2018 (10) TMI 1304 - HC - Income Tax

Disallowing of expenses for provision of one year warranty - Held that - This expenditure related to the maintenance and repair charges expended by the assessee on Air Conditioner units supplied to the customers. CIT (Appeals) in particular believed that this was based on actual cost involved in rendering such past sale services. Adhoc 10% disallowance of various expenditure in absence of bills and vouchers for the same - assessee had not produced bills and vouchers for the expenditure - Held that - Commissioner of Income Tax (Appeals) allowed additional evidence to be produced at the appellate stage, call for the remand report and came to the conclusion that all expenditure were duly reflected. No question of law arises.

Summary

Issues:
1. Disallowance of expenditure for provision of one-year warranty
2. Adhoc disallowance of various expenditures in absence of bills and vouchers

Analysis:
1. The first issue in this case revolves around the disallowance of expenditure amounting to ?2.58 crores incurred by the assessee for maintenance and repair charges on Air Conditioner units provided to customers. The Assessing Officer disallowed this expense, but both the Commissioner of Income Tax (Appeals) and the Tribunal overturned this decision. The Commissioner believed that the expenditure was justified as it represented the actual cost incurred in providing post-sale services. The Tribunal upheld this view, leading to the dismissal of the appeal. The judgment emphasizes the importance of considering the actual cost involved in providing services to customers when assessing such expenditures.

2. The second issue concerns the adhoc disallowance of 10% of various expenditures by the Assessing Officer due to the absence of bills and vouchers. The Commissioner of Income Tax (Appeals) allowed the assessee to submit additional evidence during the appellate stage. After reviewing the additional evidence and the remand report, the Commissioner concluded that all expenditures were appropriately reflected, thereby justifying the decision to delete the adhoc disallowance. The judgment highlights the significance of allowing the submission of additional evidence during the appellate process to ensure a fair assessment of expenses. Ultimately, the Tax Appeal was dismissed, affirming the decisions of the lower authorities.