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

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TAXAP/1237/2018HC GujaratGJHC24061213201809 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 dismissed the Tax Appeal. Regarding Question A, concerning the disallowance of Rs. 1,77,10,631 for one-year warranty provisions, the Court noted that the CIT(A) believed the expenditure was based on actual costs for rendering past sale services. Regarding Question B, concerning the ad-hoc disallowance of Rs. 1,84,19,200, the Court observed that the CIT(A) allowed additional evidence, obtained a remand report, and concluded that all expenditures were duly reflected. The Court found that no question of law arose from the Tribunal's decision on these matters. Therefore, the appeal was dismissed.

What were the facts?

The Revenue, Principal Commissioner of Income Tax 2, is in appeal against the Income Tax Appellate Tribunal's order dated April 18, 2018. The appeal concerns two main issues: the disallowance of expenses claimed by the assessee, Hitachi Homes and Life Solutions (I) Ltd., for one-year warranty provisions amounting to Rs. 1,77,10,631, and an ad-hoc disallowance of 10% of various expenditures totaling Rs. 1,84,19,200 due to a lack of bills and vouchers. The Assessing Officer made these additions. The Commissioner of Income Tax (Appeals) deleted both additions. The Tribunal upheld the CIT(A)'s decision.

What were the issues?

1. Whether the Appellate Tribunal erred in law and facts by upholding the deletion of the Assessing Officer's addition of Rs. 1,77,10,631, which disallowed expenses claimed by the assessee for one-year warranty provisions. The Revenue contends that this expenditure related to maintenance and repair charges for Air Conditioner units supplied to customers. The CIT(A) believed this was based on actual costs for past sale services. 2. Whether the Appellate Tribunal erred in law and facts by upholding the deletion of the Assessing Officer's ad-hoc addition of Rs. 1,84,19,200, representing a 10% disallowance of various expenditures, due to the absence of bills and vouchers. The Revenue argued for this disallowance. The CIT(A) allowed additional evidence at the appellate stage, called for a remand report, and concluded that all expenditures were duly reflected. Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The Revenue is challenging the Tribunal's upholding of the CIT(A)'s deletion of the warranty provision expenses and the ad-hoc disallowance of other expenditures.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

C/TAXAP/1237/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1237 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus HITACHI HOMES AND LIFE 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.1,77,10,631/ 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.1,84,19,200/ on adhoc10% disallowance of various expenditure in absence of bills and vouchers for the same?”

QuestionA pertains to disallowance of expenditure of Rs.1.77 crores (rounded off) made by the Assessing Officer. Commissioner of Income Tax C/TAXAP/1237/2018 ORDER (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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