9911796707
TMI Blog2022 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2008-09, AY 2010-11, AY 2011-12, AY 2012-13 AY 2013-14 has allowed provision for warranty, the provision made during the instant year is on same basis as in all the years is hereby allowed. Advances and Deposits Written Off - assessee recognized amount of DEPB license and DEPB receivable at the time of export of certain items and the same was also credited as income in the P L A/c of earlier years - AO held that the assessee has claimed DEPB license and DEPB receivable written off by debiting the P L A/c during AY 2009-10 u/s. 36(1)(vii)/36(2) - assessee has claimed such deduction as business loss u/s. 28 - HELD THAT:- It is generally accepted principle that losses, other than capital losses, which arise out of and are incidental to the business of assessee must be necessarily deducted in the ascertainment of profits of the business u/s. 28 of the Act. The basis of various judgments of the Hon'ble Courts, in order that an item of loss can be taken into account in computing the profits of the business, it should fulfill the following conditions that it should be a real loss, not notional or fictitious, a loss on revenue account and not on capital account, it must hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. D. Jain , Vice President And Dr. B. R. R. Kumar , Member ( A ) For the Appellant : S. K. Aggarwal , CA For the Respondents : Meenakshi J. Goswani , CIT-DR ORDER Per Dr. B. R. R. Kumar , Accountant Member The present appeal has been filed by the revenue against the order of ld. CIT(A)-4, New Delhi dated 13.08.2018. 2. Following grounds have been raised by the revenue: 1. Whether on the facts and in circumstances of the case and in law, the ld. CIT(A) has erred in deleting the disallowance of ₹ 15,22,91,304/- claimed as deduction by the assessee on account of provision for liquidated damages, disregarding the findings of the AO that the provision was made without any scientific or rational basis. 1. a) Whether the Ld. CIT(A) has erred in deleting the disallowance of provision for liquidated damages, not appreciating the fact that the basis of recognition as well as the estimation/quantification of the provision for liquidated damages made by the assessee in respect of various contracts was completely ad hoc in nature, not supported by relevant of details and documents regarding contract-wise delays. 2. Whether on the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of services. The said international transactions were referred to the Transfer Pricing Officer (TPO) for determination of Arm's Length Price and adjustment, if any, thereof. 1. Liquidated Damages: 5. The similar issue has been adjudicated in the case of the assessee for the A.Y. 2014-15 by the order passed by this bench in ITA No. 8119/Del/2018 order dated 18.08.2021. During the year, the provision has been made on liquidated damages for delay in delivery to customer and under performance in accordance with the terms prescribed under the contract. 6. For the sake of ready reference, the operative part of the earlier order is reproduced below: 23.- 13... The ld. CIT(A) has categorically noted that assessee has provided for liquidated damages based on the period of delay which occurred during the end of the year and on the basis of percentage of the contract the value payable as damages in terms of the agreement. Apart from that, assessee has also reversed the provision for liquidated damages in the year in which clients waived the said liquidated damages and the write back amount has been offered to tax by the assessee. Whence a provision is arising out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e defect or deficiency or in case of damage of equipment; assessee shall do the needful and for this purpose it has been making provision for making such guarantee. The ld. CIT(A) has also taken note of the actual expenses incurred on warranty by the assessee in earlier years and also calculated the percentage of such expenditure (as noted by us herein above). If based on such actual expenditure incurred on warranty, assessee has made the provision for warranty, then ostensibly it can be held that, not only assessee has made the provision as per past experience but there was a certain degree of certainty while making such estimate. The ratio laid down by the Hon'ble Apex Court in the case of Rotork Controls India (P) Ltd. Vs. CIT (supra) is squarely applicable... 15. The observations and finding of the ld. CIT(A) is not only in accordance with the facts and material on record, but also in conformity with the principle laid down by the Hon'ble Supreme Court, hence there is no reason to deviate from such a finding and accordingly same is confirmed. 10. The Co-ordinate Bench of ITAT vide combined order dated June 11, 2018 for AY 2010-11 AY 2011-12, has dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made during the instant year is on same basis as in all the years is hereby allowed. 3. Advances and Deposits Written Off: 13. The assessee has claimed DEPB license and DEPB receivable written off of ₹ 33,02,179/- by debiting the P L A/c during AY 2009-10. The assessee recognized amount of DEPB license and DEPB receivable at the time of export of certain items and the same was also credited as income in the P L A/c of earlier years. However, during the subject assessment year, the assessee has written off such amount by debiting the P L a/c since the assessee became un-entitled to DEPB license and DEPB receivable amount. 14. This issue has been decided in assessee's own case in other assessment years by ITAT and the ld. DRP which has been followed by ld. CIT(A) in deleting the disallowance. 15. The ITAT vide order dated June 11, 2018 for AY 2010-11, has dismissed the Revenue's appeal against favourable directions of the ld. DRP allowing the deduction of advances and deposits written-off. The relevant extract from the order is as follows: 12.1 As far as ground no. 2 pertaining to advances and deposits written off are concerned, it is seen that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Basis of writing off advances deposits written off of ₹ 33,02,179/-: 19. The following details of DEPB license and DEPB receivable written off during AY 2009-10 by debiting the P L A/c show GL code, GL description and amount written off: GL Code GL description Amount written off in Rs. 8050004 DEPB license 4,30,304 8050005 DEPB receivable 28,71,875 Total 33,02,179 20. The assessee has written off DEPB license of ₹ 4,30,304/- during AY 2009-10 owing to non-entitlement of such licenses. Details showing license no., license date, opening closing balance of license and amount of license written. 21. Similarly, DEPB receivable written off represents amount written off by assessee during the subject year of ₹ 28,71,875/- owing to non-entitlement, of such receivable amounts. Details showing invoice reference no., date of invoice, opening closing balance of DEPB receivable and amount of DEPB receivable written off. 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be cancelled since material purchased are tailor- made for the contracts with customers. Where the contract with vendors gets cancelled, the assessee is required to pay compensation to vendors as agreed in the contracts. In the cases where contract with vendors for purchase could not be cancelled, the assessee had to take delivery of the material and to the extent such material could not be used, the same after reducing the scrap value is to be written off as loss on cancellation/suspension of contracts. 27. In the AY 2009-10, on cancellation/suspension of contracts with the customers, amount of ₹ 32,83,80,000/- received from customers has been included in income. On the other hand, the liability to pay to the vendors for cancellation of purchase contracts and cost of material aggregating to ₹ 41,64,92,017/- has been debited as provision for loss on suspended contracts and claimed as deduction. 28. The AO in the assessment order has disallowed ₹ 8,81,12,017/- out of the total provision of ₹ 41,64,92,017/- by stating that the assessee had accounted for revenue from contracts to the tune of ₹ 32,83,80,000/- and on that basis AO concluded that pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still in the process of discussion with our suppliers, as well as working on the figures internally, and we hope to complete the entire exercise in a couple of days. Letter dated December 9, 2008 We thank you for your understanding and appreciation of the compelling circumstances as explained in our mail of 1st December 2008. As asked by you in your letter referred above and well conceived by stipulation in the contract, as of now we convey you by this letter to consider the following: Contract with Dalmia Cement Ventures Ltd. Letter dated November 17, 2008 This refers to the meeting we had in our office at Noida on 27th Oct'08. Please find below the points discussed and confirmed in and email dated 27th Oct '08. i) Due to the unforeseen financial crisis across the world, leading to difficulties in financial closures of Projects, we are cancelling our order for Raw Mill, Cement Mill for Plant 3 and Pyro for Plant 4. Letter dated November 27, 2008 With reference to the meeting we had in our office at Noida on 27th November, 2008 and as discussed, we confirm for cancellation of plant No. 1 2 also, which were under hold. Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgments of various Courts relevant this issue. Quote a few, The Hon'ble Delhi High Court in the case of R C Jain Vs. CIT [1973] 91ITR 557 (Delhi IIC) wherein compensation paid by assessee to vendor owing to not taking delivery of goods was held as an allowable deduction. Relevant extracts are reproduced below: If the assessee had taken delivery of the pipes and resold the same himself he would have suffered the same loss in the market. The fact that the assessee did not take delivery but preferred the transaction to end in a resale by his vendor does not make it any the less a business loss. It is, therefore, difficult to find that the loss is not allowable on account of the fact that the goods were not taken delivery of. The Hon'ble Rajasthan High Court in the case of Madira Kraya Vikraya Sangh Vs CIT [1993] 69 Taxman 556 (Rajasthan HC) has held as follows: ... it cannot be denied that the loss which has been suffered by the assessee on account of the stipulation contained in the contract/licence to lift a particular quantity and that it was his obligation to make the payment of the loss to the Government which would certainly be a liability ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
