TMI Blog2017 (11) TMI 1841X X X X Extracts X X X X X X X X Extracts X X X X ..... for adjudication by the Tribunal in earlier years. The issue was decided against the assessee in all the years. On hearing both the sides and considering the fair admission of the issue by assessee, we are of the opinion, this ground for this year also has to be decided against the assessee. Accordingly, the ground No.3 is dismissed, and the same is in favour of the Revenue. Disallowance u/s 14A - HELD THAT:- We are of the opinion, that it is now binding on our Benches that the disallowance in this case should be restricted to 2% of the exempt income. Therefore, we find it relevant to give a direction to the AO to follow the cited decision in the case of Godrej Agrovet Ltd [ 2014 (8) TMI 457 - BOMBAY HIGH COURT] after examining peculiar facts of the present case. With these directions, we remand this issue to the file of the CIT(A) for fresh adjudication on this issue. Accordingly, the grounds raised by the revenue are allowed for statistical purposes. Provision for warranty - HELD THAT:- We find similar issue was raised by the revenue for adjudication before us for the A.Y 2005-06 vide ground No.5 of that appeal with identical directions, we remand this issue also to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-, Scrap sale ₹ 3,27,99,000/- and sundry sale ₹ 11,81,000/-) to the total turnover for the purpose of section 80HHC and reducing the deduction available u/s 80HHC. 3. From the above, it is evident that the above ground relates to the manner of computation and allowability of deduction on certain receipts for the year under consideration u/s.80HHC of the Act. It has 3 limbs, (i) Job work charges, (ii) Scrap sales and (iii) Sundry sales. 4. It is the claim of the Ld.AR before us, that the issues relating to job work charges and sundry sales again are not pressed . Accordingly, that part of this ground No.2 is dismissed. That leaves the issue relating to the Scrap sale income of ₹ 3,27,99,000/- qua the deduction u/s.80HHC of the Act. 5. Relevant facts of this issue relating to Scrap sales include that the assessee earned the said income on account of Scrap sales and the same was included in the total turnover of the assessee. The claim of the assessee in this regard relates to the exclusion of the same from the total turnover. Referring to the identical issue that came up for adjudication before the Hon ble Supreme Court in the case of Punjab Stainless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The issue was decided against the assessee in all the years. 12. On hearing both the sides and considering the fair admission of the issue by the Ld.Counsel for the assessee, we are of the opinion, this ground for this year also has to be decided against the assessee. Accordingly, the ground No.3 is dismissed, and the same is in favour of the Revenue. 13. Ground No.1 relates to the LD charges amounting to ₹ 50,01,417/-disallowed by the AO. 14. At the outset, Ld.Counsel submitted that this is a covered issue in favour of the assessee vide ITA.No.857 884/PUN/2006 for the A.Y. 2001-02. Filing a copy of the said order of the Tribunal for the A.Y 2001-02, Ld.Counsel brought our attention to Para No.38 to 47 commencing from page 22 of the Tribunal s order, Ld.Counsel submitted that this issue may be remanded to the AO s file for examining the facts and deciding the issue in the light of the said order of the A.Y.2001-02. 15. On hearing both the parties on this issue, we find relevant paras from the said Tribunal s order needs to be extracted and the same read as under : 38. The issue in ground of appeal No.12 is against the disallowance of liquidated damages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call for relevant particulars and decide the same. 41. In respect of balance liquidated damages, the assessee filed evidences in respect of certain items and the CIT(A) held that in view of the evidences filed for ₹ 3,41,724/-, ₹ 5,44,987/-, 1,45,0721- and ₹ 5,25,067/-, allowability towards the payment of liquidated damages had arisen during the relevant previous year and the same was held to be allowable. In respect of last item i.e. of ₹ 20,82,1401-, the assessee had only made the provision, even before any demand was raised by the concerned party. Since it was not known as to whether the demands were actually received or not, the CIT(A) held that the assessee was not justified in making the claims towards liquidated damages merely on the basis of provision. Hence, out of liquidated damages of ₹ 36,38,990/-, claim to the extent of ₹ 20,82,139/- was held as inadmissible and the disallowance was confirmed to that extent. 42. The assessee is in appeal vide ground of appeal NO.12. The Revenue is also in appeal against the order of CIT(A) in allowing liquidated damages of ₹ 1,49,97,483/- paid to M/s. Oil India Ltd. vide ground of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to pay liquidated damages. Further, in case other conditions of the purchase order are not complied with by the assessee, then also as part of purchase order itself, there is a clause that the purchaser may at his discretion withhold any payments until the whole of stores has been supplied and he may also deduct recovery from the supplier liquidated damages. The major item of expenditure relates to damages of ₹ 1.56 crores claimed by and paid to MIs. Oil India Ltd. The assessee was duty bound to complete the said project within stipulated period and since the assessee could not fulfill the same, M/s. Oil India Ltd. vide letter dated 20.01.2001 demanded damages of ₹ 1.49 crores. In view of the understanding between the parties, the claim of ₹ 1.49 crores on account of liquidated damages being relatable to carrying on of business of assessee, is duly allowable as expenditure in the hands of assessee. Accordingly, upholding the order of CIT(A), we dismiss the ground of appeal No.7 raised by the Revenue. 46. Now, coming to the balance expenditure of ₹ 6,64,552/-, which was the interest paid on mobilization advances. Clause (iii) of contract copy, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods have been supplied by the assessee. There is no infraction of law in such cases and accordingly, we find no merit in the orders of authorities below in this regard. Reversing the order of CIT(A), we direct the Assessing Officer to allow the claim of assessee also on account of provision made of ₹ 20,82,139/-. The ground of appeal No.12 raised by the assessee is thus, allowed and the ground of appeal No.7 raised by the Revenue is dismissed. 16. Considering the above, we are of the view that the matter should be remanded to the AO s file for applying the said legal proposition on the issue under consideration. In principle, the ground is allowed in favour of the assessee. The AO shall grant reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Accordingly, this ground is allowed for statistical purposes. 17. The only final issue left (Ground No.2) relates to club expenses of ₹ 12,500/-. Ld.Counsel submitted that identical issue was again adjudicated by the Tribunal in the assessee s own case for the A.Y. 2001-02 (supra). He brought our attention to the relevant para No.22 to 25. 18. On hearing both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee (Ground No.4) paid by the assessee, Ld.Counsel submitted that the said expenditure never results in the benefit of any enduring nature. Therefore, the same constitutes Revenue expenditure. According to the Ld.AR for the assessee, a similar issue came up before the Tribunal and the Tribunal has already decided the issue in favour of the assessee holding such expenses as Revenue in nature. Relying on the order of the Tribunal in the assessee s own case for the A.Y. 1991-92, Ld.Counsel submitted the said issue was decided in assessee s favour vide ITA No.262/PUN/1995. After going through the same, we find this issue also should re-visit to the file of CIT(A) for examining the facts and to decide the same in the light of the order of the Tribunal for A.Y. 1991-92 after granting reasonable opportunity of being heard to the assessee. Accordingly, this issue is decided and allowed for statistical purposes. 24. Regarding the allowability for provision of warranty (Ground No.5), Ld.Counsel submitted the issue now stands covered in favour of the assessee vide the Apex Court judgment in the case of Rotork Controls India Pvt. Ltd., 314 ITR 62. According to him, when the assessee con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the extent of 2% of the total exempt income earned by the respondent- assessee on the basis its order dated 27.2.2009 for the assessment year 2002-2003 and order dated 10.9.2009 for the Assessment Years 2003-2004 and 2004-2005 wherein disallowance was restricted to 2% of the exempt income. Further; the Tribunal has remanded the matter to the AO to verify the disallowance claimed and restrict the disallowance only to the extent to 2% of the total exempt income. We find no fault with the order of the Tribunal. 29. As such, Ld. AR has not made out any specific and sustainable case or argument why the said ratio cannot be applied to this case. Considering the same, we are of the opinion, that it is now binding on our Benches that the disallowance in this case should be restricted to 2% of the exempt income. Therefore, we find it relevant to give a direction to the AO to follow the cited decision in the case of Godrej Agrovet Ltd (supra) after examining peculiar facts of the present case. With these directions, we remand this issue to the file of the CIT(A) for fresh adjudication on this issue. Accordingly, the grounds raised by the revenue are allowed for statistical purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt judgment in the case of Godrej Agrovet Ltd (supra). CIT(A) shall grant reasonable opportunity of being heard to the assessee. Accordingly, this ground is allowed for statistical purposes. 36. Regarding the disallowance of prior period expenses , Ld.Counsel submitted the CIT(A) omitted this ground while adjudication of the appeal. Therefore, this ground needs to re-visit to the file of the CIT(A). Further, he submitted the CIT(A) may be directed to adjudicate this issue in the light of the orders of the Tribunal in the assessee s own case for the A.Y 2000-01 vide ITA No.546 503/PUN/2004. We order accordingly. Accordingly, this ground is allowed for statistical purposes. 37. In the result, appeal of the assessee is partly allowed for statistical purposes. ITA No. 692/PUN/2014 ( BY Revenue for A.Y. 2006-07) 38. In this appeal of the revenue, there are 3 issues for adjudication before us. They are (i) disallowance u/s.14A of the Act; (ii) disallowance u/s.40A(2)(b) with regard to remuneration paid to the Directors; and (iii) provision for warranty. Ld.DR fairly submitted that the ground No.1 relating to the disallowance 14A of the Act needs to re-visit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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