PRINCIPAL COMMISSIONER OF INCOME TAX 2 vs. HITACHI HOMES AND SOLUTIONS (I) LTD.

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TAXAP/1239/2018HC GujaratGJHC24061215201809 October 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court addressed two questions of law. Regarding the first issue concerning the disallowance of Rs. 2,58,61,384 for warranty expenses, the Court noted that the CIT(A) believed the expenditure was based on the actual cost of rendering past sale services. The Tribunal upheld this decision. The second issue involved an ad-hoc 10% disallowance of Rs. 2,12,24,500 for expenditures lacking bills and vouchers. The CIT(A) permitted additional evidence, obtained a remand report, and found that the expenditures were reflected. The Court observed that for this second issue, 'No question of law arises.' The judgment does not explicitly detail the reasoning for upholding the deletion of the warranty expenses, but it implies agreement with the lower authorities' findings. The operative direction was to dismiss the appeal.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax 2, filed an appeal against an order of the Income Tax Appellate Tribunal dated April 18, 2018. The appeal concerned assessment year(s) not explicitly stated in the judgment. The Assessing Officer had made additions to the assessee's income, Hitachi Homes and Solutions (I) Ltd. The Commissioner of Income Tax (Appeals) and the Tribunal had deleted these additions. The first addition of Rs. 2,58,61,384 related to the disallowance of expenses claimed by the assessee for a one-year warranty on Air Conditioner units. The second addition of Rs. 2,12,24,500 was an ad-hoc 10% disallowance of various expenditures due to a lack of bills and vouchers.

What were the issues?

1. Whether the Appellate Tribunal erred in law and facts by upholding the deletion of the addition of Rs. 2,58,61,384 made by the Assessing Officer, which disallowed expenses claimed by the assessee for a one-year warranty? The Revenue contended that these expenses were disallowed by the Assessing Officer. The assessee's position, as upheld by the CIT(A) and the Tribunal, was that these expenses related to maintenance and repair charges for past sale services and were based on actual costs. 2. Whether the Appellate Tribunal erred in law and facts by upholding the deletion of the addition of Rs. 2,12,24,500 made by the Assessing Officer, which was an ad-hoc 10% disallowance of various expenditures in the absence of bills and vouchers? The Revenue's contention was that the disallowance was made due to the lack of supporting documentation. The CIT(A), however, allowed additional evidence at the appellate stage, called for a remand report, and concluded that all expenditures were duly reflected.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

C/TAXAP/1239/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1239 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus HITACHI HOMES AND SOLUTIONS (I) LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 09/10/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 18.04.2018 raising following questions for our consideration: “[A] Whether the Appellate Tribunal has erred in law and on facts by upholding the decision of CIT(A) of deleting the addition made

by Assessing

Officer

of Rs.2,58,61,384/ by disallowing the expenses claimed by the assessee for provision of one year warranty? [B] Whether the Appellate Tribunal has erred in law and on facts by upholding the decision of CIT(A) of deleting the addition made

by Assessing

Officer

of Rs.2,12,24,500/ on adhoc10% disallowance of various expenditure in absence of bills and vouchers for the same?”

QuestionA pertains to disallowance of expenditure of Rs.2.58 crores (rounded off) made by C/TAXAP/1239/2018 ORDER the Assessing Officer. Commissioner of Income Tax (Appeals) and the Tribunal deleted the same. This expenditure related to the maintenance and repair charges expended by the assessee on Air Conditioner units supplied to the customers. The Commissioner of Income Tax (Appeals) in particular believed that this was based on actual cost involved in rendering such past sale services.

QuestionB pertains to adhoc disallowance of 10% made by the Assessing Officer on the ground that the assessee had not produced bills and vouchers for the expenditure. Commissioner of Income Tax (Appeals) allowed additional evidence to be produced at the appellate stage, call for the remand report and came to the conclusion that all expenditure were duly reflected. No question of law arises.

In the result, Tax Appeal is dismissed.

(AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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