TMI Blog2019 (2) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provision of warranty - Held that:- It is a settled principle of law that the provisions created by the assessee on the scientific basis are liable for deduction u/s 37(1) of the Act. In this regard, we find support and guidance from the judgments of Rotork Controls India Pvt. Ltd. vs. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA] we note that the assessee has created the provision @ 0.4% of the total turnover amounting to ₹ 18,86,570/- (0.4% of ₹ 47,16,42,449/-). On perusal of the ledger of warranty replacing expenses, it was observed that the assessee had incurred actual expenses amounting to ₹ 60,21,216/- only which exceeds the provision created in the books of accounts of the assessee. The fact of actual expenses incurred by the assessee under the head warranty replacing expenses was not doubted by the authorities below. The copy of the ledger warranty replacing expenses is also available on record. Therefore, after considering the facts in totality, we are of the view that the provisions created by the assessee are not ad-hoc provision but based on the scientific basis. We also note that the assessee has been claiming the deduction for the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.03.2015 02.12.2015 relevant to Assessment Years (AYs) 2012-13 2013-14. 2. First, we take up ITA No.1735/Ahd/2016 pertaining to the AY 2012-13. Revenue has raised the following grounds of appeal: 1. The Ld CIT(A) has erred in law and on facts in deleting the addition made by AO of ₹ 1,11,43,571/- u/s 145A. 2. The Ld CIT(A) has erred in law and on facts in deleting the addition of ₹ 18,86,570/- made by AO towards provision for warranty. 3. The Ld CIT(A) has further erred in law and on facts in allowing claim of excess depreciation @5% on certain vehicles acquired by the assessee during the F.Y. 2009-10 instead of usual rate of 155. 4. The department craves leave to add or alter any further grounds of appeal before or during the course of hearing. 3. The first issue raised by the Revenue is that Learned CIT(A) erred in deleting the addition made by the AO for ₹ 1,11,43,571/- u/s 145A of the Act. 4. Briefly stated facts are that the assessee is an individual and engaged in the business of manufacturing of paper converting machine and reselling of parts. The assessee in its balance sheet as on 31.03.2012 has shown excisable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances in the own case of the assessee in ITA No. 3109/Ahd/2013 pertaining to the A.Y. 2010-11 vide order dated 29.09.2016 has decided the issue in favor of the assessee. The relevant extract of the order is reproduced as under: 6. After hearing both sides and perused the material on record, we find that Hon ble ITAT, Ahmedabad Co-ordinate Bench for A.Y.2009-10 and also in respect of earlier year i.e. A.Y.2007-08 have decided the identical issue in favour of the assessee by keeping reliance on the decision of Hon ble Jurisdictional High Court rendered in the case of ACIT vs. Narmada Chematur Petrochemicals Ltd. (2010) 327 ITR 369 (Guj.) In view of above facts and legal findings, we consider that ld. CIT(A) has correctly deleted the addition in favour of assessee. Revenue s appeal on this issue is rejected. We also find it important to refer to the judgment of Hon ble Jurisdictional High Court in the case of ACIT Vs. Narmada Chematur Petrochemicals Ltd. reported in 327 ITR 369 wherein it was held as under: There is one more aspect of the matter. Such duty of central excise if added to enhance the value of closing stock would result in enhanced opening stock on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is correct. 5.2.1 The Hon ble Supreme Court in the case of Rotork Controls India Pvt. Ltd. vs. CIT 314 ITR 62 has held that warranty provision is allowable as a deduction. 5.2.2 In view of these facts and the discussion above as also the judgement of the Hon ble Supreme Court, the addition of ₹ 18,86,570/- is deleted. Ground of appeal no. 2 is allowed. Being aggrieved by the order of ld CIT(A) revenue is in appeal before us. 11. The Learned DR before us vehemently supported the order of AO whereas the Learned AR before us submitted that the similar provisions were made in the A.Y. 2014-15 which was allowed by the Revenue. 11.1 Ld AR further submitted that the actual expenses incurred against such warranty expenses exceed the amount of the provision created in the books of accounts. The Ld AR in support of his claim filed the copy of the ledger of warranty replacing the expenses which is placed on record. The Ld AR vehemently supported the order of Ld CIT(A). 12. We have heard the rival contentions and perused the materials available on record. It is a settled principle of law that the provisions created by the assessee on the scientific basis are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee in respect of certain vehicle purchased before 30.09.2009 claimed depreciation @ 50% on their written down value. As per the assessee, these vehicles were the commercial vehicles as per the Motor Act. However, the AO was of the view that these vehicles were not the commercial vehicles and accordingly held that the assessee is ineligible to claim the depreciation @50% on the written down value. 14.1 The AO also observed that his predecessor in the AY 2010-11 and 2011-12 also made similar disallowance. Accordingly, the AO worked out the excess depreciation claimed by the assessee amounting to ₹ 3,74,917/- and disallowed the same by adding to the total income of the assessee. 15. Aggrieved, assessee preferred an appeal to Learned CIT(A) who has deleted the addition made by the AO by observing as under: 8.2 I have considered the assessment order and the submissions made by the appellant. The AO has made the disallowance on account of depreciation amounting to ₹ 3,47,917/-since while the appellant had claimed vehicles as commercial vehicles and accordingly depreciation at 50%, the AO held that the vehicles were not commercial vehicles and therefore d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinct and different from private vehicle and the vehicle used by the appellant is a private vehicle. The appellant has submitted that as per Note No. 6 to the Rules in Appendix-I, the word commercial vehicle has been defined to include Light Motor Vehicle as defined by Motor Vehicle Act,1988. Further, section 2(21) of the Motor Vehicle Act define the word Light Motor Vehicle as Light Motor Vehicle means transport vehicle or amnibus. The gross vehicle weight of either of which or a Motor Car or a Tractor or road roller, theunladen weight of any of which does not exceed 7500 Kg. The appellant has further submitted that as per theRC Book, the vehicle is LMV and the weight of the car is 2074 Kg. and the unladen weight is 1454 Kg. which was less than 7500Kg. Therefore, the appellant has claimed that the car purchased was acommercial vehicle and appellant was entitled to depreciation at higher rate. After considering the submission of the appellant and the facts, I aminclined to accept the submission made by the appellant. The Clause VI-A of the Appendix i.e. the table of rates of which depreciation is admissible prescribes the depreciation @ 50% for new comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in law and on facts in deleting the addition made by AO of ₹ 1,79,53,006/- u/s 145A. 2. The Ld CIT(A) has erred in law and on facts in deleting the disallowance made by the AO of ₹ 37,65,840/- being 0.5% on sales towards provisions for warranty replacement. 3. That the Ld CIT(A) has erred in law and on facts in not appreciating that the claim for warranty replacement has been made by the assessee twice i.e. on provision basis in captioned A.Y. and also in subsequent A.Y. (A.Y. 2014-15) i.e. ₹ 1,22,89,760/- on actual basis, which is not permissible. 4. The department craves leave to add or alter any further grounds of appeal before or during the course of hearing. 18. The first issue raised by the Revenue is that Learned CIT(A) erred in deleting the addition made by the AO for ₹ 1,79,53,006/- u/s 145A of the Act. 19. The issue involved in this ground of appeal of the revenue is identical to the issue raised by the Revenue in ITA No.1735/Ahd/2016 which has been decided against the revenue and in favor of the assessee by us vide paragraph no. 7 of this order. Thus respectfully following the same we do not find any reason to inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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