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2019 (2) TMI 332 - AT - Income TaxAddition u/s 145A - assessee is liable to include the amount of excise and VAT while valuing the closing stock as on 31.03.2012 as per the provision of Section 145A? - AO disregarded the contention of the assessee and added the amount of Excise and VAT in the closing stock - Held that - In the own case of the assessee in A.Y. 2010-11 decided the issue in favor of the assessee Hon ble Jurisdictional High Court in the case of ACIT Vs. Narmada Chematur Petrochemicals Ltd. 2010 (8) TMI 263 - GUJARAT HIGH COURT such duty of central excise if added to enhance the value of closing stock would result in enhanced opening stock on the first day of the next accounting period, namely, 1- 4-1997. So, next year s profits would get depressed accordingly. Over a period of time, the whole exercise results in evening out; in other words, revenue neutral. At the same time, while disturbing the value of the closing stock the assessing authority cannot change the method of accounting regularly employed. - decided in favour of assessee. Addition on account of the provision of warranty - Held that - It is a settled principle of law that the provisions created by the assessee on the scientific basis are liable for deduction u/s 37(1) of the Act. In this regard, we find support and guidance from the judgments of Rotork Controls India Pvt. Ltd. vs. CIT 2009 (5) TMI 16 - SUPREME COURT OF INDIA we note that the assessee has created the provision @ 0.4% of the total turnover amounting to ₹ 18,86,570/- (0.4% of ₹ 47,16,42,449/-). On perusal of the ledger of warranty replacing expenses, it was observed that the assessee had incurred actual expenses amounting to ₹ 60,21,216/- only which exceeds the provision created in the books of accounts of the assessee. The fact of actual expenses incurred by the assessee under the head warranty replacing expenses was not doubted by the authorities below. The copy of the ledger warranty replacing expenses is also available on record. Therefore, after considering the facts in totality, we are of the view that the provisions created by the assessee are not ad-hoc provision but based on the scientific basis. We also note that the assessee has been claiming the deduction for the provision of warranty expenses and there was no disallowance made by the AO in the AY 2014-15. It means the AO accepted the provision for the AY 2014-15. These provisions are allowable as deduction u/s 37(1) - Decided against revenue Addition on account of excess depreciation - assessee in respect of certain vehicle purchased before 30.09.2009 claimed depreciation @ 50% on their written down value - Held that - The exact issue was the subject matter of appeal in AY 2010-11 & 2011-12 as well wherein after a detailed discussion on the definition of commercial vehicles and light motor vehicle, as defined under the Motor Vehicles Act, 1988, decided the issue in favour of the appellant. Since the vehicles under question are the same on which.depreciation has been allowed @ 50% and relying on the judgement of the Hon ble ITAT in the case of ACIT Vs. Voltamp Transformers Ltd. 2013 (3) TMI 804 - ITAT AHMEDABAD the depreciation at 50% is allowed and the disallowance of ₹ 3,74,917/- made by the Assessing Officer is deleted. Double deduction - allowability of actual expenses as well as provision for warranty expenses - Held that - On perusal of the copies of the ledgers filed by the assessee regarding the ledger of warranty expenses, we note that the assessee in one year is creating the provision in the books of accounts which is reversed in the subsequent year by the same amount. Therefore it could not be concluded that the assessee has claiming the double deduction on account of actual expenses as well as provision for warranty expenses. Accordingly, we are of the view that there is no infirmity in the order of Learned CIT(A) hence, the ground of appeal of the revenue is dismissed.
Issues Involved:
1. Deletion of addition made under Section 145A. 2. Deletion of addition made towards provision for warranty. 3. Allowance of excess depreciation on certain vehicles. 4. Alleged double deduction for warranty replacement expenses. Detailed Analysis: 1. Deletion of Addition Made Under Section 145A: The Revenue contended that the CIT(A) erred in deleting an addition of ?1,11,43,571/- for AY 2012-13 and ?1,79,53,006/- for AY 2013-14 under Section 145A of the Income Tax Act. The Assessee had not included excise and VAT in the valuation of closing stock. The AO added these amounts, but the CIT(A) deleted the additions, following the ITAT’s decisions in the Assessee’s own case for previous years and the Gujarat High Court judgment in ACIT vs. Narmada Chematur Petrochemicals Ltd. The ITAT upheld the CIT(A)’s decision, noting that the facts were identical to previous years and the adjustments would be revenue-neutral over time. 2. Deletion of Addition Made Towards Provision for Warranty: The AO disallowed a provision for warranty expenses amounting to ?18,86,570/- for AY 2012-13 and ?37,65,840/- for AY 2013-14, treating it as an unascertained liability. The CIT(A) deleted the disallowance, citing the Supreme Court’s decision in Rotork Controls India Pvt. Ltd. vs. CIT, which allows such provisions if based on historical data. The ITAT confirmed the CIT(A)’s decision, noting that the actual expenses incurred exceeded the provision and that similar provisions were allowed in subsequent years. 3. Allowance of Excess Depreciation on Certain Vehicles: The AO disallowed excess depreciation of ?3,74,917/- for AY 2012-13, arguing that the vehicles were not commercial vehicles eligible for 50% depreciation. The CIT(A) allowed the higher depreciation, relying on the ITAT’s decision in the Assessee’s own case for previous years and the definition of commercial vehicles under the Motor Vehicles Act. The ITAT upheld the CIT(A)’s decision, emphasizing that the vehicles met the criteria for commercial vehicles as defined by the relevant laws. 4. Alleged Double Deduction for Warranty Replacement Expenses: For AY 2013-14, the AO claimed that the Assessee was taking double deductions by claiming both actual warranty expenses and provisions for warranty expenses. The CIT(A) deleted the addition, and the ITAT upheld this decision. The ITAT found that the Assessee reversed the provision in the subsequent year, negating the possibility of double deduction. Conclusion: The ITAT dismissed the Revenue’s appeals for both AY 2012-13 and AY 2013-14, upholding the CIT(A)’s decisions on all contested issues. The judgments were consistent with prior rulings in the Assessee’s favor and adhered to established legal principles.
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