Income Tax Appellate Tribunal - Mumbai
Hindustan Dorr Oliver Ltd, vs Department Of Income Tax on 13 January, 2014
1 M/s. Hindustan Dorr Oliver Ltd.
आयकर अपीलीय अिधकरण, ं ई Ûयायपीठ 'जे' मुब
अिधकरण मुब ं ई।
IN THE INCOME TAX APPELLATE TRIBUNAL " J" BENCH, MUMBAI सव[ौी आय.पी. बंसल, Ûयाियक सदःय एवं , नरे Ûि कुमार ǒबãलैáया, लेखा सदःय के सम¢ BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAIYA, AM आयकर अपील सं./I.T.A. No.7389, 7390 & 7391/Mum/2002 िनधा[रण वष[ / Assessment Years :1997-98 to 1999-2000 (िनधा[ M/s. Hindustan Dorr-Oliver The JCIT, Ltd.,Dorr Oliver House, Special Range-8(2), Chakala, Andheri (E), Aayakar Bhavan, Mumbai-400 099 Mumbai-400 020 आयकर अपील सं./I.T.A. Nos.614, 615 & 790/Mum/2003 िनधा[रण वष[ / Assessment Years :1997-98 to 1999-2000 (िनधा[ The DCIT, M/s. Hindustan Dorr-Oliver Special Range-8(2), Ltd.,Dorr Oliver House, Aayakar Bhavan, Chakala, Andheri (E), Mumbai-400 020 Mumbai-400 099 ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACH 0964P (अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent) अपीलाथȸ ओर से/ Appellant by: ` Shri J.D. Mistry Shri Niraj Sheth ू×यथȸ कȧ ओर से/Respondent by : Shri Rajan Bahadur सुनवाई कȧ तारȣख / Date of Hearing :13.01.2014 घोषणा कȧ तारȣख /Date of Pronouncement : 22.1.2014 आदे श / O R D E R PER BENCH:
These appeals by the assessee and cross appeals by the Revenue are directed against separate orders of the Ld. CIT(A) for A.Yrs 1997-98, 1998-99 and 1999-
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2000. As these appeals involved common issues, they were heard together and disposed off by this common order for the sake of convenience and brevity.
ITA No. 7389/M/02 -A.Y 1997-98 - Assessee's appeal2. The first ground relates to the disallowance of the provision for doubtful debts amounting to Rs. 50,27,986/-.
3. The issue of bad debt has been considered by the AO at para-7 of the assessment order. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has made a provision of Rs. 50.27 lakhs on account of doubtful debts to the profit and loss account. The AO sought clarification from the assessee to which assessee replied vide reply dt. 10.1.2000. It was explained that depending upon the feedback and discussions with the staff, the possibility of the customer to repay the outstanding is assessed and suitable provision is made. Once a provision is made in a year , it is reversed in toto in the next year by a corresponding credit to cost of sales account irrespective of whether the amount has been received or not. A fresh estimate is done for the next year and provision is created by debit to cost of sales account. Thus, this debit is the net effect of the additions and deletions of provisions in the current year.
3.1. It was further explained that requirements Sec. 36(2)(1) has been fully complied with by posting debit entry in profit & loss account and corresponding credit entries in provision for Doubtful Debts account. It was further explained that it was not essential to post corresponding entry in the individual ledger accounts of parties. The AO has discussed the names and amounts of 19 parties for which provision for doubtful debts was created. These details find place at para-7.2 of assessment order. The AO further discussed the client-wise movement of provision for doubtful debts at pages 12 and 13 of the assessment order. The 3 M/s. Hindustan Dorr Oliver Ltd.
AO further discussed the claim of the assessee in respect of various parties and finally came to the conclusion that after the amendment to the provisions of Sec. 36, deduction on account of bad debts is allowable only when it is written off as irrecoverable in the accounts of the assessee in the previous year. According to the AO after 1.4.1989, writing off of bad debts as irrecoverable has become essential . According to the AO, the assessee has not written off the amounts claimed on account of provision for doubtful debts as irrecoverable in the concerned debtors accounts in the previous year relevant to assessment year under consideration and disallowed the claim of bad debts of Rs. 50,27,986/-.
4. The assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) has considered the grievance of the assessee at page-2 of his order. At para-3.4 of his order, the Ld. CIT(A) has observed that assessee's representative admitted that in the year only a provision has been made in view of the Explanation which is also applicable for the year, no deduction in respect of the provision can be allowed. Relying upon this submission of the assessee, the Ld. CIT(A) confirmed the disallowance of Rs. 50,27,986/- made by the AO.
6. Before us, the Ld. Counsel for the assessee submitted that on identical issues the Tribunal has restored the matter back to the files of the AO for verification of the claim of the assessee in assessment year 1993-94 in ITA No. 4147/M/96 and in assessment year 1995-96 vide ITA No. 201/M/99. The Ld. Counsel for the assessee further placed reliance upon the decision of the Hon'ble Supreme Court in the case of Vijaya Bank Vs CIT 323 ITR 166 and also on the decision of the Tribunal in the case of Arrow Coated Products Ltd. Vs ACIT 136 ITD 315.
7. The Ld. Departmental Representative relied upon the findings of the Ld. CIT(A).
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8. We have carefully perused the orders of the lower authorities and the decision of the Tribunal in assessee's own case (supra). We find that the Tribunal at para-21 & 22 on page-8 of its order has held as under:
"The common issue in ground No. 1 of the appeal raised by the Revenue in ITA No. 4147/M/96 & 201/M/99 is against the deletion of addition under the head provision for doubtful debts. The Ld. AR for the assessee pointed out that the issue has been decided by the Special Bench of Bangalore Tribunal in Wipro Information Technology Ltd. VS DCIT (2004) 88 TTJ (Bang) 778, wherein similar of incremental provision made for bad and doubtful debts and advances considered at length and after considering the judicial precedents on the issue, it was held as under:
...... (vii) Bad debt in respect of sales turnover which has been recognized as income is allowable subject to furnishing of details required in this behalf. It is also held that the amount written off in respect of bad debts is allowable even though the individual account of debtor is not written off but a consolidated entry is passed in respect of the same by debit to P&L account. To this extent, the judgment in Vithaldas H. Dhanjibhai Bardanwals Vs CIT (1981) 21 CTR (Guj) 190 (1981) 130 ITR 95 (Guj) still holds good."
The matter was set aside to the file of AO with a direction to allow the claim in the light of the findings in para 3.11 at page 802 of the judgement. The Ld. AR further stated that the explanation to Sec. 36(1)(vii) of the I.T. Act does not require that individual account of the debtors are to be credited. Reliance was also placed on the decision of Hon'ble Bombay High Court in CIT Vs ASEA Ltd. (2002) 258 ITR 407 (Bom). The Ld. DR stated that in order to allow the claim of the assessee is bad debts, the accounts have to be reconciled when any bad debt is written off, simultaneously entry is passed in the P&L account, but in case of provision no deduction is made to the parties account, the liability stands and provision in the form of liability is created with no change to the P&L account. The Ld. DR concluded by stating that such a provision is hit by explanation to Sec. 36(1)(vii) of the I.T. Act.
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We have heard the rival submissions and perused the records. From the perusal of record, we find that this issue has not been considered in the light of the above said decisions. We deem it fit to restore the issue back to the file of AO to decide the same in accordance with law and after following the guidelines laid down in Wipro Information Technology Ltd. (supra). Thus ground No. 1 raised by the Revenue in A.Yrs 1993-94 & 1995-96 is allowed for statistical purpose."
9. In line with the findings of the Tribunal in assessee's own case for A.Yrs. 1993-94 and 1995-96, we restore this issue back to the files of the AO to decide the same in accordance with the law and the findings of the Tribunal (supra). We also direct the AO to consider the decision of the Tribunal in the case of Arrow Coated Products Ltd., in 136 ITD 315 which has strongly been relied upon by the Ld. Counsel for the assessee after verifying the facts of the case with that of Arrow Coated's case after giving a reasonable and sufficient opportunity of being heard to the assessee. Ground No. 1 is allowed for statistical purpose.
10. Ground No. 2 relates to the disallowance of the provision of Rs. 1,89,30,249/- for warranty and filed services.
11. This issue has been discussed by the AO at para-6 on page-7 of his order. During the course of the assessment proceedings, the assessee was asked to furnish figures of actual utilization of amount out of the provision created for warranty and field services and was also asked to explain why the deduction may not be allowed on the actual figure. The assessee filed a detailed reply. It was explained that details of utilization of Write-back of provision of warranty and filed services for the provision made in the assessment year 1995-96 and 1996-97 are already placed on record. It was further explained that the provision has been added back to the company's income at the time of finalization of assessment u/s. 143(3) and therefore have been taxed earlier. In the current year, as the provision 6 M/s. Hindustan Dorr Oliver Ltd.
has been written back, the company has offered it for tax. Therefore, the same income has been taxed twice. The AO discussed the entire facts at para-6.3 of his order and at para 6.4 observed that while deciding the appeals of the assessee for A.Yrs 1995-96 and 1996-97, the Ld. CIT(A) has categorically examined this issue considering the findings of the Ld. CIT(A) in earlier assessment years, the AO allowed the actual amount utilized during the year at Rs. 19,02,580/- and added back to the entire provision of Rs. 2,08,32,829/-.
12. The assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) has considered the grievance of the assessee vide ground No. 4 of his order at page-5 and at para 6.5 the Ld. CIT(A) has confirmed the findings of the AO relying upon the decision of his predecessor for A.Yrs 1995-96 and 1996-97.
13. Before us, the Ld. Counsel for the assessee submitted that the issue has been restored back to the files of the AO by the Tribunal in A.Yrs 1995-96 and 1996-
97.
14. We have carefully perused the findings of the lower authorities and the decision of the Tribunal in assessee's own case for A.Y. 1995-96 in ITA No. 303/M/99. We find that at para-31 on page-13 of its order, the Tribunal has given the following directions:
"The ground No. 2 raised by the assessee is against the disallowance on account of provision for warranty and field services. Similar issue was decided by the Tribunal in its order dt. 31.7.2007 (supra) in para 22, wherein the order of CIT(A) has been confirmed and the AO was directed to re-work the disallowance on account of provision made for warranty and field services as indicated in the said para-22 of order dt. 31.7.2007. Following the decision in the said order, we direct the AO to rework the disallowance as directed in the A.Y. 1990-91. Thus, this ground of appeal raised by the assessee is allowed for statistical purpose."
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Respectfully following the aforesaid findings of the Tribunal, we direct the AO to rework the disallowance as per the directions of the Tribunal mentioned hereinabove. Ground No. 2 is allowed for statistical purpose.
15. Ground No. 3 relates to the disallowance made under Rule 6D of the Act. The AO has discussed this issue at para-15 on page-49 of his order wherein the AO has made an adhoc disallowance of Rs. 1,50,000/- for want of details and relied upon the decision of the Bombay High Court in the case of Aorow India ltd. Vs CIT 229 ITR 325. The grievance of the assessee was considered by the Ld. CIT(A) at para-8 on page-7 of his order and upheld the action of the AO following the decision of the Jurisdictional High Court relied upon by the AO.
16. Before us, the Ld. Counsel for the assessee fairly conceded that the decision of the Jurisdictional High Court is against the assessee.
17. We have considered the facts of the case in the light of the decision of the Jurisdictional High Court (supra). No interference is called for. Ground No. 3 is accordingly dismissed.
18. Ground No. 4 relates to the disallowance of Guest house expenses. The AO has discussed at length this issue at para-16 on page-49 of his order. The AO observed that the assessee has claimed amount of rent paid at Rs. 3,60,000/- as guest house rent. According to the AO, the same is not allowable u/s. 37(4) of the Act and accordingly disallowed Rs. 3,60,000/-.
19. The Ld. CIT(A) has considered the grievance of the assessee at para-9 on page-7 of his order and at para-9.4 observed that in the preceding assessment year similar disallowance have been confirmed by the Ld. CIT(A). Following the said 8 M/s. Hindustan Dorr Oliver Ltd.
decisions, the Ld. CIT(A) upheld the action of the AO to include the rent paid for guest house accommodation as part of the disallowance u/s. 37(4) of the Act.
20. Before us, the Ld. Counsel for the assessee could not bring any distinguishing facts on record.
21. After considering the facts and the submissions made before the lower authorities, in our humble opinion, the findings of the Ld. CIT(A) require no interference. Ground No. 4 is accordingly dismissed.
22. Ground No. 5 relates to the claim of deduction u/s. 80-O of the Act on the net income from service.
23. The assessee claims that the deduction u/s. 80-O of the Act be allowed on gross service charges received and not on net income from service charges received after deducting expenses incurred.
24. The AO has considered this issue at para-17 on page-50 of his order and at para-17.2 the AO computed the eligible deduction of the assessee at Rs. 17,75,105/-.
25. The assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) has considered the grievance of the assessee at para-10 of his order and at para-10.3 confirmed the action of the AO.
26. Aggrieved by this, the assessee is before us. Before us, the Ld. Counsel for the assessee fairly conceded that this issue has been decided against the assessee by the decision of the Bombay High Court in the case of Asian Cable Corpn. Ltd. 262 ITR 537. We find that in the said decision, the Hon'ble Jurisdictional High Court has held that for special deduction gross receipts cannot constitute the basis for 9 M/s. Hindustan Dorr Oliver Ltd.
deduction u/s. 80-O of the Act. Deduction to be allowed is only on net income basis. Respectfully following the findings of the Hon'ble Jurisdictional High Court, Ground No. 5 is dismissed.
27. Ground No. 6 relates to the disallowance of entertainment expenses u/s. 37(2A) of the Act. The AO has considered this disallowance at para-14 on page- 47 of his order. The AO observed that the assessee has suo motu disallowed Rs. 2,04,488/- u/s. 37(2A) of the Act. At para-14.2 of his order, the AO followed the decision of the Tribunal in the case of Borosil Glass Ltd and recomputed the disallowance u/s. 37(2A) at Rs. 2,58,359/- and after deducting the disallowance made by the assessee, the AO made an additional disallowance of Rs. 53,871/-.
28. The Ld. CIT(A) has considered the grievance of the assessee at para-12 of his order and at para-12.1 the Ld. CIT(A) observed that on similar set of facts, higher disallowance made by the AO in assessment year 1996-97 has been upheld in appeal. In the light of these facts, the Ld. CIT(A) confirmed the disallowance made by the AO.
29. We find that the Tribunal in ITA No. 4580/M/09 for A.Y. 19960-97 has considered a similar grievance at para-23 of its order and at para-24, the Tribunal has followed the findings for A.Y. 1991-92 in ITA No. 7787/M/94. As no distinguishing facts have been brought before us, respectfully following the findings of the Tribunal in assessee's own case (supra), findings of the Ld. CIT(A) are confirmed. Ground No. 6 is accordingly dismissed.
30. Ground No. 7,8, 9 and additional ground No. 2 relate to the disallowance of depreciation on assets given on lease .
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31. Facts relating to the claim of depreciation on wind electric generation on which 100% depreciation of Rs. 1,30,00,000/- has been claimed by the assessee are that the assessee entered into purchase of 'Bonus make Wind Electric Generator from M/s. REPL Synergy Ltd amounting to Rs. 1,30,00,000/-. The invoice and the delivery challan are placed in the paper book. Subsequent to this, the assessee entered into the lease agreement with REPL Engineering on quarterly lease rental of Rs. 6,53,250/-. The assessee has claimed depreciation at the rate of 100% of Rs. 1,30,00,000/-. During the course of the scrutiny assessment proceedings, the AO verified the claim of depreciation for which the AO wrote letters to REPL Synergy Power Systems Ltd which is at page-21 & 22 of the assessment order and at page-22, the AO remarked that the said letter could not be served upon the address provided by the assessee as it was found that the company is closed for a long time. A letter was also issued to Dr. Yeshwant R. Ullal, Chartered Engineer who issued certificate relating to the technical details and utility value of 100% depreciable asset. The said letter is at page-22 & 23 of the assessment order. Reply to the same is at page-24 of the assessment order. The AO further wrote a letter dt. 12.11.1999 to Gujarat Energy Development Agency at Porbunder which is at page-25 of the assessment order and at page-26 the AO reproduced the reply received from Gujarat Energy Development Agency. The AO further wrote a letter to REPL Engineering Ltd., which is the lessee of the assessee. The said letter is at page-27 of the assessment order and reply to the same is at page-28 of the assessment order.
32. After considering all these letters and reply to them, the AO recorded the statement of Shri B.S. Doctor, Director of the REPL Engineering ltd, the lessee of the assessee. The statement is at page-38 & 39 of the assessment order and at para-9.16 at page-42, the AO finally came to the conclusion that the said asset does 11 M/s. Hindustan Dorr Oliver Ltd.
not exist at all. The AO further observed that the assessee has therefore made bogus depreciation claim to the extent of Rs. 1,30,00,000/- being 100% of the cost of the asset alleged to have been leased out to M/s. REPL Engineering Pvt. Ltd. . The transaction with M/s. REPL is therefore held as finance lease.
33. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) has considered this grievance vide ground No. 12 at para-16 of the Appellate order. The Ld. CIT(A) observed that during the appellate proceedings, the assessee has relied upon the documentary evidence submitted before the AO to justify the claim. It was further submitted that the claim of depreciation was based on documentary evidences while the AO has relied upon the statement of certain persons which were contrary to the factual position. The Ld. CIT(A) further observed that the basic fact i.e. required to be examined is whether the asset on which the depreciation was claimed was ever in existence and whether it was ever purchased by the assessee as the lessor and taken delivery of, whether it was given to the lessee on the terms and conditions which could suggest that the lessor was the real owner and whether the lessor ever exercised any control over the leased asset by their regular inspection etc. 33.1. After considering answers to these questions posed by the Ld. CIT(A), the CIT(A) at page-16.11 finally concluded " In the instant case, the entire arrangement was thus made to mislead the revenue authorities with a view to legitmise a tax avoidance scheme. The action of the AO to identify its true character and treat it as a financial transaction is correct. His consequential action to deny the appellant the benefit of deduction of depreciation amounting to Rs. 1,30,00,000/- being as per law, is therefore sustained". 12 M/s. Hindustan Dorr Oliver Ltd.
34. The Ld. CIT(A) also confirmed the disallowance of lease management fees amounting to Rs. 1,30,000/- holding that the assessment order show that the above claim was rejected on the ground that the payment was claimed in respect of services by way of lease arrangement which on enquiry was found to be non- existent.
35. Aggrieved by this, the assessee is before us. The Ld. Counsel for the assessee reiterated the claim of depreciation relying upon the very same documents which have been considered by the AO during the course of the assessment proceedings. It is the say of the Ld. Counsel that the assessee has been showing lease rental income which clearly establishes the fact that the assessee has leased out assets to M/s. REPL Engineering. The Ld. Counsel also drew our attention to the criminal proceedings initiated by the assessee against the lessee for cheque bouncing case as the lease rental cheques were dishonored by the bank. The Ld. Counsel also drew our attention to the settlement between the assessee and the lessee for an amount of Rs. 20,00,000/-. It is the say of the Ld. Counsel that these related facts go to establish the claim of depreciation on the leased assets. In alternative, the Ld. Counsel argued that the lease rentals shown by the assessee should be allowed as bad debts and the cost of the Windmill should be allowed as a business loss as the material evidence on record clearly suggest that the assessee was cheated by M/s. REPL Engineering. Therefore, the claim of business loss is tenable in law.
36. The Ld. Departmental Representative strongly supported the findings of the lower authorities.
37. We have carefully perused the orders of the lower authorities and the relevant material evidence brought on record. The claim of the depreciation by the 13 M/s. Hindustan Dorr Oliver Ltd.
assessee is totally based on paper evidence whereas the AO has rejected the claim based on the categorical denial by Gujarat Energy Development Agency (GEDA) which is an autonomous body of the State of Gujarat. In its reply, GEDA has empathetically mentioned that M/s. Hindustan Dorr Oliver Ltd (assessee) has not installed any Wind farm in the State of Gujarat any time, neither any commissioning certificate has been issued by our office to them. The copy of the commissioning certificate bearing No. GEDA/PBR-RKP/HDO/96/491dt. 30.9.1996 referred by you is not genuine and hence is a fake certificate. This letter of GEDA which is an autonomous body of the State of Gujarat is sufficient to deny the claim of depreciation. However, we also find that the lower authorities have accepted this to be a financial transaction, in that case, the other claims of the assessee has to be verified. Therefore, in the interest of justice and fair play, we restore this issue back to the files of the AO. The AO is directed to verify the claim of bad debts in respect of lease rentals and the claim of business loss as the assessee claims that it has been cheated by REPL Engineering , therefore the cost of Wind Mill should be allowed as a business loss. The AO is directed to verify these claims of the assessee after giving reasonable opportunity of being heard to the assessee. These grounds are disposed of accordingly and for statistical purpose are considered to be partly allowed.
38. Ground No. 10 relates to the disallowance of Rs. 6,85,38,717/- made towards cost of sales.
39. This issue has been considered by the AO at para-5 on page-2 of the assessment order. During the course of the assessment proceedings, the AO 14 M/s. Hindustan Dorr Oliver Ltd.
observed that the auditors have reported adjustment to the cost of procurement after adjusting net write-back of earlier years' provision. After considering the accounting entries and the submissions of the assessee, the AO observed that out of the provision amount of Rs. 6,85,38,717/-, the actual utilization that has taken place in the year under consideration is only Rs. 6,58,88,032/-. With respect to balance amount of Rs. 26,50,685/-, neither the bills have been received in the accounting year under consideration nor in the immediate succeeding financial year. The AO concluded that the purchases to the provision amount to the extent of Rs. 26,50,685/- as excess provision towards cost of sale.
40. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) has considered this grievance vide ground No. 14 before him. It was contended before the Ld. CIT(A) that the method of accounting followed by the assessee is a scientific one inasmuch as it is based on the matching principle of providing for in the very same year the expenditure incurred or services availed of during an accounting year. After considering the facts and the submissions, the Ld. CIT(A) observed that there is no evidence either of the services rendered at the point of sale and bill or debit note has been received subsequent to sale, the liability created by way of provision can be held to be made not in respect of services rendered at the point of sale but probably at a much later point of time. Hence, at the point of sale, such liability cannot be held to have accrued. Hence, the provision created cannot be said to be for accrued liability but for a contingent one and hence liable for disallowance.
41. Aggrieved this, the assessee is before us. The Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities. 15 M/s. Hindustan Dorr Oliver Ltd.
42. The Ld. Departmental Representative strongly supported the findings of the Ld. CIT(A).
43. The issue under consideration is whether a provision in respect of services rendered at the point of sale can be allowed as deduction. There is no dispute that such expenditure is allowable as deduction, provided it is in regard to an expenditure incurred during the year, even if it is not due for payment on account of bill/debit note having not been received. However, no such evidence was brought before the lower authorities nor before us. Therefore, we do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 10 is accordingly dismissed.
44. Additional ground No. 1 relates to the claim of exclusion of unutilized provision for warranty and filed services disallowed in 1989-90.
45. It is the say of the Ld. Counsel that a similar issue has been decided by the Tribunal in assessee's own case in ITA No. 61/M/94 for A.Y. 1990-91 and in ITA No. 7961/M/94 for A.Y. 1991-92. The Ld. Counsel submitted that similar view deserves to be taken.
46. We have carefully perused the facts of the case vis-à-vis order of the Tribunal in ITA No. 7961/M/94 for A.Y. 1991-92. We find that a similar additional ground was taken before the Tribunal in that year also. The Tribunal has considered this issue at para-58 and at para-59 followed the decision of the Tribunal in ITA No. 7682/M/03. Respectfully following the findings of the Tribunal in assessee's own case (supra), we restore the present issue to the files of the AO with a direction to decide the issue following the directions of the Tribunal 16 M/s. Hindustan Dorr Oliver Ltd.
in assessee's own case for A.Y. 1991-92. The additional ground No. 1 is allowed for statistical purposes.
ITA No. 614/Mum/2003 -A.Y. 1997-98 - Revenue's appeal47. The Revenue has raised two substantive grounds of appeal. Ground No. 1 relates to the deletion of the disallowance of Rs. 56,70,115/- on account of fees paid for technical services.
48. At the very outset, the Ld. Counsel for the assessee submitted that this issue has been settled in favour of the assessee by the decision of the Tribunal in assessee's own case from A.Yrs 1984-85 to 1995-96. We find force in the submissions of the Ld. Counsel as the Ld. CIT(A) himself at page-4 on para 4.4 has observed that this fact has also been accepted in the preceding year both by the ITAT and by the Ld. CIT(A). In the light of the above and following the decisions of the Tribunal, findings of the Ld. CIT(A) are confirmed. Ground No. 1 is accordingly dismissed.
49. Ground No. 2 relates to the deletion of the disallowance of Rs. 35.70 lakhs being the notional interest.
50. This issue has been considered by the Ld. CIT(A) vide ground No. 3 before him and at para-5.4, the Ld. CIT(A) deleted the addition following the decision of his predecessor for A.Yrs. 1995-96 and 1996-97.
51. The Ld. Counsel for the assessee submitted that the Tribunal has confirmed the findings of the Ld. CIT(A) in preceding assessment years. Copies of the orders of the Tribunal are placed before us.
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52. We have carefully perused the orders of the lower authorities and the orders of the Tribunal. We find force in the submissions of the Ld. Senior Counsel. We find that the Tribunal in assessee's own case has confirmed the findings of the Ld. CIT(A). Respectfully following the decision of the Tribunal, findings of the Ld. CIT(A) are confirmed. Ground No. 2 is accordingly dismissed.
53. In the result, the appeal filed by the assessee is allowed in part for statistical purposes and the appeal filed by the Revenue is dismissed.
ITA No. 7390/M/02-A.Y. 1998-99 - Assessee's appeal54. Ground No. 1 relates to provision for warranty and field services
55. The issue involved is identical with the issue in ground No. 2 in paras 10 to 14 in ITA No. 7389/M/02 for A.Y. 1997-98, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No.7390/M/02 for assessment year 1998-99 is allowed for statistical purpose.
56. Ground No. 2 & 3 are not pressed by the Ld. Counsel for the assessee. Therefore it is dismissed as not pressed.
57. Ground No. 4 relates to disallowance of cost of sales. The issue involved is identical with the issue in ground No. 10 in paras 38 to 43 in ITA No. 7389/M/02 for A.Y. 1997-98, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No.7390/M/02 for assessment year 1998-99 is dismissed.
ITA No. 615/M/03 - A.Y. 1998-99 - Revenue's appeal18 M/s. Hindustan Dorr Oliver Ltd.
58. Ground No. 1 relates to the deletion of the disallowance on account of fees paid for technical services.
59. The issue involved is identical with the issue in ground No. 1 in para 48 & 48 in ITA No. 614/Mum/2003 for A.Y. 1997-98 in Revenue's appeal, therefore, on similar lines, similar reasons, the appeal filed by the Revenue in ITA No.615/M/03 for assessment year 1998-99 is dismissed.
ITA No. 7391/M/02-A.Y. 1999-2000 - Assessee's appeal60. Ground No. 1 relates to provision for warranty and field services
61. The issue involved is identical with the issue in ground No. 2 in para 10 to 14 in ITA No. 7389/M/02 for A.Y. 1997-98, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No.7391/M/02 for assessment year 1999-2000 is allowed for statistical purpose.
62. Ground No. 2 is consequential to ground No. 7,8, 9 & additional ground No. 2 in para 30 to 37 in ITA No. 7389/M/02 to be decided afresh in the light of the decision for A.Y. 1997-98. These grounds are partly allowed for statistical purpose.
63. Ground No. 3 relates to the disallowance of cost of sales.
64. The issue involved is identical with the issue in ground No. 10 in para 38 to 43 in ITA No. 7389/M/02 for A.Y. 1997-98, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No.7391/M/02 for assessment year 1999-2000 is dismissed. The AO is directed to verify the claim if the impugned 19 M/s. Hindustan Dorr Oliver Ltd.
amount was taxed in earlier year, then the same should not be taxed once again in this year.
65. Ground No. 4 relates to the disallowance of the provision for doubtful debts.
66. The issue involved is identical with the issue in ground No. 1 in para 3 to 9 in ITA No. 7389/M/02 for A.Y. 1997-98, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No.7391/M/02 for assessment year 1999-2000 is allowed for statistical purpose. .
ITA No. 790/M/03 - A.Y. 1999-2000 - Revenue's appeal67. Ground No. 1 relates to the deletion of the disallowance on account of fees paid for technical services.
68. The issue involved is identical with the issue in ground No. 1 in para 47 & 48 in ITA No. 614/Mum/2003 for A.Y. 1997-98 in Revenue's appeal, therefore, on similar lines, similar reasons, the appeal filed by the Revenue in ITA No.790/M/03 for assessment year 1999-2000 is dismissed.
69. In the result, the appeals filed by the assessee in ITA Nos. 7389 to 7391/M/02 are allowed in part for statistical purpose and the cross appeals filed by the Revenue in ITA Nos. 614, 615 and 790/M/03 are dismissed.
Order pronounced in the open court on 22.1.2014 .
Sd/- Sd/-
(I.P. BANSAL ) (N.K. BILLAIYA)
Ûयाियक सदःय/JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER
मुंबई Mumbai; Ǒदनांक Dated 22.01.2014
व.िन.स./ RJ , Sr. PS
20 M/s. Hindustan Dorr Oliver Ltd.
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. आयकर आयुƠ(अपील) / The CIT(A)-
4. आयकर आयुƠ / CIT
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण,
मुंबई / DR, ITAT, Mumbai
6. गाड[ फाईल / Guard file.
आदे शानुसार/
ार BY ORDER,
स×याǒपत ूित //True Copy//
उप/सहायक
उप सहायक पंजीकार
(Dy./Asstt. Registrar)
आयकर अपीलीय अिधकरण,
अिधकरण मुंबई / ITAT, Mumbai