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TMI Blog2016 (10) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... erial on record. We find that the consolidated order supra as placed on record by the Ld.AR, the Tribunal decided the issue therein is similar to the issue on hand covering the grounds as raised in no's 1(a) & (b) and the relevant portion of which is reproduced herein below: 25. The issue raised in Ground No. 8 relates to the disallowance of 1.51 crores made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made by the assessee for leave encashment. 26. The assessee-Company during the year under consideration had made a provision of Rs. 1.51 crores for leave encashment on the basis of an acturial valuation and the same was claimed as deduction by relying on the decision of the Hon'ble Calcutta High Court in assesese's own case reported in 292 ITR 470 and the decision of the Hon'ble Supreme Court in the case of Bharat Earth Movers reported in 245 ITR 428. The Assessing Officer, however, disallowed the claim of the assessee for provision of leave encashment relying on the Clause (f) inserted in Section 43B by the Finance Act, 2001 w.e.f. 1s t April, 2002. The ld. CIT(Appeals) confirmed the said disallowance. The assesese challenged the consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Civil Appeal, would pay tax as if Section 43B(f) is on the Statute Book, but at the same time, it would be entitled to make claim in its return. Keeping in view all these developments, the Coordinate Bench of this Tribunal in the case of Dy. CIT -vs.- BLA Industries Pvt. Ltd. (ITA No. 1434/KOL/2012 dated 16.01.2015) has restored the similar issue to the file of the Assessing Officer with a direction to await till the final decision of the Hon'ble Supreme Court on the issue and then to decide the issue accordingly. Following the said decision of the Coordinate Bench, we restore this issue to the file of the Assessing Officer with the similar direction. Ground No. 8 is accordingly treated as allowed for statistical purposes. 5. Taking into consideration the order supra, we remand the issue to the file of AO to decide the same in accordance with the Judgment of the Hon'ble Supreme Court that may be passed in Civil Appeal filed by the Revenue. Ground no's 1(a) & (b) are allowed for statistical purposes. 6. Regarding ground no's-2(a), (b) & (c) are similar questioning the disallowance of Rs. 9,97,00,000/- made by the Assessing Officer and confirmed by the CIT-Appeals on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions are satisfied:- (i) An Enterprise has a present obligation as a result of past events; (ii) It is probable that an out-flow of resources will be required to settle the obligation; (iii) A reliable estimate based on historical trend can be made on account of obligation on the basis of historical trend. 10. The ld. D.R. has not raised any contention to dispute the proposition propounded by the Hon'ble Supreme Court in the case of Rotork Controls India (Pvt.) Limited (supra) on this issue. He, however, has contended that the issue as to whether the assessee in the present case has satisfied the conditions laid down by the Hon'ble Supreme Court for allowing deduction on account of provision for warranty requires verification and since the same has not been done either by the Assessing Officer or by the ld. CIT(Appeals), the matter may be restored to the file of the Assessing Officer for the limited purpose of such verification. We find merit in this contention of the ld. D.R. and since the ld. Counsel for the assessee has also not raised any objection in this regard, we restore this issue to the file of the Assessing Officer with a direction to decide the same in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges and direct and indirect expenses properly and proceeded to apply Rule 8D(2)(ii) and (iii). Accordingly, the AO computed the expenditure of Rs. 1,86,487/-, Rs. 9,92,67,063/- and Rs. 2,24,06,750/- U/R 8D(2)(i),(ii) and (iii) respectively and disallowed an amount of Rs. 12,18,60,300/-for the purpose of section 14A of the Act and added same to the total income of the Assessee. 13. In first appeal, the assesse submitted details of interest paid on term loans, working capital and fund mobilization expenses in a tabular form, wherein the assesse admits that Rs. 16.05 crores where it could not be able to specifically show that such sum utilized for business purpose out of Rs. 38,17,24,153/- and in view of the order of Kolkata Tribunal urged to restrict the disallowance to Rs. 6,16,37,232/-. The relevant portion of which is reproduced herein below:- 6.2 During the course of appeal, the appellant has made the following submissions:- ".....In light of the above the assessee humbly submits the following:- The details of Interest shown in the Annual Report and considered by the AO is Rs. 38,17,24,153/- for the purpose of computing Rule 8D(ii). Details Amount (Rs.) Nature of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in foreign companies whose dividends are taxable Chloride Batteries SE Asia Pte Ltd 10.35 10.35 Expex Batteries Ltd 0.77 0.77 Associated Battery Mfg (Ceylon) 7.30 7.30 CELL Motive Power Pty - 1.02 Investments which would yield Tax free income 359.58 498.83 Exide Industries Limited Average ==={359.58 + 498.83}/2=429.21 Our humble request your kindself would be to approve above in principle and restrict the disallowance to Rs. 6.16 crores." 14. The CIT-A did not agree with the submissions of the Assessee, but however, taking into consideration of foreign investments to an extent of Rs. 19.44 crores and Rs. 18.44 crores as standing on 31-03-2008 and 31-03- 2007 respectively and directed the AO to restrict the average value of investments to Rs. 429.21 crores instead of Rs. 448.135 crores as computed by the AO. 15. The Assessee before this Tribunal questioned the order of CIT-A. The Ld.AR submits that the disallowance may be restricted to disallowance as made by the Assessee before the CIT-A and referred para 4.4.1 at page 27 of written submission and argued that the assessee has surplus reserves at Rs. 253.98 crores a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us, the Ld.AR submits that the issue squarely covered by the consolidated order dt:20-01-16 of Coordinate Bench in Assessee's own case for A.Y 2003-04 & 2004-05 in ITA 189/Kol/2007 and ITA 1414/Kol/2007 respectively. The Ld. DR relied on the orders of CIT-A and AO. 19. Heard rival submissions and perused the material on record. We find that the consolidated order supra as placed on record by the Ld.AR, the Tribunal decided the issue therein is similar to the issue on hand covering the ground as raised in ground no-4 and the relevant portion of which is reproduced herein below: 21. Grounds Nos. 5(c) & 6 involve the issue relating to the disallowance of Rs. 69.21 lakhs and Rs. 2.05 crores made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of payment made by the assessee to Sonata Information Technology and on account of ERP expenses respectively. 22. During the year under consideration, the assessee had incurred expenditure of Rs. 2.05 crores for upgradation of ERP. A sum of Rs. 69.21 lakhs was also paid by the assessee to M/s. Sonata Information Technology for software and hardware support as well as consultancy services in connection with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew ERP package. The upgradation of ERP, in our opinion, therefore, cannot be equated with replacement as contended by the ld. D.R. and the advantage being only incremental to the extent of the additional features in the new version, the same cannot be treated as the replacement of the entire ERP package so as to treat the expenditure incurred on upgradation as capital expenditure. Moreover, the use of any ERP package in the case of manufacturer like the assesese- Company is generally for coordinating and rationalizing its functions and business process in order to ensure that the business is carried on more efficiently and effectively and by applying the functional test, the expenditure incurred on ERP package, in our opinion, cannot be treated as capital expenditure as it does not result in creation of any new asset or advantage of enduring nature in the capital field. We, therefore, direct the Assessing Officer to allow the deduction claimed by the assessee on account of expenditure incurred on upgradation of ERP and implementation thereof treating the same as revenue in nature. 20. In the present issue, the assessee incurred expenditure of Rs. 3,40,80,049/- for routine mainten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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