TMI Blog2017 (10) TMI 1470X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the assessee complied with the condition of writing off of the debts in the books of account of the assessee as irrecoverable. They made an elaborate discussion distinguishing the Supreme Court judgment in the case of T.R.F. Ltd Vs. CIT [ 2010 (2) TMI 211 - SUPREME COURT] . In our view, the decision of DRP is required to be reversed on this issue considering the binding of judgments of Hon'ble Supreme Court (supra) read with Section 36(1)(vii) of the Act. - Appeal of the assessee is allowed. - ITA No. 282, 412/PUN/2015 Assessment Year : 2010-11 - - - Dated:- 27-10-2017 - Shri d. Karunakara Rao, AM And Shri Vikas Awasthy, JM Revenue by : Shri Rajeev Kumar Assessee by : Shri Nikhil Pathak And Shri Sunil Tembe ORDER D. Karunakara Rao, These are cross appeals filed by the Revenue and Assessee against the order/direction of the AO/Dispute Resolution Panel (DRP), Pune dated 26.12.2014. 2. The brief facts of the case include that the assessee filed return of income declaring total income of ₹ 122,33,03,480/-. The assessee is engaged in the business of manufacturing and trading of packaging mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... segments is not correct. 5. The grounds raised by the assessee read as under: 1.1 The learned Assessing Officer/DRP erred in disallowing the incremental provision for warranty of ₹ 1,04,84,520/-. 1.2 The learned Assessing Officer/DRP erred in not appreciating that the provision of warranty was properly ascertained and was not in the nature of Contingent Liability. 1.3 The learned Assessing Officer/DRP erred in not following the below mentioned decisions: i) Rotok Controls India P. Ltd. CIT (2009) 314 ITR 62 (SC) iii) CIT Vs. Ericssion Communications P. Ltd. (2009) 318 ITR 340 (Delhi) 2.1 The learned Assessing Officer/DRP erred in disallowing the claim ofbad debts of ₹ 85,00,273/-which were written off and debited to Profit Loss account of the year under assessment. He erred in not allowing the above claim of bad debts u/s. 36 (1)(vii) r.w.s 36(2) of the Income Tax Act, 1961. 2.2 The learned Assessing Officer/DRP erred in not appreciating that the bad debts written off during the year under assessment satisfied all the conditionsprescribed u/s.36(1) (vii) r.w.s. 36(2) of the Income Tax Act, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of the assessee. Thus, the decision of the DRP is fair and reasonable. Ld. AR prayed for dismissing the appeal of the Revenue. 8. We heard both the parties on the issue raised by Revenue that relates to correctness of aggregation approach in benchmarking international transactions. We find that similar issue was raised by Revenue as per ground in Para 3 of the Tribunal Order (supra.) and after elaborately discussing in Para 14 of the order of Tribunal, we find that aggregation approach was approved as per discussion given in Para No. 21 of the said order of Tribunal. For the sake of completeness, the said Para No. 21 is extracted and placed here in below: 21. In view thereof, we uphold the business strategy adopted by the assessee which would follow that sale of machinery, packaging material and straws etc. were closely interlinked and the same could not be evaluated separately. The aggregation approach adopted by the assessee in benchmarking its international transactions of closely interlinked transaction is, thus, accepted. 9. Further, on perusal of Para No.14 of the said order of the Tribunal, we find that the Tribunal discussed elaborately th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present appeal is against the claim of deduction on account of provision made for warranty. The assessee was engaged in the manufacture and sale of processing equipments and filling machines for both dairy and bread processing industries. The machineries which were being manufactured by the assessee were heavy packaging machineries and for the supply of same, the assessee was entering into agreement with the prospective buyers. The copy of one such agreement is placed on record by the assessee at pages 70 to 79 of the Paper Book. As per warranty clause 7 of the agreement, it is provided that the equipment is sold subject to express warranty, wherein the seller warrants that the equipments shall be free from material defects in workmanship, materials and design for period of 12 months from the date of commencement of use or period or 18 months from the delivery, whichever is shorter. It was undertaken by the assessee to repair or replace free of charge to the purchaser any part of equipment which contains a defect or actual refund to the purchaser the portion of price attributable to the defective part. The replacement or repair price were also subject to some warranty for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tently, the same was created at ₹ 32.74 crores but ₹ 31.07 crores was written back and the deduction by way of provision of warranty was claimed only at ₹ 1.67 crores. The Assessing Officer had also disallowed sum of ₹ 1.67 crores only. In view thereof, we find no merit in the observations of CIT(A) in denying the claim of assessee. Applying the ratio laid down by the Hon ble Supreme Court in Rotork Controls India P. Ltd. Vs. CIT (supra), the assessee having fulfilled the conditions laid down by the Apex Court, we find merit in the claim of assessee and accordingly, we direct the Assessing Officer to allow the deduction on account of provision for warranty made at ₹ 1.67 crores. The grounds of appeal raised by the assessee are thus, allowed. 23. Fromthe above, it is evident that the claim of the assessee on account of warranty provision is allowed by the Tribunal in assessee s own case in the A.Y. 2003-04. Ld. Departmental Representative has not brought anything on record to controvert the above finding of the Tribunal. Therefore, we find that the order of CIT(A) is in tune with the decision of the Tribunal. Therefore, the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
