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TMI Blog2023 (6) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... .A.T. in I.T.A. No. 223/Ran/2016 for the assessment year 2011-12. Since the respondent-assessee is common in all these appeals as such all are being heard together and being disposed of by this common judgment. 2. The respondent Assessee is a government of India undertaking and has engaged in the business of manufacturing, project works, reconditioning, Execution and Commissioning of machineries, Equipment for Steel plants, Mining sector, Railways, Defense etc. and is registered under the provisions of Companies Act, 1956. 5. Facts of T.A. No. 25 of 2019 On 28.09.2012 Assessee filed its return declaring total income to be "NIL". Return was processed under Section 143 (1). On 26.08.2013, case of the Assessee was selected for scrutiny. Notice under Section 143(3) was issued. On 29.01.2015, assessment order was passed wherein amount claimed as business expenses under the head of "Provision for Warranty Expenses" amounting to Rs.3,93,07,000/-. Respondent-Assessee preferred an Appeal before CIT(A) being Appeal No. 159/Ran/Co/14-15. On 20.03.2017, appeal filed by the Respondent was allowed. All additions made by the Assessing Officer was deleted. The revenue preferred an Appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the Respondent Assessee under the Income Tax Act, 1961? 2. Whether in the facts and circumstances of the case, the Respondent Assessee has complied with all the conditions laid down in the judgment of the Hon'ble Supreme Court, passed in the case of Rotork Controls India Private Limited v. CIT reported in (2009) 13 SCC 283, to be entitled to the amount of "Provision of Warranty Expenses" as an expenditure to the business income of the respondent Assessee under the Income Tax Act, 1961? 3. Whether in the facts and circumstances of the case, the finding of the Ld. ITAT in the Impugned Judgment that "the appellant company had made a reasonable estimate of claiming at 0.5% of sales based on past expenses and technical estimates" is perverse and not based on any material evidence? 4. Whether in the facts and circumstances of the case, the Impugned Judgment passed by Ld. ITAT is perverse? Tax Appeal No. 37 of 2019 This appeal shall be heard on the following substantial questions of law: 1. Whether in the facts and circumstances of the case, the amount under the head of "Provision for Leave Assistance", Provision for Liquidated Damages" and Miscellaneous Provision" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith all the conditions laid down in the judgment rendered in the case of Rotork Controls India (supra) to be entitled to the amount of "Provision of Warranty Expenses" as an expenditure to the business income of the respondent Assessee. (b) The finding of the Ld. ITAT in the Impugned Judgment that "the appellant company had made a reasonable estimate of claiming at 0.5% of sales based on past expenses and technical estimates" is perverse and not based on any material evidence. (c) The amount under the head of "Provision for Leave Assistance", Provision for Liquidated Damages" and Miscellaneous Provision" respectively cannot be allowed as expenditure to the business income of the Respondent Assessee. (d) The Ld. Tribunal is incorrect in holding that the expenditure made on sales promotion is allowable under Section 40(a) despite the fact that the Assessee failed to discharge its onus of providing evidences in support of TDS made on the same. 8. Learned counsel for the respondent Assessee supported the impugned judgment and submits that no error has been committed by the learned tribunal, as such these appeals may be dismissed as no substantial question of law is involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in respect of which a reliable estimate is possible of the amount of obligation. As stated above, the case of Indian Molasses Co. (supra) is different from the present case. As stated above, in the present case we are concerned with an army of items of sophisticated (specialized) goods manufactured and sold by the assessee whereas the case of Indian Molasses Co. (supra) was restricted to an individual retiree. On the other hand, the case of Metal Box Company of India (supra) pertained to an army of employees who were due to retire in future. 48. In that case the company had estimated its liability under two gratuity schemes and the amount of liability was deducted from the gross receipts in the profit and loss account. The company had worked out its estimated liability on actuarial valuation. It had made provision for such liability spread over to a number of years. In such a case it was held by this Court that the provision made by the assessee-company for meeting the liability incurred by it under the gratuity scheme would be entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. 49. The same principle i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Damages:- Liquidated damages refer to an amount actually deducted by the customers for delayed supply of the equipment by the HEC. It is a prevalent trade practice and also a commercial term in the contract and agreement with the customers. The amount so deducted under the contractual obligation as a normal trade practice is charged to profit and loss account as liquidated damages by way of provision or otherwise. If any sum is subsequently refunded back to the Assessee by the customers, then the Assessee credit its profit and loss account with such refund. Since the liquidated damages provided in the accounts are based on allowances/expenditure/deduction allowed by the Assessee to its customer as a part of contract and this practice is being followed by the Assessee consistently, and such debits are based on actual deduction made by the customers, accordingly they are ascertained expenditure. Accordingly, looking to the facts and practice, the Assessee company has not committed any error in making the provisions of liquidated damages. (ii) Miscellaneous Provisions:- As per the accounting policy of the Assessee whereby the inventory of Raw materials, stores and spares, loose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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