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TMI Blog2018 (4) TMI 1979X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) has rightly treated the sale consideration arising out of land as long term capital gain and sale consideration attributable to building as short term capital gain. Hence, we find no infirmity in the order of CIT(A) and hence the same is confirmed. The issue of Revenue s appeal is dismissed. - SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM For the Appellant : Dhanesh Bafna, Ravi Sawana, AR For the Respondent : V Justin, DR ORDER PER MAHAVIR SINGH, JM: These cross appeals are arising out of the order of Commissioner of Income Tax (Appeals)-6, Mumbai [in short CIT(A)], in appeal No. CIT(A)-6/IT.178/Rg.2(3)/11-12 dated 20.08.2013. The Assessment was framed by the Asst. Commissioner of Income Tax (OSD), Circle-2(3), Mumbai (in short ACIT ) for the A.Y. 2009-10 vide order dated 29.12.2011 under section 143(3) of the Income Tax Act, 1961(hereinafter the Act ). 2. The first issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the disallowance of claim by the AO of warranty provisions. For this Revenue has raised the following ground No. 1:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of the war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions, the claim of the appellant for provision for warranty is required to be allowed. The AO is directed to accordingly allow the claim in respect of provision for warranty. Aggrieved, now Revenue is in appeal before us. 4. Before us, the learned Sr. Departmental Representative argued that that even now the assessee could not explain to scientific basis on which the warranty provision was paid. He argued that the sample sale voucher could not prove the basis of computation of warranty. Even the assessee could not establish the past experience of warranty claimed on purchases made by customers on the basis of which the warranty provision was credited. The learned Sr. Departmental Representative argued that even the Hon ble Supreme Court in the case of Bharat Earth Movers Vs CIT 2000 (245) ITR 428 (SC) has recognized the provision for warranty, which should be based on experience and historical trends regarding the claim of warranty expenses. According to him, the working must be robust and it should be determined on historical trend basis of proper accounting system for keeping relationship between nature of sales, warranty provisions made and actual expense incurred against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nty claimed by assessee during the relevant AY is ₹ 21,10,038/- which is net of the provision utilized during the year. Further it is also a fact that the provision for warranty has never been disallowed in any of the earlier assessment year even though the assessment proceedings were conducted under section 143(3) of the Act. The learned counsel for the assessee informed the Bench that during AY 2010-11, warranty provision was disallowed by the AO but subsequently allowed by the CIT(A) and Tribunal dismissed the appeal of Revenue on account of low tax effect. We also find that the assessee also follows reversal method of accounting wherein, the provision utilized is reduced from the provision for warranty lying in the books of accounts assessee. In such circumstances, we have to go through the decision of Hon ble Supreme Court in the case of Rotork Controls India Private Limited vs. CIT (314 ITR 62) (SC), wherein Hon ble Supreme Court has observed as under:- Where there are a number of obligations (e.g., product warranties or similar contracts) the probability that an outflow will be required in settlement, is determined by considering the said obligations as a whole. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en sold by the assessee company through a transfer deed and the first schedule to the deed of transfer which contains the details of transfer, has land and the buildings and structures mentioned therein . 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing that the gain arising oil and building has to be given separate treatment without appreciating that the AD had correctly treated the transfer under the head short term capital gain as the land and buildings were sold by the assessee company as a package through a transfer deed and the land and building comprised part of block of assets of the assessee company. 11. Briefly stated facts are that the assessee has sold its factory building situated at NIDC, Narol, Dist-Ahmedabad to Trumac Engineering Company P. Ltd as on 10-12-2008 at a total consideration of 5,75,00,000/-. The assessee in its fixed asset schedule attach along with balance sheets disclosed the land and buildings separately as on 31-03-2008 and 31-03-2009 and while taking the value as on 31-03-2009 the assessee had deducted the value at ₹ 1,22,690/- and for building at ₹ 84,53,034/-. The assessee while filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration and from this consideration, the written down value of the building at Rs.84,53,034/- shall be reduced to arrive at the short term capital gain in respect of the factory building sold. The short term capital gain to be assessed shall therefore be Rs.50,46,966/- . Aggrieved, now Revenue is in second appeal before Tribunal. 13. The assessee also raised the issue that the WDV of the building should be taken as per the Income Tax Act instead of the value as per companies Act, as directed by CIT(A). For this assessee raised the following ground:- On the facts and circumstances of the case the learned CIT(A) has erred in directing the Assessing Officer to consider the written down value (WDV') of building as per Companies Act, 1956 at Rs 84,53,034 instead of WDV as per the Act of Rs 1,39.52.126 and thereby assessing short-term capital gain at Rs 50,46,966 without considering the fact that the WDV of block of building is in excess of the consideration received on sale of building. 14. We have heard the rival contentions and gone through the facts and circumstances. We find that the CIT(A) has rightly treated the sale consideration arising out of land as long term capital gain a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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