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TMI Blog2013 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... t available - there is no need to interfere with the order of the FAA - Decided against assessee. Disallowance u/s 14A - Held that:- AO has not mentioned anywhere as how much exempt income was declared by the assessee-company for the year under consideration. He has also silent about the expenditure incurred by the assessee for earning such income. He has disallowed Rs. 23.83 lacs on the assumption that assessee had made investment in shares of two companies and must have earned exempt income. AO/FAA has not enquired about the investments made by the assessee and the availibility of funds with it. Both of them have discussed the legal principles, but have totally missed the facts. In our opinion, if no exempt-income was shown by the assessee in the return of income and no expenditure was claimed by it to earn said income, provisions of section 14A as well as Rule 8D would not be applicable. As the FAA has not discussed these vital issues before rejecting the claim of the assessee, so, we are unable to endorse his views. In short, the basic facts of claim of exempt income and incurring expenses for earning the said income are missing in the matter under consideration - Decided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of filing of returns, incomes returned, dates of assessment, assessed incomes, dates of orders of the CIT(A)can be summarised as under : AY. Date of filing of Return Returned Income (Rs.) Date of assessment Assessed Income (Rs.) Dt. of orders of CIT(A) 2005-06 24.10.2005 17.97 lacs 19.09.2007 40.90 lacs 29.10.2009 2008-09 30.09.2008 58.16 lacs 22.11.2010 89.75 lacs 10.06.2011 2009-10 26.09.2009 2.01 Crores 22.04.2011 2.35 Crores 12.03.2012 ITA No.8725/Mum/2010 -AY.2005-06 2. First ground of appeal pertains to confirmation of the disallowance of provision for warranty for After Sales Service of Rs.10,10,378/-.During the assessment proceedings AO found that the assessee had debited an amount of Rs.19.04 lacs as warranty replacement expenses. The assesse had debited an amount of Rs. 19,04,996/- as warranty replacement expenses. On verification of the details furnished by the assessee, it is noticed that the expenses include provisions of Rs. 10,10,378/-. He directed the assessee to fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 ITR 585). He finally held that the assessee had made a provision regarding charges payable in terms of sale which had not crystallised the assessee failed to prove the actual incurrence of liability under the warranty cause, that in absence of any such details, acceptance of the claim without any basis could not be allowed, that the AO was justified in making the impugned disallowance. 2.2. Before us, Authorised Representative(AR) submitted that the assessee was incurring expenditure under the head warranty for After Sales Service, that during the year assessee had incurred warranty expenditure of Rs.9 lacs for the year under consideration, that the assessee had made provisions for the first time, that in subsequent year necessary entries were passed in books of a/cs. in the balance-sheet said fact was mentioned in form of a note, that sales of the assesse has increased in the year under consideration as compared to last year, that provision made was reasonable considering the sales. He referred to page no.1,11,12 of the Paper-Book (PB).He relied upon the judgment of the Hon ble Supreme Court delivered in the case of Rotork Controls India Pvt. Ltd.(314 ITR 62).He also referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provisions made and compared it with the actual expenses incurred. Appellant has failed to prove that figures furnished by it are based on a sensible estimate . We find that evidence of yearly reassessment of such estimates were not produced. In other words appellant has not maintained data systematically .assessee has claimed that gross sales had increased over the years. We find that the assessee in not only dealing in computer peripherals, but it is also engaged in the business of exporting of chemicals and dye stuff, bulk pharmaceuticals and intermediaries. It is not known whether the increase in sales was result of selling of computers or other items. DR has rightly pointed out that there is no correlation between the increased sales and warranty expenditure expenditure on warranty liability has gone down with increase in sales. In these circumstances, we are of the opinion that provision made by the assessee was for contingent liability. We have perused the judgments delivered by the Hon ble Apex Court delivered in the case of Rotork Controls India Pvt. Ltd. (supra).In our humble opinion that case rather supports the views expressed by the AO and the FAA. We find that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, it has to be allowed. In these circumstances, reversing the order of the FAA, we decide ground no.2 in favour of the assessee. Appeal filed by the assessee is allowed in part. ITA No.5671/Mum/2011-AY.2008-09 4. Ground of appeal pertains to disallowance confirmed by the FAA u/s.14A of the Act. During the assessment proceedings AO found that the assessee had made investment of Rs 3.52 Crores no disallowance u/s.14A of the Act was made by it.After confronting the assessee with Rule 8D r.w.s.14A provisions, he made a disallowance of Rs. 23.83 lakhs. 4.1.Against the order of the AO assessee preferred an appeal before the First Appeal Authority (FAA). After considering the submissions of the assessee, he held that the issues arising out of application of sec. 14A and Rule 8D were settled by Godrej and Boyce Mfg. Ltd (43 DTR 177-Bom)in which it was decided that the provisions of Rule 8D were not ultra-vires ,that sub section (2) of section 14A was applicable from AY 2007 onwards, that the provisions of rule 8D were applicable w.e.f. AY 2008-09,that the AO had worked out the disallowance in terms of Rule 8D r.w.s.14A of the Act. Finally, he upheld the orders of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(va) of the Act. AO made the said disallowance on account of delay in payment of Employees Rs. Contribution to Provident Fund beyond grace period of five days after due date. We have decided the similar issue in favour of the assessee while disposing ground no.2 for the previous assessment year. Following the same, ground no.3 is decided in favour of the assessee. 7. Last ground of appeal is about addition of Rs. 704/-, being difference in reconciliation of AIR report. Before us, said ground was not pressed. Ground no.4 stand dismissed, as not pressed. As a result, appeal filed by the assessee is allowed in part. ITA No.3523/Mum/2012 AY- 2009-10 8. First ground of appeal is about disallowance of Rs. 31.61 lacs made by the AO and affirmed by the FAA u/s 14A of the Act r.w. Rule 8D. 8.1. We find that identical issue for the earlier year has been decided by us in favour of the assessee. Facts and circumstances of the case are similar that of the previous assessment year except the fact that the assessee had made further investment of Rs. 9.85 lacs with one of the group companies. There is no evidence on record that assessee had claimed any expenditure or exempt incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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