2020 (7) TMI 720 - AT - Income Tax

Disallowance of provision for warranty while computing book profits u/s.115JB - HELD THAT - Disallowance made under normal provisions of the Act, ITAT had set aside to the file of the ld. AO - We also find that there is absolutely no finding recorded by the ld. CIT(A) in his appellate order as to whether the provision has been made on a scientific basis based on past history of the assessee. Since, the same issue has been set aside to the file of the ld.AO under normal provisions of the Act, we deem it fit and appropriate in the interest of justice and fair play to remand this ground also to the file of the ld. AO as the decision in this case would be depending on the outcome of the decision taken by the ld. AO under normal provisions of the Act. Accordingly, the ground raised by the assessee is set aside to the file of the ld. AO for denovo adjudication in accordance with law. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Summary

Issues:
Appeal regarding disallowance made towards provision for warranty under computation of book profits u/s.115JB of the Income Tax Act, 1961.

Analysis:
1. The appeal in ITA No.6961/Mum/2012 for A.Y.2003-04 concerns the disallowance made towards provision for warranty of ?23,48,01,000 while computing book profits u/s.115JB of the Act. The matter was recalled as the Tribunal did not adjudicate on this issue in the original appeal. The Tribunal recalled the order for the limited purpose of adjudicating on the disallowance of provision for warranty.

2. The assessee, a public limited company engaged in manufacturing vehicles, tractors, and property development, made a provision for warranty for F.Y.2002-03. The provision was made based on scientific empirical basis and past history. However, the ld. AO disallowed the sum under normal provisions of the Act and u/s.115JB. The ITAT set aside the disallowance under normal provisions to the file of the ld. AO and remanded the issue for denovo adjudication.

3. The order was pronounced after 90 days from the conclusion of the hearing. Citing a precedent, the Tribunal justified the delay due to the lockdown announced by the Government. The Tribunal highlighted the extraordinary circumstances caused by the Covid-19 pandemic and the subsequent lockdown, which disrupted judicial work. Considering the situation, the Tribunal excluded the lockdown period while calculating the 90-day limit for pronouncement of orders. The appeal of the assessee was allowed, and the appeal of the Assessing Officer was dismissed.

4. Following the judicial precedent, the Tribunal pronounced the order beyond the 90-day period. The appeal of the assessee was allowed for statistical purposes. The order was pronounced in accordance with Rule 34(5) of ITAT Rules and placed on the notice board on 29/07/2020.