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TMI Blog2015 (5) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... - There is no case for interference in the order of ld.CIT(A). It is admitted position that assessee has actually written off the amounts. Once it is so then matter is squarely covered by the decision of Hon.Supreme Court in the case of TRF Ltd. vs. CIT (2010 (2) TMI 211 - SUPREME COURT) wherein it is held that w.e.f. 1.4.1989 in order to obtain a deduction in relation to bad debts it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. It is enough if the bad debt is written off and the bad debt is irrecoverable in the account of assessee. Following the above decision of Hon.Supreme Court, we confirm the order of ld.CIT(A) and dismiss this ground of Revenue. Disallowance of provision for warranty expenses - Held that:- The assessee has to submit present value of warranty expenses. It has to be properly ascertained and discounted on accrual basis. A proper calculation on this issue will be submitted to the AO who will examine the same and allow the claim as per decision of Hon.Supreme Court in Rotork Controls India (P) ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA) as above. This ground of Revenue is allowed but for statistical purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the facts and circumstances of the case. 2. The Learned Commissioner (Appeal) erred in confirming the disallowance of ₹ 2,69,966/- being administrative expenses u/s.14A of the Act, considering them incurred in relation to exempted dividend income. 3. The appellant prays for appropriate relief on the above grounds of appeals. 4. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal as circumstances may justify. (b) Revenue s appeal in ITA No.613/Ahd/2011- for AY 2006-07. 1. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 4,09,899/- being liquidated damages made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer. 2. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 34,39,000/- being bad debts, made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer. 3. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 1,12,14,000/- being provision for warranty expenses, made by the A.O., without appreciating the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 49,60,500/- and addition of Arms Length Price in respect of sale material to associated-concern amounting to ₹ 2,28,082/-. The ld.CIT(A) deleted the disallowance of ₹ 4,09,899/- made on account of liquidated damages. The ld.CIT(A) also deleted the addition made on account of bad-debts written off of ₹ 34,49,000/- by following the order of his predecessor in AY 2005-06. In respect of disallowance of provisions for warranty expenses of ₹ 1,12,14,000/-, the ld.CIT(A) deleted the same by following his predecessor s order passed in AY 2005-06. However, in respect of disallowance of ₹ 26,13,682/- made u/s.14A of the Act, the ld.CIT(A) partly allowed the appeal, whereby the ld.CIT(A) deleted the addition made on account of the interest expenses and sustained the addition made on account of administrative expenses of ₹ 2,69,966/-. In respect of disallowance made u/s.36(1)(iii) of ₹ 1,86,650/-, the ld.CIT(A) following his predecessor s order passed in AY 2005-06 deleted the addition. In respect of the addition made on account of royalty of ₹ 49,60,500/-, the ld.CIT(A) following his predecessor s order passed in AY 2005-06, deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds, disallowance of interest cannot be made. Similarly no disallowance out of administrative expenditure can be made as there is no direct nexus. As a result, this grounds is allowed. In this year also, the AO has not established the nexus. Moreover, the ld.counsel for the assessee has relied on the decision of the Hon ble Kerala High Court in the case of CIT vs. Catholic Syrian Bank Ltd. reported at (2012) 207 Taxman 2 :: (2011) 9 taxmann.com 148 (Ker.)(Mag), wherein the Hon ble High Court has held that so far as disallowance of administrative expense is concerned, there is no precious formula or proportionate disallowance, hence no disallowance can be called for under the identical facts. On the other hand, the ld.DR has relied on the decision of Hon ble Calcutta High Court in the case of Dhanuka Sons(supra). Since different views have been expressed by the Hon ble Calcutta High Court and Hon ble Kerala High Court, view which is in favour of assessee is to be Adopted as held by the Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. reported at 88 ITR 192 (SC). Therefore, respectfully following the decision of Hon ble Kerala High Court in the case of Catholi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahd/2007 for AY 2003-04 (assessee s crossappeal), dated 11/02/2011, the issue ahs been restored back to the file of AO. 12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon ble Coordinate Bench in ITA No.2002/Ahd/2007 for AY 2003-04 vide para-56 has restored this issued back to the file of AO. The Hon ble Tribunal in para-56 has given the following direction:- 56. We have heard the parties and carefully perused the material on record. In our considered view the issue regarding liquidated damages requires a fresh look by the AO. He would allow the claim on actual basis. Wherever the other party has claimed liquidated damages against the assessee in the current year Asst.Year it should be allowed. The assessee would submit individual account and the AO will examine such accounts and take a decision as per law. This ground is allowed but for statistical purposes. 12.1. After considering the totality of the facts, we feel that a similar direction may also be issued in this case as well. Accordingly, the AO is directed to decide this issue afresh in the light of the directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is enough if the bad debt is written off and the bad debt is irrecoverable in the account of assessee. Following the above decision of Hon.Supreme Court, we confirm the order of ld.CIT(A) and dismiss this ground of Revenue. 14.1. Since the facts are identical in this case also and the Revenue has not pointed out any change in the facts and circumstances of the case, therefore we uphold the order of the ld.CIT(A) and dismiss this ground of the Revenue s appeal. 9.1. Since the facts are identical to the facts as were raised in ITA No.2923/Ahd/2008 for AY 2005-06 and the Revenue has not pointed out any change into the facts and circumstances of the case, therefore following the decision of Coordinate Bench passed in ITA No.2923/Ahd/2008, the issue is decided in favour of assessee in this year as well. Hence, the finding of the ld.CIT(A) is sustained and this ground of Revenue s appeal is rejected. 10. Ground No.3 is against the deletion of disallowance of ₹ 1,12,14,000/- being provision for warranty expenses made by the AO. 10.1. The ld.Sr.DR submitted that the Tribunal in earlier assessment year, i.e. AY 2005-06 was pleased to restore this issue to the file of AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Thus, this ground of Revenue s appeal is allowed but for statistical purposes. 11.1. Since there is no change into the facts and circumstances of the case and following the decision of the Coordinate Bench passed in ITA No.2923/Ahd/2008, in this year also, this issue is restored back to the file of AO for decision afresh. Thus, this ground of Revenue s appeal is allowed for statistical purposes. 12. Ground No.4 is against the deletion of disallowance of interest expenses of ₹ 23,43,716/- being interest expenses made by the AO u/s.14A of the Act. 12.1. At the outset, ld.Sr.counsel for the assessee pointed out that the identical issue came before the Hon ble Tribunal by way of ITA No.2923/Ahd/2008-Revenue s appeal, wherein the Hon ble Tribunal has decided the issue in favour of assessee. 12.2. The ld.Sr.DR has fairly conceded the fact that the Tribunal has decided this issue in favour of assessee for AY 2005-06. However, he supported the order of the AO. 13. We have heard the parties. We find that the ld.CIT(A), while deciding the issue, has followed his predecessor s order passed in AY 2005-06 and the issue travelled upto the stage of Tribunal by way of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on which no income was earned. Hon.Supreme Court in the case of Munjal Sales Corporation vs. CIT (2008) 298 ITR 298 (SC) held where assessee had sufficient profits in the current year then interest free advances can be considered to be flowing from such profits. Hon ble Bombay High Court in CIT vs. Reliance Utilities Power Ltd. (2009) 313 ITR 340 (Bom) held that if there are fund available both interest free and interest bearing, then a presumption arise that investment were out of interest free funds generated or available with the assessee. If the interest free funds were sufficient to meet the investment no disallowance of interest paid on borrowed funds would be necessary. Once such presumption is established claim of interest was allowable. 15. There is another aspect of the matter. If the assessee has made investment in subsidiaries out of mixed funds and for commercial expediency then no interest out of payment made on borrowed funds can be disallowed as held in S.A.Builders Ltd. vs. CIT (2007) 288 ITR 1 (SC). Hon ble Punjab Haryana High Court in CIT vs. Hero Cycles Ltd. (2010) 323 ITR 518 (P H) held that no disallowance out of interest payment is permissible if A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .counsel for the assessee supported the order of the ld.CIT(A) and submitted that under the identical facts, the Hon ble Tribunal in ITA No.1476/Ahd/2006(supra) the issue has been decided in favour of assessee vide para Nos.9 16 by observing as under:- 9. Ground No.4(a) relates to disallowance of proportionate interest of ₹ 10,70,7000/-. The AO disallowed proportionate interest out of interest paid on borrowed funds on the assumption that borrowed money has been used for acquisition of investment as on balance sheet date. As per AO the Company had made total investment to the extent of ₹ 1008.51 lacs in the equity shares and Mutual funds. During the year the investment in shares and Mutual funds were increased from 940.32 lacs to ₹ 1008.51 lacs. Out of this investment, to the tune of ₹ 61 lacs, is made in subsidiary Companies namely Karamsad Investment Ltd. Karamsad Holding Ltd. Since the assessee had purchased shares in those companies being sister concerns, the nature of investment is the same as in shares and Mutual Fund of other companies. The assessee company had earned dividend income of ₹ 94.47 lacs during the year and has claimed as exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. 15.1. Since the facts are identical to the facts as were raised in ITA No.2923/Ahd/2008 for AY 2005-06 and the Revenue has not pointed out any change into the facts and circumstances of the case, therefore following the decision of Coordinate Bench passed in ITA No.2923/Ahd/2008, the issue is decided in favour of assessee in this year as well. Hence, the finding of the ld.CIT(A) is sustained and this ground of Revenue s appeal is rejected. 16. Ground No.6 of Revenue s appeal is against the deletion of disallowance of ₹ 49,60,500/- being royalty expenses made by the AO. 16.1. At the outset, ld.Sr.counsel for the assessee pointed out that the identical issue came before the Hon ble Tribunal by way of ITA No.2923/Ahd/2008-Revenue s appeal, wherein the Hon ble Tribunal has decided the issue in favour of assessee. 16.2. The ld.Sr.DR has fairly conceded the fact that the Tribunal has decided this issue in favour of assessee for AY 2005-06. However, he supported the order of the AO. 17. We have heard the parties. We find that the issue travelled upto the stage of Tribunal by way of ITA No.2923/Ahd/2008 and the Tribunal has decided the issue in favour of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r AYs 2007-08 2008-09, wherein following grounds have been raised by the respective parties:- (c) Assessee s appeal for AY 2007-08 (ITA No.319/Ahd/2011) 1. The Learned Commissioner (Appeal) failed to understand the facts and circumstances of the case. 2. The Learned Commissioner (Appeal) erred in confirming the disallowance of ₹ 9,14,475/- being administrative expenses u/s.14A of the Act, considering them incurred in relation to exempted dividend income. 3. The appellant prays for appropriate relief on the above grounds of appeals. 4. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal as circumstances may justify. (d) Revenue s appeal for AY 2007-08 (ITA No.614/Ahd/2011) 1. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 33,909,742/- being bad debts, made by the A.O., without appreciating the facts and materials brought on record by the Assessing Officer. 2. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 1,53,55,536/- being provision for warranty expenses, made by the A.O., without appreciating the facts and materials brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year of recovery. 5. The appellant prays for appropriate relief on the above grounds of appeals. 6. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal as circumstances may justify. (f) Revenue s appeal for AY 2008-09 (ITA No.2296/Ahd/2011) 1. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 1,47,77,100/- made on account of provision for warranty expenses without appreciating facts that provision for warranty was in the nature of contingent, unascertained and non-crystallized liability. 2. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 27,96,724/- made on account of interest expenses u/s.36(1)(iii) without appreciating the fact that once the funds are put into the business, they lose identity. 3. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 62,84,947/- made on account of royalty payment without appreciating the fact that the said payment was made for the use of trade mark. 4. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in ITA No.2923/Ahd/2008 in paras-15, 15.1 15.2(reproduced at para-11 of this order) has restored this issue by following the order of the Coordinate Bench passed in ITA No.12/Ahd/2008 for AY 2004-05. Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is restored to the file of AO for decision afresh in the light of the direction given by the Tribunal in ITA No.12/Ahd/2008 for AY 2004-05. Thus, this ground of Revenue s appeal is allowed for statistical purposes. 24. Ground No.3 is against the deletion of disallowance of interest expenses of ₹ 25,28,987/- and Administrative expenses of ₹ 9,14,475/-. The disallowances were made by invoking the provisions of section 14A of the Act. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 has decided the issue in favour of assessee, in paras- 16 17 of its order. The ld.Sr.DR has fairly conceded the fact that the ld.CIT(A) has followed the order passed in AY 2005-06. 25. We have heard the rival s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has decided the issue in favour of assessee in para-20 (reproduced in paras-17 17.1 of this order). Since there is no change into the facts and circumstances of the case, therefore taking a consistent view, the issue is decided in favour of assessee. Thus, this ground of Revenue s appeal is rejected. 30. Ground No.6 is against the deletion of disallowance of ₹ 17,21,313/- in respect of provision for bad advances written off. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005-06 and the issue under appeal travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 was pleased to set aside the issue to the file of AO in para-11.1 12.1 of its order. The ld.Sr.DR supported the order of the AO and fairly conceded that the issue has been set aside to the file of AO. 31. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has followed the order passed in AY 2005-06. The facts are identical as were in the AY 2005-06. This Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds of Assessee s appeal are allowed. 35. In the result, Assessee s appeal for AY 2008-09 is partly allowed. 36. Revenue s appeal (ITA No.2296/Ahd/2011):- Ground No.1 is against deletion of disallowance of ₹ 1,47,77,100/- made on account of provision for warranty expenses. The ld.Sr.counsel for the assessee has pointed out that the ld.CIT(A) has followed the order passed in AY 2005- 06 and the issue under appeal travelled upto the stage of the Tribunal and the Tribunal in ITA No.2923/Ahd/2008 was pleased to set aside the issue to the file of AO in para-15 of its order. The ld.Sr.DR supported the order of the AO and fairly conceded that the issue has been set aside to the file of AO. 36.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has followed the order passed in AY 2005-06. The facts are identical as were in the AY 2005-06. This Tribunal in ITA No.2923/Ahd/2008 for AY 2005-06, order dated 28/01/014, has set aside the issue to the file of AO in para-15 (reproduced in paras-11 11.1 of this order). Since there is no change into the facts and circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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