DCIT, CHENNAI vs. M/S. RENOLD CHAIN INDIA PVT. LTD., DINDIGUL

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

These are the cross appeals filed by the Revenue & the assessee for the AY 2011-12 against the orders of the Ld.CIT(A)-3, Chennai, in ITA No.53/2014-15/CIT(A)-3.

2.0 ITA No.2259/2016

The Department challenged the Order of the Ld.CIT(A) on the following grounds:

1) The order of the Ld. Commissioner of Income-tax (Appeals) is contrary to law and facts of the case. 2) The Ld. CIT(A) has erred in holding that the assessee had disallowed the provision of bonus in the earlier year and hence the same is allowable on payment basis u/s.43B in the instant year. 3) The Ld.CIT(A) has erred in not directing the Assessing Officer to verify the claim of disallowance of bonus made in the earlier year, before directing the Assessing officer to delete the addition made of ₹37,29,353/-. 4) For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Commissioner of Income-Tax (Appeals) may please be set-aside and that of the Assessing Officer be restored.

All the grounds of appeal are related to the addition of ₹37,29,353/-. 3.0 The assessee filed return of income declaring total income of ₹Nil on 28.11.2011 and assessment was completed under Section 143(3) of the Act by an order dated 31.03.2014 on a total income of ₹77,30,730/-. In the assessment made u/s143(3), the Assessing Officer (in short ‘AO’) has disallowed a sum of ₹37,29,353/- under the head provisions for bonus since the same is outstanding. The assessee went on appeal before the CIT(A) and the Ld. Commissioner of Income Tax(Appeal) (hereinafter & 2286/Mds/2016 :- 3 -: referred to as ‘Ld.CIT(A)’) deleted the addition stating that the amount of ₹38,28,466/- was disallowed by the assessee in the statement of computation Income u/s.43B of the Tax Act (in short ‘the Act’) in the previous assessment hence making addition would amount to double addition of the same expenditure in two different assessment years.

4.0 Aggrieved by the Order of the AO, the department is in appeal before us.

We heard both the parties, the AO disallowed the bonus u/s.43B since the same was outstanding under the head provisions. According to the AO, the assessee has neither disallowed the amount u/s.43B nor paid before filing the return of income. The Ld.CIT(A) without giving an opportunity to the AO, deleted the addition holding that the amount was already disallowed by the assessee in the statement of computation and it was related to the earlier year provision. It requires verification at the level of AO to find out the correct assessment year and whether it should be brought to tax or not? Both the parties, Ld.AR and the Learned Departmental Representative (hereinafter referred to as ‘Ld.DR’) agreed to remit the matter back to the file of AO. Therefore, we remit the matter back to the file of AO and direct the AO to verify the amount of ₹37,29,353/- attracts provisions u/s.43B for addition or not and decide this issue afresh on merits. The AO should give opportunity to the assessee. The Revenue’s appeal is allowed for statistical purposes. & 2286/Mds/2016 :- 4 -:

5.0 for the AY 2011-12

The assessee has filed an Appeal against the disallowances of warranty expenses on the following grounds:

6.0 During the assessment proceedings, the AO disallowed a sum of ₹79,45,000/- towards warranty expenses. The AO found that the assessee debited the P&L A/c for an amount of ₹79,45,000/- under the head warranty expenses and noticed that the provisions for warranty expenses were outstanding at ₹48,12,000/- as on 31.03.2011. Since the assessee failed to furnish the details, the AO disallowed the entire warranty expenses. The Ld.CIT(A) confirmed the addition since no supporting evidences were furnished. During the appeal, Ld.AR argued that the assessee produced the details before the Ld.CIT(A) vide letter dated 29.10.2015, but the Ld.CIT(A) decided the appeal without considering the submissions made by the assessee and requested to provide an opportunity by remitting the matter back to the file of the AO & 2286/Mds/2016 :- 5 -: for further verification and to produce necessary evidences in support of its claim.

7.0 We heard both the parties and perused the material placed on record.

The assessee has debited warranty expenses of ₹79,45,000/- to the P&L A/ and the outstanding provision as on 31.03.2011, was ₹48,12,000/- and the AO has added the entire amount of ₹79,45,000/-. The warranty expenses are allowable expenses subject to the actuarial or on payment basis as per the system of accounting regularly followed by the assessee.

The assessee required to submit necessary details before the AO substantiating the provision made for ₹48,12,000/-. The A.R contends that the details were filed before the Ld.CIT(A) but the CIT (A) has not considered the explanation and the details filed by the assessee.

Therefore, we are of the considered opinion that the issue requires further verification at the level of lower authorities and remitting the matter back to the file of AO to verify the correctness and genuineness of the claim of the assessee will render the justice. Accordingly the issue is remitted back to the file of AO to decide the case afresh on merits. AO should afford an opportunity to the assessee and this ground is allowed for statistical purposes. & 2286/Mds/2016 :- 6 -:

8.0 In the result, the appeal of the assessee is allowed for statistical purposes.