently. I therefore, hold that the appellant is entitled to the said claim. My predecessors and myself have in earlier years consistently allowed this claim of the appellant. Hence, claim of liquidated damages is allowed u/s 37(1) of the Act and disallowance in this regard is deleted. 28 Aggrieved by such order of the CIT(A), the revenue is in appeal here before us. 29 We have considered the rival submissions made by bot ..... 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