TMI Blog2016 (1) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... AT for the reason that the Assessing Officer himself while deciding the issue in question has accepted the auditor's certificate for the assessment year 2003-04 and has categorically held that such a certificate of the Chartered Accountant would have been suffice to accept the claim of the assessee towards the adjustment entries for prior period expenses. In such view of the matter, the assessee has cured the defects pointed out by the Assessing Officer, by filing the necessary auditor's report before the CIT which was properly considered and held that it was a genuine error in the book entry and the same is confirmed by the ITAT which in our opinion is justifiable. We are not inclined to interfere with the factual findings given by the authorities regarding the genuiness of the adjustments in the book entry. It is settled law that the no income can arise by mere book entries (vide Kedarnath Jute Manufacturing Co. Ltd. vs CIT (Central), Calcutta - 1971 (8) TMI 10 - SUPREME Court ). - ITA No. 902/2008 - - - Dated:- 19-1-2016 - N. K. Patil And S. Sujatha, JJ. For the Appellant : Sri. K. V. Aravind, Adv For the Respondent : Smt. S.R. Anuradha, Advs JUDGMENT This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that a provision for reserves for warranty is an allowable expenditure even though it is a contingent liability? 3. Whether the Appellate Authorities were correct in holding that the gain in exchange rate i.e. due to fluctuation cannot be excluded when computing deduction u/s.10A of the Act even though this amount had not been directly arisen in the course of export? 4. Whether the Appellate Authorities were correct in holding that the sale proceeds not realized within the time of 6 months granted by the Reserve Bank of India without their being any extension cannot be excluded from the total turnover when computation deduction u/s.10A of the Act?. 5. Whether the Appellate Authorities were correct in holding that allocation of expenditure towards royalty for use of trade mark and logo to Wipro Ltd., and Monogram Licencing International Incorporated at 50:50% by the assessee should be upheld and not as worked out by the Assessing Officer based on local sales? 6. Whether the Appellate Authorities were correct in holding that allocation of expenditure as worked out by the assessee on account of consumables, salary etc., on the basis of sales based on percentag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is a contingent liability which has not accrued. None of the authorities below have examined this issue in the light of the Judgment pronounced by the Apex Court in Rotork Controls Case (supra). No finding is forth coming from the records that the assessee has satisfied the three conditions laid down by the Apex Court to claim the benefit of a provision. In such circumstances, he requests this Court to remand the matter back to the Assessing Officer so as to enable him to examine the case of the assessee in the light of the tests laid down by the Apex Court in Rotork Controls Case (supra). 5. On the other hand Smt.Anuradha, learned counsel appearing for the assessee would contend that all these aspects were considered by the authorities below and it is categorically held by the authorities that the provision is as per accounting standards and is based on the past experience coupled with scientific and rational basis. It is also contended that the department has accepted the earlier order passed by the authorities for the assessment year 1998-99 wherein similar provision was made as per standard of accounting. Tribunal has allowed similar issue of provision in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that this issue is similar to that of Question no.1. In view of the observations made in Question No.1, we are not inclined to remit the matter back to the Assessing Officer on this issue more particularly, this issue being covered by the Judgment of the Coordinate Bench of this Court in the very same assessee's case reported in 270 ITR 259 and 278 ITR 337 confirmed by the Apex Court in Rotork Controls Case (supra). Re. Question No.3 10. Both the learned counsel appearing for the parties agree that the issue involved in this question is covered against the revenue by the Judgment of this Court in ITA No.3202/2005 disposed of on 28.02.2012. 11. In view of the Judgment rendered by this Court in ITA No.3202/2005 dated 28.02.2012, we answer this question against the revenue and in favour of the assessee. Re. Question No.4 12. Learned counsel appearing for the parties agree that this issue is directly covered by the Judgment of this Court in ITA No.879/2008 disposed of on 25.03.2015. 13. Following the said Judgment rendered by the Co-ordinate Bench of this Court in ITA No.879/2008 disposed of on 25.03.2015, we answer this question in favour of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f expenses in the trading turnover. What the Assessing Officer has done is removing the value of Franchise sales from the total sales as the Franchise sales are different from direct sales. This methodology adopted by the Assessing Officer is not properly considered by the CIT and ITAT. CIT was of the view that the course adopted by the Assessing Officer in allocating the expenses amounts to prescribing a new method of estimation based on the Proportionate turnover contrary to the method of accounting regularly followed by the assessee and accepted by the department in earlier years. This view is confirmed by the ITAT placing reliance on the Judgment of the Apex Court in Indo Nippan's case (supra). The Apex Court in Indo Nippan's case has held that whatever method the Assessing Officer adopts, the method has to be consistent with the accepted principles of accountancy. 18. In the present case, what the Assessing Officer has done is to delete the value of franchise sales from total expenses. No method of accountancy adopted by the assessee is disturbed. The course adopted by the Assessing Officer to delete the franchise sales is based on the reasoning that franchise sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s view of the CIT is upheld by the Tribunal . 22. Learned counsel Sri K V Aravind appearing for the revenue would submit that no reconciliation is made by the CIT. It cannot be accepted that a genuine error has occurred in accounting entry and the same is corrected by the adjustments made in the book entry by the assessee which has been confirmed by the ITAT. Accordingly, he seeks to remand the matter to the Assessing Officer to examine the correctness of the auditor's report furnished by the assessee before the CIT. 23. We do not see any flaw in the order passed by the ITAT for the reason that the Assessing Officer himself while deciding the issue in question has accepted the auditor's certificate for the assessment year 2003-04 and has categorically held that such a certificate of the Chartered Accountant would have been suffice to accept the claim of the assessee towards the adjustment entries for prior period expenses. In such view of the matter, the assessee has cured the defects pointed out by the Assessing Officer, by filing the necessary auditor's report before the CIT which was properly considered and held that it was a genuine error in the book entry and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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