2018 (1) TMI 940 - AT - Income Tax

Disallowance of bad debt - Held that - When, on the basis of similar evidence the first appellate authority has allowed assessee s claim for the assessment year 2009 10, we fail to understand why it was not allowed for the impugned assessment year. Further, when the Assessing Officer has not offered any adverse comment with regard to claim of bad debt in the remand report, what further rejoinder was expected from the assessee. As it appears, the first appellate authority without properly applying his mind to the evidences brought on record has sustained the disallowance. Therefore, we are of the opinion that no disallowance is required to be made. Accordingly, we delete the addition made by the Assessing Officer - Decided in favour of assessee. Disallowance of advance given to employees being written off - Held that - Disallowance of advance given to employees being written off was primarily made in the absence of supporting details and evidence. For this very reason, similar disallowance was made in assessment year 2009 10, which has been accepted by the assessee. In the impugned assessment year also, the factual position is no different. Except furnishing the name of some persons with amounts written against their names no other details or supporting evidence have been produced by the assessee to demonstrate advancement of money to the concerned persons. No supporting bills / vouchers have been produced either before the Departmental Authorities or before us. No reason to interfere with the order of the learned Commissioner (Appeals) on this issue. - Decided against assessee. Delayed payment of employee s contribution to P.F. - payment was not made within the due date as provided under Explanation 2 to section 36(1)(va) - Held that - There is no dispute to the fact that such payments were made before the due date of filing of return of income for the impugned assessment year. That being the case, following the decision of the Hon ble Jurisdictional High Court in Hindustan Organics Ltd. v/s CIT, 2014 (7) TMI 477 - BOMBAY HIGH COURT we allow assessee s claim of deduction Allowance of warranty expenditure claimed - contention of the assessee before us that the disputed amount claimed as deduction in the impugned assessment year has been offered as income in the subsequent assessment year i.e., assessment year 2011 12 - Held that - We direct the Assessing Officer to allow assessee s claim of deduction of provisions made for warranty expenses in the impugned assessment year subject to verification of the fact that the amount in question was offered as income in assessment year 2011 12. This ground is considered to be allowed for statistical purposes. Allowance of expenditure on consumables - Held that - The expenditure incurred by the assessee is in respect of a material which is in the nature of consumable. This fact is very much evident from the discussion of the first appellate authority while dealing with identical issue in assessee s own case for assessment year 2009 10, acopy of which was placed before us. The Assessing Officer without properly verifying the facts has disallowed assessee s claim. - Decided in favour of assessee.

Issues Involved:
1. Disallowance of bad debt.
2. Disallowance of write-off of advance to employees.
3. Disallowance of delayed payment of employee's contribution to P.F.
4. Allowance of warranty expenditure.
5. Allowance of expenditure on consumables.

Issue-wise Detailed Analysis:

1. Disallowance of Bad Debt:
The assessee challenged the disallowance of a bad debt amounting to Rs. 35,50,044. The Assessing Officer (AO) disallowed the deduction due to the absence of supporting evidence. The Commissioner (Appeals) confirmed the disallowance, noting that the assessee did not provide the necessary evidence or a rejoinder to the remand report. The Tribunal, however, found that the assessee had submitted sufficient evidence during the assessment and remand proceedings. It highlighted that similar evidence was accepted in the previous assessment year (2009-10) and that the AO did not make any adverse comments in the remand report. Consequently, the Tribunal allowed the assessee's claim, citing the Supreme Court decision in TRF Ltd. v/s CIT.

2. Disallowance of Write-off of Advance to Employees:
The assessee contested the disallowance of Rs. 4,22,090 written off as advances given to employees. The AO disallowed the amount due to a lack of supporting details. The Commissioner (Appeals) upheld the disallowance, referencing a similar decision for the previous assessment year (2009-10). The Tribunal noted that the assessee had not provided adequate evidence, such as bills or vouchers, to support the claim. Therefore, it upheld the disallowance.

3. Disallowance of Delayed Payment of Employee's Contribution to P.F.:
The AO disallowed Rs. 52,329 for delayed payment of employee's contribution to the provident fund, as it was not paid within the due date specified in Section 36(1)(va) of the Act. The Commissioner (Appeals) sustained the disallowance. However, the Tribunal allowed the assessee's claim, noting that the payments were made before the due date for filing the return of income, in line with the Jurisdictional High Court decision in Hindustan Organics Ltd. v/s CIT.

4. Allowance of Warranty Expenditure:
The Revenue challenged the allowance of Rs. 32,55,695 claimed by the assessee as warranty expenditure. The AO disallowed it, considering it a provisional claim. The Commissioner (Appeals) allowed the claim, following a previous decision for the assessment year 2009-10. The Tribunal directed the AO to verify whether the amount was offered as income in the subsequent assessment year (2011-12) and allowed the claim subject to this verification.

5. Allowance of Expenditure on Consumables:
The Revenue disputed the allowance of Rs. 6,73,089 claimed as consumable expenditure. The AO treated the material as a capital asset and allowed depreciation instead. The Commissioner (Appeals) allowed the claim, referencing a similar decision for the assessment year 2009-10. The Tribunal agreed with the Commissioner (Appeals), noting that the expenditure was for consumable material and did not find any reason to interfere with the decision.

Conclusion:
The assessee's appeal was partly allowed, and the Revenue's appeal was partly allowed for statistical purposes. The cross objection by the assessee was dismissed as infructuous.

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