ANDRITZ HYDRO P LTD,BHOPAL vs. PR CIT-1, BHOPAL

per the provisions of Section 263 of the Act, the order passed by the

Ld. AO can be revised only if the said order is erroneous in so far as

it is prejudicial to the interests of the revenue. Accordingly, in order

to initiate the revision proceedings, two conditions are required to

be satisfied simultaneously – (i) the order should be erroneous and

also (ii) prejudicial to the interest of Revenue as held in the cases

Malabar Industrial Co. Limited vs CIT (243 ITR 83) (SC); CIT vs

Associated Food Products (P.) Ltd. (280 ITR 377) (Madhya Pradesh

HC); Manish Kumar vs Commissioner of Income-tax (16

taxmann.com 212) (Indore ITAT). We find that the assessee in its

submission to the Ld. PCIT, the Appellant had explained that the

deduction for utilisation/reversal of warranty provision has been

claimed only in respect of the pre-merger provision brought from

Andritz Hydro Private Ltd. ITANo.198 & 199/Ind/2020

Prithla Unit which was disallowed in the return of income of the

year of creation of such provision. The assessee co. had also

furnished copies of computation of income of Prithla Unit for pre-

merger years from which disallowance of warranty provision in the

year of creation could be easily verified and the Ld. PCIT has not

disputed the above facts as on para 4, the Ld. PCIT has clearly

written that “It is noticed that the assessee in the computation of

income in the relevant A.Y. 2015-16 has deducted a sum of Rs.

1,09,47,667/- on account of warranty expenses disallowed for

earlier years.” Accordingly, where the Ld. PCIT has accepted that

the claim of deduction in the current year is in respect of warranty

provision disallowed in the earlier years, it cannot be said that

allowance of such claim is erroneous in nature. Further, we find

that there was no loss to the revenue on account of Ld. AO’s

acceptance of the claim of deduction of utilisation/reversal of that

warranty provision since the said provision was disallowed and

offered to tax in the earlier years. Therefore, the claim of deduction

of utilisation/reversal of that warranty provision of Rs.

1,09,47,677/- was neither erroneous nor prejudicial to the interests

Andritz Hydro Private Ltd. ITANo.198 & 199/Ind/2020

of Revenue. We also find that the assessee had made complete

disclosures which were duly considered by the Ld. AO with due

application of mind while passing the assessment order. The details

of warranty provision, in respect of which the assessment order is

sought to be revised by the Ld. PCIT, were submitted by the

assessee co. by way of submission of Financial Statements and

computation of income and the Ld. AO had requested to produce

books of accounts which were produced by the assessee in

electronic format. The assessee co. had also submitted the trial

balance of for the subject year vide submission dated 23 November

2017. In the same submission, the assessee co. had also provided

detailed of warranty provision created, utilised and reversed during

the subject year. We find that the Ld. AO noted that the books of

accounts in e-format are checked on a test check basis. The Ld. AO

has specifically scrutinized the miscellaneous expenses and has

also made an addition in this regard. Ld. AO had scrutinised details

of warranty to his satisfaction and the documents and

submissions/details filed were duly verified and considered by the

Ld. AO while passing the Assessment order. Thus, we find that the

Andritz Hydro Private Ltd. ITANo.198 & 199/Ind/2020

Ld. AO has duly examined the issue and with due application of

mind did not invoke any disallowance on account of the claim of

deduction of utilisation/reversal of that warranty provision of Rs.

1,09,47,677/-. Therefore, we are of the view that the Ld. PCIT was

not justified in noting that the Ld. AO did not examine all the

material facts of the case during the assessment proceedings. This

view is supported by the ratio laid down in the the following judicial

pronouncements:

a. Jurisdictional bench of ITAT in the case of Vidisha Tractors vs ACIT (53 TTJ 432) (ITAT Indore). b. Hon'ble Delhi High Court in its judgment in the case of CIT vs Anil Kumar Sharma 335 ITR 83 (Delhi HC) c. Hon'ble Delhi High Court in its judgment in the case of CIT vs Hindustan Marketing & Advertising Co. Ltd. 341 ITR 180 (Delhi HC)

December 2008, the amount of provision standing in the balance

sheet of Prithla unit was Rs.5,10,50,999. This amount has arrived

as follows:

Amount of Tax Treatment Assessment Year provision in the created return AY 2003-04 and earlier years 1,33,87,575 Disallowed AY 2004-05 1,80,424 Disallowed 39

Andritz Hydro Private Ltd. ITANo.198 & 199/Ind/2020

AY 2005-06 16,48,000 Disallowed AY 2006-07 87,86,000 Disallowed AY 2007-08 90,30,000 Disallowed AY 2008-09 1,16,01,000 Disallowed AY 2009-10 (Pre- Merger) 64,18,000 Disallowed As on 31 December 2008 5,10,50,999

From above, we find that the Prithla Unit had created a provision of

Rs. 5,10,50,999/- which was not claimed as a deduction in the year

of creation. This has also been accepted by the Ld. PCIT in para 4

pursuant to verification of tax computations of the above years

furnished before the Ld. PCIT. Upon the merger, this provision was

transferred to the books of the merged company. After the merger,

the provision has been utilised/reversed during various years and

the same has been claimed as a deduction on utilisation/reversal

since no deduction was claimed in the year of creation of provision.

The details of deduction claimed on utilisation/reversal of provision

till AY 2015-16 are summarised as under:

Deduction claimed Assessment Year (INR) AY 2009-10 (Post Merger) Nil AY 2010-11 23,94,383 AY 2011-12 24,43,079 AY 2012-13 44,60,063 AY 2013-14 56,51,613 AY 2014-15 Nil AY 2015-16 1,09,47,667

Andritz Hydro Private Ltd. ITANo.198 & 199/Ind/2020

pronouncements (supra) and considering the fact that the

deduction in respect of provision was not claimed by the Prithla

Unit in the year of creation of provision, we are of the view that the

claim in the year of utilisation/reversal does not tantamount to

double deduction as alleged by the Ld. PCIT. Therefore, the reversal

of provision is not taxable under section 41 of the Act as no

deduction was claimed/allowed in the years of creation of the

provision. Therefore, the above treatment was neither erroneous nor

prejudicial to the interest of the revenue since the allowance upon

utilisation/reversal has been claimed only in the case of the

provision that was disallowed in the year of its creation. Thus, the

order of the Assessing Officer is held not to be erroneous or

prejudicial to interests of revenue on account of allowance of

deduction of utilisation/reversal of warranty provision. Therefore,

we hold that the Ld. PCIT has erred in invoking powers under

section 263 of the Act. Accordingly, we set aside the order of the ld.

PCIT holding it invalid and restore the order of the Assessing

Andritz Hydro Private Ltd. ITANo.198 & 199/Ind/2020

Officer. Consequently, grounds raised in the appeal of the assessee

for the assessment year 2015-16 stand allowed.

198 & 199/Ind/2020 for the assessment years 2014-15 & 2015-16

are allowed.

Order was pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 29.10.2021.

Sd/- Sd/- (MADHUMITA ROY) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore; �दनांक Dated : 29.10.2021 !vyas!

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore