TMI Blog2019 (7) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... hen such reversal should be added now at the time of its reversal. There is another sum of ₹ 27,95,163/- in the Table, which has been shown as `Claims recovered . AR stated that the assessee recovered claims from some parties. This amount is directed to be credited to Provision for warranty, thereby reducing the amount of expenses incurred during the year. There is another sum of ₹ 55,03,000/-, which is `Reversal during the year . As the assessee is getting deduction on creation of provision, such reversal, being excessive provision created in the past, needs to be recognized as income for the year. In so far as CP division is concerned, the assessee made provision during the year at ₹ 3,10,33,820/-. As against that, the amount of actual expenditure is ₹ 3,11,63,197/-. In view of the fact that actual expenditure incurred by the assessee in CP division is more than the amount of provision, we hold that deduction should be allowed for the amount of provision created. In the absence of such a position, we would have directed to follow the same rule of allowing provision at the rate of 0.40% of the sales of CP division. Once deduction is allowed on creatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii). There is substantial difference between registration of a company and action taken for increase in authorized share capital. In the case of the assessee because of amalgamation proceedings, there was need to increase in authorized share capital and therefore, such expenses cannot be segregated from the main amalgamation proceedings and therefore, these expenses are part of amalgamation expenses. We set aside the order of the Ld. CIT(Appeals) on this issue and direct the AO to delete the addition from the hands of the assessee. Thus, ground No.4 raised in appeal by the assessee is allowed and ground No.3 of the Revenue s appeal is dismissed. Disallowance of provision on stock obsolescence - HELD THAT:- Respectfully, following the decision of the Hon ble Jurisdictional High Court in assessee own case [ 2013 (2) TMI 883 - BOMBAY HIGH COURT] , we direct the AO to provide provision for stock obsolescence to the assessee and delete the addition therein. Thus, ground No.5 raised in appeal by the assessee is allowed. Addition being income from scrap sale - the assessee stated that the amount was already offered to tax in assessment year 2001-02 - HELD THAT:- In order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee further claims that they are ready with relevant supporting documents and evidences pertaining to this amount and has prayed that an opportunity be provided so that on merits before the First Appellate Authority, the assessee can demonstrate its case. In the case before us, most of the issues relating to factual verification are being restored to the file of Assessing Officer and this issue also qualifies in that category. In view of the matter, we set aside the order of the Ld. CIT(Appeals) on this issue and restore the issue to the file of the AO for adjudication after following the principles of natural justice. Thus, ground No.9 raised in appeal by the assessee is allowed for statistical purposes. Disallowance of excess provisions - HELD THAT:- We have perused the case records and given thoughtful consideration to the findings of the First Appellate Authority. There is a clear cut verification on facts which is on record that the assessee has given no basis whatsoever for making such ad-hoc provisions and actually there were no expenses incurred at all from this provisions during the year. Therefore, we do not find any infirmity with the findings of the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, ground No.13 raised in appeal by the assessee is dismissed. Exclusion of 90% of following receipts from profit of business for the purpose of deduction u/s.80HHC - HELD THAT:- As appreciate that this issue has been restored to the file of the Ld. CIT(Appeals) in assessee s own case. However, in the present scenario where most of the issues, we have restored to the file of AO for verification, this issue, therefore is restored to the file of Assessing Officer for re-examination and adjudicating the matter after providing reasonable opportunity of hearing to the assessee. TPA - royalty payment at arm s length price - royalty payments - HELD THAT:- We find that even in assessment yea₹ 2004-05 and 2005-06 on this issue, relief was provided to the assessee. Following the decision for assessment year 2004-05 and 2005-06, the Ld. CIT(Appeals) has deleted the addition made on account of disallowance of royalty payments on export to AEs. For this year also, factual matrix being same, it was perfect decision rendered by the CIT(Appeals). Moreover, we observe that payment of royalty to AEs is not disputed which has been done as per RBI norms and as per relevant agreement e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(Appeals) and therein the assessee submitted that investments were made by the assessee out of its own funds (interest free funds) and demonstrated through books of account that the own funds were far in excess of investments made during the year. Therefore, no disallowance for interest income can be made under the provisions of section 14A of the Act. The assessee had Reserve and Surplus of ₹ 115.27 crores as on 31.03.2002 and profit before tax during the current year at ₹ 15.26 crores. It was further stated by the assessee that non trade investments were carried forward from the erstwhile Chicago Pneumatics India Ltd. which got merged with the assessee. The borrowed funds majorly constitutes of cash credit and bank overdraft and Sales Tax Deferral Loan from Government of Maharashtra which are non interest bearing funds which are only to the tune of 3% of the total funds of the assesee. The Ld. CIT(Appeals) after considering the submissions of the assessee and the facts of the case, has given a detailed reasoned decision. The Ld. CIT(Appeals) observed that the Assessing Officer made disallowance for administrative expenses attributable to exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2002 and profit before tax during the current year of ₹ 15.26 Crores. The Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd.(supra.) analysed the situation that when it is established that the assessee is having sufficient funds then presumption would arise that investments was made out of such funds available with the company. In that case, the assessee had interest free funds of ₹ 398.19 crores comprising share capital, reserve surplus, depreciation reserves. Therefore, entire investment made in the sister concern was out of the own funds of the company and the presumption tilted in favour of the assessee as per the observation of the Hon ble Jurisdictional High Court. 7.1 Reverting to the facts of the present case, it is already analyzed that the assessee was having sufficient own funds and therefore, whatever investment was made, the legal presumption is they were from the said own funds of the assessee. Therefore, no disallowance u/s.14A of the Act is called for. 7.2 With regard to the disallowance on administrative expenses, considering the entirety of facts and circumstances in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, there has been no need for the assessee to make further provisions during the current year. In addition to this, the assessee has also received ₹ 27,95,163/- from vendors towards warranty expenses which has to be considered as the income of the assessee of the current year. As regards the Chicago Pneumatic Division, the assessee had an opening balance of ₹ 49,35,909/- and made further provision of ₹ 3,10,33,820/- during the year. As against this, the assessee has incurred expenses of ₹ 3,11,63,197/- and there has been an excess provisioning of ₹ 48,06,532/- during the current year which the Assessing Officer has disallowed. 9. The Ld. CIT(Appeals) on this issue has observed that in assessee s own case, the Co-ordinate Bench of the Tribunal, Pune in ITA No.1424 1425/PN/07 dated 30.11.2010 for assessment year 1996-97 1998-99 has held that validity of such an estimation made on a reasonable basis for provision for warranty based on past history of the case. Consequently, the Co-ordinate Bench of the Tribunal, Pune allowed estimation of provision for warranty @ 0.4% of the net sales which was considered by the Ld. CIT(Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de provision during the year at ₹ 3,10,33,820/-. As against that, the amount of actual expenditure is ₹ 3,11,63,197/-. In view of the fact that actual expenditure incurred by the assessee in CP division is more than the amount of provision, we hold that deduction should be allowed for the amount of provision created. In the absence of such a position, we would have directed to follow the same rule of allowing provision at the rate of 0.40% of the sales of CP division. Once deduction is allowed on creation of provision, there can be no question of allowing deduction for actual expenses incurred in this division. The AO is directed to give effect to our above directions/observations after allowing opportunity of hearing to the assessee. Thus, ground No.2 of the assessee s appeal is allowed for statistical purposes. 11. In the Revenue s appeal, ground No.2 is against the decision of the Ld. CIT(Appeals) in providing warranty provision @ 0.4% of net sales. In the assessee s appeal, we have already decided there is no infirmity in the findings of the Ld. CIT(Appeals), hence, ground No.2 of Revenue s appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ITR 371 (1966) wherein it has been held that the term actually paid is not to be understood in a physical sense but in the sense that the expenditure is actually incurred. The Hon ble Bombay High Court in the case of CIT Vs. Tata Hydro Electric Supply Co. Ltd. (1995) 219 ITR 178 has held that the meaning of the word paid as used in section 36(1)(iv) of the Act has to be construed in the sense set out in clause (2) of section 43 of the Act. 15. Per contra, the Ld. DR has placed strong reliance on the orders of the Sub-ordinate Authorities. 16. We have perused the case records and heard the rival contention. We observe that Section 35DDA of the Act does not make any reference to sums actually paid. It refers expenditure that expenditure can be actually incurred or paid. The spirit of interpretation with any scheme of Act provides that there has to be a holistic approach in interpreting the statutes and within the frame work of the statue itself there cannot be any isolated or secluded interpretation until or unless exclusively provided within the statute itself. We have to read Section 35DDA along with Section 43(2) of the Act and in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 536/- is the same as was in those years. In those appellate orders, it was held that stamp duty expenses on immovable property amounting to ₹ 2,37,52,680/- was eligible for amortization under section 35DD of the Act while fees for increase in authorized share capital i.e. ₹ 10,50,00/- was not eligible for amortization in view of the decision of the Hon ble Delhi High Court in the case of CIT Vs. Hindustan Insecticides Ltd. 250 ITR 338. Therefore, the Ld. CIT(Appeals) herein allowed the stamp duty expenses as eligible for amortization under section 35DD of the Act but fees for increase in authorized share capital was found as not eligible in view of the decision of the Hon ble Delhi High Court (supra.). 19. Ground No.3 of Revenue s appeal is against the partial relief provided by the Ld. CIT(Appeals) in favour of the assessee on this issue. 20. At the time of hearing, the Ld. AR of the assessee vehemently argued that the case law relied on by the Ld. CIT(Appeals) of the Hon ble Delhi High Court is substantially different on facts with regard to that of the assesseee. In the case of the assessee, there was amalgamation pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No.3 of the Revenue s appeal is dismissed. 24. Ground No.5 relates to disallowance of provision on stock obsolescence . It is observed by the Revenue Authority that the assessee made mere provisions for obsolescence but all of the corresponding items were not actually written off from the closing stock but still the deduction was claimed for the provision for stock obsolescence. The facts on record demonstrates that the comparative figures given in assessment year 2001-02 against the provision made of ₹ 2,17,38,129/-, the actual write off of obsolete stock was worth ₹ 1,22,83,015/- only. Similarly in the relevant year, the assessee claimed a deduction of ₹ 5,77,48,543/- on the basis of provision for obsolescence of the inventory whereas the actual write off of stock was made to the extent of ₹ 3,70,21,550/- only. Similarly in assessment year 2003-04, the Assessing Officer pointed out that the provisioning of account was made every year whereas the actual write off is of a much smaller amount. Further, no documentary evidences were furnished regarding the same. The Ld. CIT(Appeals) observed in his order that there is tendency of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it is well established theory that the closing stock is liable to be valued at cost or market price whichever is lower. The principle applicable with regard to obsolete stock is akin to the aforesaid theory and the assessee made no mistake in adopting such a policy to make a provision for the obsolete stock. In the present case, in our view, the Commissioner of Incometax (Appeals) made no mistake in deleting the addition. In fact, the learned Counsel for the assessee had pointed out that a similar dispute had arisen in the assessee s own case for the assessment years 1973-74 to 1975-76 and the Tribunal had upheld the stand of the assessee and for that matter a reference was made to the decision of the Tribunal, Bombay Bench in the case of IAC v. Consolidated Pneumatic Tool Co. (I) Ltd. 15 ITD 564 (Bom). It is further pointed out that such policy of identifying and making a provision for diminution of value of obsolete stock was accepted by the department in the past and no disallowance was made till the instant assessment year. In this background of the matter also, we find that the Commissioner of Income-tax (Appeals) has rightly deleted the addition and that the Ground of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. Respectfully, following the decision of the Hon ble Jurisdictional High Court, we direct the Assessing Officer to provide provision for stock obsolescence to the assessee and delete the addition therein. Thus, ground No.5 raised in appeal by the assesse is allowed. 27. The Revenue in its appeal in ground No.5 has challenged the part relief given to the assessee on the stock actually written off. We have decided this issue in assessee s appeal allowing stock obsolescence to the assessee. Therefore, ground No.5 of the Revenue s appeal is dismissed. 28. Ground No.6 pertains to confirming the addition of ₹ 3,40,443/- being income from scrap sale which according to the assessee was the amount already offered to tax in assessment year 2001-02 i.e. preceding assessment year . 29. The facts on this issue are that in the Special Audit Report (SAR), the assessee has debited ₹ 3,40,443/- to sale of scrap account giving effect to the sale of car and this has resulted in reducing the income from sale of scrap by the said amount. The assessee by way of its explanation vide letter dated 05.05.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim out of provision made for share handling charges included under the head Miscellaneous expenses . Total provision for share handling charges made was ₹ 14,76,398/- whereas the actual expenses incurred was ₹ 9,59,431/-. Accordingly based on the special audit report, the excess provision made at ₹ 5,16,957/- was disallowed by the Assessing Officer. 33. Before the Ld. CIT(Appeals), the submission of the assessee was that the assessee has made monthly provision of ₹ 1,20,000/- for share handling charges account which was paid to the registrar of the company in relation to the expenses incurred relating to the company matters during financial year 2001-02 i.e. assessment year 2002-03. Out of the total provision of ₹ 1,476,398/- in the share handling account, the assessee has actual incurred expenses amounting to ₹ 959,431/- in relation to the share handling charges. Out of balance provision of ₹ 516,954/-, the sum of ₹ 501,463/- has been actually incurred out in subsequent financial year 2002-03 i.e. assessment year 2003-04. It is the plea of the assessee that this provision goes on for every year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial audit report in which it is stated that the assessee has written off this amount after reconciliation when the same could not be reconciled. It was further observed by the Assessing Officer that the assessee could not produce any working as to when and for which consignment custom duty was paid and how much was adjusted against the actual import and what is the nature of this amount of ₹ 16,44,087/-. The assesee could not give the breakup and the details with supporting evidences as to why this write off of unreconciled amount was allowable as deduction. The Ld. CIT(Appeals) upheld the findings of the Assessing Officer stating that no working along with supporting evidences has been placed on record by the assessee regarding this amount and justification for claiming it as deduction has not been explained. The Ld. AR of the assessee at the time of hearing prayed that this issue may be restored to the file of the Assessing Officer where they would provide necessary evidences and working and would present their case on merits. 38. We have perused the case records and analyzed the facts and circumstances in this case. On this issue, the Revenue Authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs mentioned in the SAR they were unable to provide evidences/ explanations with regard to the remaining disallowed amount of ₹ 9,22,696/-. The assessee further claims that they are ready with relevant supporting documents and evidences pertaining to this amount and has prayed that an opportunity be provided so that on merits before the First Appellate Authority, the assessee can demonstrate its case. In the case before us, most of the issues relating to factual verification are being restored to the file of Assessing Officer and this issue also qualifies in that category. In view of the matter, we set aside the order of the Ld. CIT(Appeals) on this issue and restore the issue to the file of the Assessing Officer for adjudication after following the principles of natural justice. Thus, ground No.9 raised in appeal by the assessee is allowed for statistical purposes. 42. Ground No.10 is with regard to the disallowance of excess provisions of ₹ 8,25,000/- . The Assessing Officer relying on the observation of SAR has disallowed the provision for expenses of ₹ 8,25,000/-considering the same as excessive provision against which no expenditure were act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of fact recorded by the Tribunal. These facts of the decision relied upon by the appellant revealed that this judgment was distinguishable on facts with reference to the appellant's case. In the appellant's case no basis whatsoever has been given for making the ad-hoc provisions, and there were no expenses incurred at all from these provisions during the year. The excess provision created on ad-hoc basis was therefore not allowable and the disallowance made by the AO is hereby sustained. Ground No.8 is accordingly dismissed. 44. We have perused the case records and given thoughtful consideration to the findings of the First Appellate Authority. There is a clear cut verification on facts which is on record that the assessee has given no basis whatsoever for making such ad-hoc provisions and actually there were no expenses incurred at all from this provisions during the year. Therefore, we do not find any infirmity with the findings of the Ld. CIT(Appeals) and the same is thereby upheld. Thus, ground No.10 raised in appeal by the assessee is dismissed. 45. Ground No.11 is with regard to the disallowance of bad debts written off ₹ 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total claim of bad debt for the two divisions made at ₹ 1,38,94,151/-, Bad Debts claimed to the extent of ₹ 64,70,030/- is allowable as deduction for which the condition given u/s.36(2)(i) was satisfied and the disallowance of the remaining claim is hereby upheld. This ground of appeal, will therefore, be treated as partly allowed. 47. We have perused the case records and considered the legal parameters involved in this issue. It has been clearly analyzed by the Assessing Officer as well as by the Ld. CIT(Appeals) that the disallowance of bad debts in respect of two division have been made since the conditions given u/s.36(2)(i) of the Act is not been satisfied. In the SAR regarding Atlas Copco division out of the total claim of ₹ 74,56,049/- for the amount of ₹ 9,86,019/- the details regarding the nature of the debt and whether it was included as income in any of the earlier period could not be provided. Moreover, for the CP division, where total claim was ₹ 64,38,102/-, the Assessing Officer has pointed out to a double claim to the extent of ₹ 2,46,600/-; and in respect of the remaining amount, no details, breakup, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before us. It was submitted by the Ld. AR that similar claim for the assessment year 2000-01 was subject matter of consideration by the Tribunal in the assessee's own case in ITA Nos. 4335 3132/Mum/04 dated 19.11.2010 and the assessee's claim had been allowed. It was submitted that even in the earlier year, the claim related to an Inter-Corporate Deposit (ICD) placed with the very same concern i.e. M/s Vitara Chemicals Ltd. as was the case in the year 2000-01, therefore, the claim of the assessee should be allowed. 50. The Co-ordinate Bench of the Tribunal, Pune on this issue had held and observed as follows: 7. We have carefully considered the rival submissions and have perused the relevant record. In assessment year 2000-01, the Tribunal in its order dated 19.11.2010 (supra) has considered the allowability of the write-off of advance given to M/s Vitara Chemicals Ltd. in the following words: We have considered the rival submissions. We have seen the Memorandum of Association of the assessee and in clause 17 of the other objects clause permits the assessee to engage in the business of lending m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of the dues from Precision Fasteners Limited in the Court of Metropolitan Magistrate, Mumbai as a legal recourse for recovery of dues. Therefore, the facts and circumstances with regard to the facts of the case of M/s. Vitara Chemicals are similar with the case of assessee and therefore, ground No.12 of the assessee should be allowed. The Ld. AR further submitted that the decision of the Co-ordinate Bench of the Tribunal, Pune in ITA No.448/PN/2010 ITA No.409/PN/2010 (supra) has been upheld by the Hon ble Jurisdictional High Court in Income Tax Appeal No.2285 of 2011 in the case of CIT-V, Pune Vs. Atlas Copco (India) Ltd. The issue considered before the Hon ble Jurisdictional High Court was as follows: (ii) The respondent-assesee had advanced as inter corporate deposit of various amounts to about 15 companies and the interest earned on them were offered to tax. The respondent assessee had advanced as inter corporate deposit an amount of ₹ 50 lakhs to one Vitara Chemicals Ltd. during the assessment year 1999-2000. The interest received on the inter corporate deposits from Vitara Chemicals Ltd. were offered to tax in the assessment years 1999-2000 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t instead of income account. We have been explained that the company has imported goods (drill rods) from Atlas Copco Secorac/Interock. The said goods were obsolete stock and hence the Atlas Interock has given credit note for the total invoice amount to the company. The company has sold said goods as scrap at the value of ₹ 20,10,925/- during the year. The company has credited the said sale of scrap to the sundry liability account as the same amount was payable to the Atlas Copco Secocrac/Interock. As per details provided to us the said amount was written back as income in the subsequent financial year ended 31st March, 2003.The entry for the write back of the amount has been passed on 28.11.2002. Being the said amount is not be refunded, then income on account of sale of scrap should have been booked in the financial year ended 31.03.2002 and not in subsequent year. 54. The assessee was requested to explain the issue and the assessee submitted its written submissions which are as follows: The submissions made vide our letter dated May, 05, 2005 are reproduced below: The Company had imported from a party certain product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... miscellaneous income and offered to tax in A.Y. 2003-04. This method of accounting was not accepted by the Ld. CIT(Appeals) since income has arisen in this year on account of sale of scrap and he had therefore, upheld the findings of the Assessing Officer. We do not find any infirmity with the findings of the Ld. CIT(Appeals) and the same is thereby upheld. Thus, ground No.13 raised in appeal by the assessee is dismissed. 56. Ground No.14 pertains to exclusion of 90% of following receipts from profit of business for the purpose of deduction u/s.80HHC of the Act: (i) Service charges ₹ 45,160,615/- (ii) Other miscellaneous receipts ₹ 14,04,329/- 57. At the time of hearing, the Ld. AR of the assessee submitted that this issue is squarely covered by the decision in assessee s own case in ITA No.1424 1425/PN/2007 for assessment year 1996-97 1998-99 decided on 30.11.2010. The Co-ordinate Bench of the Tribunal, Pune has restored the matter to the file of the Ld. CIT(Appeals) for re-examination of facts and thereafter, adjudicate the issue. The Ld. AR prayed that a similar direction may be given in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to Ground No. 1 of appeal are that during the course of assessment proceedings, the Assessing Officer issued notices under section 133(6) to 17 randomly selected parties to whom commission was stated to have been paid by the assessee. Of these, replies from 12 parties were received. The Assessing Officer also called for detailed information regarding the names and addresses, nature of services rendered, proof of payment of commission etc. from the assessee, to which assessee submitted a detailed note. The Assessing Officer was not satisfied with the submissions of the assessee and disallowed the commission for the reason that assessee failed to produce any evidence of actual services rendered by the parties, or any correspondence between the payees and the ultimate customers. According to the Assessing Officer, there was no evidence to show that the commission payments were commensurate with the services rendered by the payee agents. He also found that commission was paid even where the customers were Government agencies. According to the Assessing Officer, there was no scope for payment of commission in Government contracts and thus, the assessee failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) deleting the disallowance, it has been argued that the objections raised by the Assessing Officer have not been addressed by the Commissioner of Income-tax (Appeals) and that the addition has been deleted on generalized considerations. 22. On the other hand, the learned Counsel for the assessee pointed out that the Commissioner of Income-tax (Appeals) made no mistake in deleting the addition on the basis of the material and submissions put-forth by the assessee before the lower authorities. In this regard, reference has been made to the relevant pages of the Paper book to point out the material which was placed before the lower authorities. Our attention has been drawn to the details of the commission paid indicating the name and address of the parties to whom commission is paid as well as the comparative chart of the commission paid for the earlier two years, copies of which have been placed at pages 35 to 39 of the Paper Book. The details of commission paid linking it to the sales made during the year along with the copies of agreements entered with dealers on a sample basis, etc., has also been referred to in the Paper Book which are placed at pages 42 to 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular service visits to ensure smooth operation of the equipment at the customer's site is also arranged through the dealer-engineer and as a part of the appointment terms of the dealers, they are required to stock sufficient parts at their end, so that timely delivery of parts and services is offered. In order to compensate the dealer for the above services, the assessee gives service commission to cover all the costs that the dealer incurs towards travelling, boarding and lodging, stocking of parts as well as training of the personnel. 24. All the aforesaid factual aspects of the matter have not been found to be non- existent by the either of the authorities below during the year under consideration. It is also not the case of the Revenue that the commission expenses have not been regularly incurred by the assessee as in the past years. In fact, one of the points raised by the Assessing Officer is with regard to the commission paid to dealers where the customers include Government agencies. In this regard, we find that the assessee specifically explained in its written submissions, copy of which has been placed 182-183 of the Paper Book, that generally t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case wherein the practice of paying commission to dealers/agents, stand established, we find no reasons to interfere with the ultimate conclusion of the Commissioner of Income-tax (Appeals) of having deleted the disallowance made by the Assessing Officer. Resultantly, Ground Nos. 1 2 are dismissed. It was further pointed out by the Ld. AR of the assessee that the decision of the Co-ordinate Bench of the Tribunal has been upheld by the Hon ble Jurisdictional High Court in ITA No.2285 of 2011 in the case of CIT-V, Pune Vs. Atlas Copco (India) Ltd. 64. We have perused the case records and analyzed the judicial pronouncements placed before us. We observe that the Co-ordinate Bench of the Tribunal, Pune in assessee s own case had considered this issue in the light of assessee s own case for the earlier assessment years 1986-87, 1988-89, 1991-92, 1992-93, 1993-94 and 1995-96. In the aforesaid years, the commission expenses incurred by the assessee were allowed as deduction. The Hon ble Jurisdictional High Court had observed that while providing relief the Tribunal had considered the issue was decided in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46. I have considered the submission of the appellant and the material available on record. In view of the provisions of Section 40(a)(i) of the Act read with its proviso, since the TDS in respect of the royalty amount of ₹ 21,18,113/ - has been made and paid during the A.Y.2002-03, though the amount may relate to A.Y.2001-02, it is liable to be allowed as deduction in this year. Out of the balance amount, the appellant's explanation itself reveals that from the total TDS liability of ₹ 9,31,789/-, only ₹ 3,02,040/- worth TDS has been deducted and paid during the F.Y. relevant to A.Y.2002-03. Accordingly, only the corresponding amount of ₹ 30,20,400/- was liable to be allowed as deduction in this year, whereas the royalty provision amounting to ₹ 62,97,481/ - on which the TDS of ₹ 6,29,749/- has been made and paid during the next F.Y. i.e. A.Y. 2003-04, the same cannot be allowed as a deduction in this year. Therefore, it is held that instead of the disallowance amounting to ₹ 95,77,308/- (inclusive of the prior period expenses as stated above), the disallowance of ₹ 62,97,481/- is hereby sustained and the balance is deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved as follows: 49. I have given careful consideration to the submissions made by the appellant and also the Tribunal decision cited by it. It is noticed that this issue regarding payment of royalty to associated enterprises for use of technology on exports made to them is dealt with by my predecessor in the appellate orders for AY 2004-05 and AY 2005-06. The relevant portion of my predecessor s order in the Appellant s case for AY 2004-05 is being reproduced as under: Whether the TPO was right in recommending an adjustment in respect of royalty payment to AEs to whom the export sales had been made? As already stated in the first part of his order, the learned TPO recommended an adjustment of ₹ 45,69,753/- on account of royalty payment to the very same AEs to whom sales had been made. Although ultimately no separate addition was recommended by the TPO on this count as an adjustment was to be made in respect of the entire amount of royalty paid ( including royalty paid to AEs to whom sales also have been made) this question which arises from the order of the TPO requires to be answered separately. This adjustment was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable) on the other. No presumption of non-arm s length payment of royalty arose upon these facts in my view. 50. Having gone through the contents of the assessment order and the submissions of the appellant, I am of the view that the factual matrix and legal position relating to this item of expenditure are not different from the AY 2004-05 and AY 2005-06 wherein my predecessor has deleted the addition made on account of disallowance of royalty payments on export to AEs. Accordingly, for the reasons discussed in the appellate order for AY.2004-05 2005-06, this ground of appeal is allowed. 71. At the time of hearing, the Ld. AR of the assessee submitted that transactions with AEs are not disputed, royalty payment at arm s length price are also not disputed and payments were made as per RBI norms which are also not disputed. The Ld. AR further submitted whether AE has stopped production of the products on which royalty was paid, is not a relevant considerating factor for the assessee. 72. We have perused the case records and analyzed the facts and circumstances in the case. We find that even in assessment years 2004-05 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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