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TMI Blog2014 (9) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... ility that an outflow will be required in settlement, is determined by considering the said obligations as a whole - if the historical trend indicates that large number of sophisticated goods were being manufactured in the past and in the past if the facts established show that defects existed in some of the items manufactured and sold then the provision made for warranty in respect of the any of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the Act - It would all depend on the data systematically maintained by the assessee – invocation of section 68 is not warranted - The source of money and genuineness of credit entry was never doubted – Decided against revenue. - ITA 596/2014 - - - Dated:- 15-9-2014 - Sanjiv Khanna And V. Kameswar Rao,JJ. For the Appellant : Ms. Suruchi Aggarwal, Sr. Standing Counsel. For the Respondent : Through ORDER Sanjiv Khanna, J. (Oral) Present appeal relates to assessment year 2007-08 and impugns order dated 7th February, 2014, passed by the Income Tax Appellate Tribunal ( Tribunal , for short). 2. The respondent-assessee an individual had shown returned income of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The Commissioner of Income Tax (Appeals) did not agree and reversed the aforesaid finding. He referred to the fact that the respondent-assessee had done liaisoning work for supply of medical equipments. Insofar as sale and purchase were concerned, the transactions were between the foreign suppliers and the concerned hospitals. The respondent-assessee s work was confined to installation and maintenance of the medical equipments. The assessee had entered into an annual maintenance contracts and it was the obligation of the respondent-assessee to maintain the said equipments for the first 5 years etc. In initial year the cost of maintenance was low, but would increase in the subsequent years with wear and tear and as the equipments got old. Accordingly, the total maintenance contract income to the extent 39% was allocated as 5% for the first year, 7% for the second year, 8% for the third year, 9% for the fourth year and l0% for the fifth year. For the assessment year 2007-08, no income or receipt from this 39% was allocated on the ground that the medical equipments were installed at the end of the said year, hence would not entail cost of maintenance in the said year. The details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them. Assessee highlighted the mistake made by the Assessing Officer in clubbing the local business of sale and purchase of medical equipments and the liaisoning of supply of foreign medical equipments and their annual maintenance contracts, which were two separate lines of business. 5. In view of the submissions made and to adjudicate the matter, Commissioner of Income Tax (Appeals) called for a remand report from the Assessing Officer, the relevant portions of which stand quoted in the first appellate order, read as under:- --While going through the case file I have observed that the assessee had filed the details asked by the AO. The last details were filed on 17/12/2009 and the case was discussed. The then AO had not issued any show cause notice during the course of assessment hearings. I have not found any adverse remark made by the AO regarding the disagreement over the amount and nature of provision for equipment maintenance. No note in the file was found to explain the nature of NMICDEC Account at any stage during the course of assessment proceedings .As per the case file or the order sheet I have observed that the above facts were not reconciled before making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. We had asked the learned counsel for the appellant-Revenue to state whether the aforesaid income were declared in the subsequent years and had been taxed and whether on the question of bifurcation or the quantum i.e. 39%, any objection was taken by the Assessing Officer/Departmental Representative before the Tribunal on the ground that it did not represent a fair, correct and reasonable estimate, based upon past or scientific data. Before the Commissioner of Income Tax (Appeals), the respondent-assessee was directed to submit a note in this regard, which was accepted. The tribunal has referred to remand report of assessing officer in which he had reported that expenditure made for the maintenance of equipments in the subsequent years was adjusted against the provisions made for equipment maintenance by the assessee and the provision for equipment maintenance for Assessment Years 2006-07, 2007-08 and 2008-09 were verified by the Assessing Officer. The Tribunal has observed that aforesaid calculations had been made on scientific basis and the balance amount was offered for taxation in the subsequent years. We had specifically asked from the counsel for the appellant revenue t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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