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TMI Blog2022 (4) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified to allow the appeal against assessment order in respect of deleting the addition made on warranty expenses? 2. That on the fact and circumstances of the case, as to whether the Ld CIT(A) is justified in allowing the additional depreciation? 3. That on fact and circumstances of the case, as to whether the Ld CIT(A) is justified in deleting the addition made on warranty expenses and additional depreciation in calculation of book profit? 4. That appellant craves the leave to make any addition, alteration, modification etc of the grounds either before the appellate proceedings, or in the course of appellate proceedings." 3. There is a delay of 152 days in filing of the appeal. This delay was stated to be neither deliberate nor intentional but was due to the pandemic circumstances prevailing at that time. We take note of the pandemic situation where the movement of people was restricted and because of such practical situation, it was always not possible to follow the time of limitation regarding filing of appeal before various forums. This fact was also observed and taken cognizance of by the Hon'ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arranty expenses at Rs. 85,81,254/-. We find that an amount of Rs. 85,81,254/- is debited in the profit & loss account towards warranty expenses. In the notes of account it is mentioned that it is a provision for warranty cost made as a percentage of sales and is based on past experience/technical estimates. Ld. AO, based on this note treated the alleged amount as provision. We, further, find that in assessee's own case this issue has come up before this Tribunal on various occasions and has been decided in the assessee's favour for AY 2006-07 & 2007-08 in ITA Nos. 1537 & 1538/Kol/2011 dated 18.12.2015, for AY 2008-09 in ITA No. 1336/Kol/2012 dated 18.03.2016 and for AY 2009-10 in ITA No. 1401/Kol/2013 dated 09.03.2018. Following finding has been given by this Tribunal in the decision for AY 2009-10 vide its order dated 09.03.2018: "5. The next issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the disallowance of Rs. 52,15,220/- towards provision for warranty, in the facts and circumstances of the case. 5.1. The brief facts of this issue is that the assessee in its profit and loss account had debited a sum of Rs. 52,15,220/- on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(Appeals) erred in deleting the disallowance of provisions for warranty of Rs. 52,15,220/- made by the AO without having regard that such provisions of warranty were made to defer the liability of payments of taxes and the assessee company never had to incur such expenditure in the past. 5.2. We have heard the rival submissions. We find that this issue has already been held in favour of the assessee by the orders of this Tribunal for assessment years 2007-08 and 2008-09 in its own case vide orders dated 18.12.2015 and 18.03.2016 for assessment years 2007-08 and 2008-09 respectively wherein it was held that: "In view of the above facts and circumstances and the precedent of Hon'ble Supreme Court, since in the present case before us the provision for such warranty is being made on the basis of past experience and has been computed in a systematic and scientific manner, as in the present case, surely we have to appreciate that these warranty expenses are towards expenses which have been incurred or are likely to be incurred within the period for which warranty has been assured to the customers against the sale of products and as such, such expenses are deductible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r non-moving inventory as on 31st March of financial year is higher than the opening balance of such provision as on 1st April of that year, then there is a net excess of the provisions made during that year which is offered for disallowance in the return and computation of total income for that year. Conversely, if the closing balance of such provision as on 31st March of a financial year is less than the opening balance of such provision as on 1st April of that year, then there is a reduction of the provision during that year which is claimed as deduction from the total income. This procedure is followed every year by the assessee without any change or deviation. The assessee furnished a statement containing the workings of provisions for non-moving inventories for the assessment year 2009-10 wherein there was total reduction of Rs. 73,54,027/- as under: i) For non-moving inventory of raw materials and components (-) Rs. 54,60,218/- ii) For non-moving inventory of finished goods (-) Rs. 12,22,750/- iii) For non-moving inventory of store and spares (-) Rs. 6,21,059/- Total (-) Rs. 73,54,027/- (Rs. 54,93,670/- as on 31.03.2009 less Rs. 1,28,47,697/- as on 01.04.2008). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions. We find that the Ld. CIT(A) had deleted the disallowance by observing as under: "I have carefully considered the submission put forth on behalf of the appellant along with the supporting details/documents, perused the facts of the case including the observation of the AO and other materials brought on record in respect of the disallowance of Rs. 18,93,809/- & Rs. 1,21,43,683/- relating to non-moving inventory. In respect of Rs. 18,93,809/-, it is seen that the disallowance has been made by the AO by treating the said amount as contingent in nature, whereas Rs. 1,21,43,683/- has been contended by the appellant as having been credited to the P&L a/c. and therefore, the appellant has contended that the said amount having been considered in the P&L a/c. should have been reduced in the computation of income which the AO did not considered. The AO in his assessment order has merely mentioned that the said sum of Rs. 18,93,809/- is not allowable as per the provisions of the Act and hence the disallowance and in respect of Rs. 1,21,43,683/- nothing has been mentioned by the AO. The appellant in his written submission has contended that the said sum of Rs. 18,93,809/- has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of warranty expenses made by the AO at Rs. 85,81,254/-. Thus Revenue's ground no. 1 is dismissed. 12. Ground no. 2 relates to disallowance of depreciation of Rs. 66,81,900/-. We observe that during the year the assessee acquired and installed various plant & machineries costing Rs. 6,78,40,001/- as shown in the fixed asset in Schedule no.-4 attached to the audited financial statement. The assessee manufactures boxes. It has claimed that before the purchase of the said machineries, the capacity of production was 75,000 boxes and after purchase of the new plant & machinery capacity has increased to 2,70,000 nos. of boxes. Additional depreciation @15% at Rs. 6,69,28,037/- and Rs. 66,81,900/- has been made by the assessee. In support of such claim a report of the Chartered Accountant u/s 32(1)(iia)(B) of the Act in the prescribed Form no. 3AA has been filed which provides the detailed list of the plant & machinery so purchased including tools and dies, a tabular chart giving details of expansion and summarized statement of the new addition of plant & machinery and electrical installation. We, further, notice that ld. AO has allowed the claim of normal depreciation of such items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully installed by 31.03.2005 - mere surmise; and it also self-defeats the other argument above, that the production is also to increase. The increase in installed capacity is also evidenced by way of increase in the assets in the Balance Sheet - plant & machinery. The assessee has fulfilled the condition of having increased its installed capacity by more than 10%. The assessee is entitled for the additional depreciation." 13. From perusal of the above finding of the ld. CIT(A) wherein each observation of the AO has been considered and the fact giving rise to the increase in the installed capacity from 75,000 to 2,70,000 boxes has been considered and claim has been allowed, we find that the assessee has filed copy of the Chartered Engineer placed at page 219 to 222 of the paper book. The certificate dated 20.03.2005 certifies that machines are purchased during November, 2004 to January, 2005. In this certificate given by the Govt. approved valuer & Chartered Engineer, complete details of new machines namely Hydraulic Press Brake, CNC Turret Punch Press is appearing. These machines are purchased from some Bhartia Industries Limited and with installation of these machines, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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