HAGGLUNDS DRIVES (INDIA) PVT. LTD. ( NOW MERGED IN BOSCH REXROTH (INDIA) LTD.),,AHMEDABAD vs. THE DY.CIT, CIRCLE-1(1)(2),, AHMEDABAD

Appellant by : Shri S. N. Soparkar, Sr. Advocate & Shri Parin Shah, A.R. Respondent by: Shri Ankit Jain, Sr. D.R. 18.07.2024 Date of Hearing Date of Pronouncement 14.10.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM: Both appeals have been filed by the Assessee against the order passed by the Deputy Commissioner of Income Tax (in short “DCIT”), Circle-1(1)(2), 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 2 - Ahmedabad and Income Tax Officer (in short “ITO”), Ahmedabad vide orders dated 06.02.2015 & 28.12.2015 passed for the Assessment Year 2010-11 & 2011-12.

2. The assessee has raised the following grounds of appeal:-

(A.Y. 2010-11) “1. On the facts and in the circumstances of the case and in law the Learned Deputy Commissioner of Income-tax Circle 1(11(2) Ahmedabad (Ld. AO) under the rectors of Honourable Dispute Resolution Panel (Hon’ble DRP) erred in classifying office equipment under the head "furniture and fittings” instead of plant and machinery and thereby disallowing differential depreciation of Rs. 1,00,564 by restricting the claim of depreciation office equipment to ten percent. The Appellant prays that the aforesaid addition be deleted.

2. On the facts and in the circumstances of the case and in law the Ld. AO erred in disallowing expenses amounting to Rs. 15,21,424 under section 40(a)(ia) of the Act without appreciating the fact that the said payments were not subject to TDS. The Appellant prays that the aforesaid addition be deleted 3 On the facts and circumstances of the case and m law the Ld. AO under the directions of Hon’ble DRP erred in disallowing devaluation of inventory amounting to Rs. 1,40,79,555. While making this addition the Ld. AO erred in law and on facts on the following: i. in disregarding the stock valuation made by the Appellant as per AS 2 and section 145A of the Act ii. in not appreciating the fact that no adverse remark made by the Auditors the audit report and iii. in disregarding the contention of the Appellant that the current method of valuation of inventory has been followed consistently over the past years The Appellant prays that the aforesaid addition be deleted 4. Without prejudice to Ground No 3 on the facts and in the circumstances of the case, the disallowance, if any, should be restricted to Rs. 40.03 500 being the amount debited to the profit and loss account for the year under consideration. The Appellant prays that appropriate relief should the granted to the Appellant The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal

.” Assessment Year 2010

11. Ground of Appeal Number 1: The assessing officer erred in classifying office equipment as “furniture and fittings” instead of “plant and machinery” and thereby disallowing differential depreciation of ₹ 1, 86, 564/-

3. The brief facts relating to this Ground of Appeal are that the assessee claimed depreciation on office equipment@15%, which the Assessing Officer (AO) classified as "furniture and fittings" and allowed depreciation @ 10%. The AO’s classification led to a proposed disallowance of differential depreciation amounting to Rs. 1,86,564/- by limiting the claim to 10%, instead of the Assessee's claimed rate of 15 percent. The Assessee argued before DRP that the AO made several legal and factual errors. Firstly, the AO claimed that the Assessee did not specify the items for which it had sought a 15 percent depreciation rate. The Assessee contested this assertion, highlighting that office equipment qualifies for depreciation under the category of " Plant and Machinery", as outlined in Part III of New Appendix-I to the rules, and has consistently claimed this higher rate in previous years. The Assessee submitted before DRP that it has correctly calculated depreciation separately for furniture and fittings at 10 percent, and that the office equipment should be classified distinctly and subject to the higher rate of 15%. The office equipment in question includes items such as fire extinguishers and mobile phones, which the Assessee submitted clearly do not fall under the definitions of “furniture or fittings”. The Assessee relied on judicial precedent from the Punjab and Haryana High Court, which recognized similar equipment as eligible for higher depreciation as part of 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 4 - plant and machinery, further reinforcing its argument. Additionally, the Assessee referred to Section 32(1)(j)(ia) of the Income Tax Act, which allows for additional depreciation on new plant and machinery, arguing that this also includes office appliances and supports their classification as plant and machinery. During the hearing before DRP, the assessee submitted that the company employs an exclusive method of accounting for Excise Duty and CENVAT, indicating that the valuation method prescribed under Section 145A of the Income Tax Act would not affect its financial statements. The assessee submitted how the accounting for excise duties and the resulting impact on the profit and loss account would remain neutral regardless of the method used. However, the AO did not accept the arguments of the assessee and held that the details of the specific office equipment for which a 15 percent depreciation was claimed were not adequately provided. The AO was of the view that the classification under Part A of New Appendix-I clearly allows only 10 percent for furniture and fittings, and without proper evidence or details, the office equipment could not be justifiably classified under the more favourable “plant and machinery” category. Accordingly, the Ld. Assessing Officer allowed 10 percent depreciation on office equipment, resulting in the disallowance of the differential depreciation.

4. The assessee is in appeal before us against the aforesaid order passed by DRP/AO confirming the addition of differential amount of depreciation in the hands of the assessee. Before us, the counsel for the assessee submitted that the assessee company has now merged with Bosch Rexroth and accordingly, the cases of the assessee are now covered by the ITAT. Decision in the case of Bosch Rexroth. The counsel for the assessee drew our attention to page 45 of paper 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 5 - book-1 and submitted that the full details of office equipment were submitted by the assessee before the assessing officer for his consideration, and the allegation of the assessing officer that the complete details were not filed by the assessee is factually incorrect. The counsel for the assessee submitted that this issue has been decided in favour of the assessee in for assessment year 2010-11.

5. It would be useful to reproduce the relevant extracts of the ruling for ready reference:

“24. The ground no.5 reads as under:

“On the facts and in the circumstances of the case and in law, the ld.AO under the direction of Hon’ble DRP erred in classifying office equipment under the head “furniture and fittings” instead of “plant & machinery” and thereby disallowing differential depreciation of Rs.11,71,648/- “ 25. Brief facts relating to the case are that during the assessment proceedings, the AO had noted that the assessee had claimed depreciation on office equipments at the rate of 15% on an amount of Rs.2,36,57,570/-. The AO held that the office equipment qualified as furniture and fittings and that the assessee accordingly was entitled to depreciation at the rate of 10% thereon and not 15%. The assessee was confronted with the same who responded by stating that it had claimed depreciation at the rate of 15% on office equipments which qualified as plant & machinery and were used in the factory premises. He stated that these equipments did not fall within the meaning of furniture and fittings. The AO was not convinced with the submission of the assessee, who held that as per the rate of depreciation prescribed under the Income Tax Rules, 1962 in Part-III of new Appendix,equipments are not covered under the plant & machinery, but they are covered under the category fittings on which rate of depreciation is 10%. Accordingly, he restricted the assessee’s claim of depreciation on office equipments to 10% as opposed to 15% claim by the assessee, and excess depreciation so claimed by the assesseeamounting to Rs.11,71,648/- was proposed by the AO to be disallowed in his draft order passed under section 143C of the Act.

26. The assessee objected to the same before the ld.DRP contending that it had been consistently claimed depreciation at the rate of 15% on office equipments which qualified as plant & machinery, and which had been allowed in earlier year also, and further relied on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Subrata Dutta Choudhary, 197 taxmann 71 (P&H) in support of his contentions that equipments qualify cannot be treated as office furniture, but qualified as plant & machinery. The 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 6 - Ld.DRP however dismissed the contentions of the assessee, nothing that the assessee had not furnished details of items on which depreciation at the rate of 15% was claimed under the head “office equipments”, and therefore, in the absence of details furnished by the assessee, the contention of the assessee cannot be accepted that office equipments qualified as plant & machinery for claiming depreciation at the rate of 25%. The relevant finding of the ld.DRP in this regard at para 1.2 of his order reads as under: “1.2 We have considered the basis of allowing of depreciation @ 10% as against depreciation claimed @ 15% by the assessee on office equipments and also consider the detailed submission and arguments of the assessee. From the detailed submission before the AO as well as before this panel, it is clear that assessee has not furnished the details of items on which depreciation @ 15% is claimed under the head office equipments. As per Part A of new Appendix -I, depreciation @10% is allowable on furniture and fittings including electrical fitting and electrical fittings include electrical wiring, socket, other fittings and fans etc. Office equipments without any details and description with supporting evidence @ 15%. Assessee's argument that the details of items/list of assets (office equipments on which depreciation was claimed @ 15% was never asked for by the AO cannot be accepted because of such office equipments. Under these circumstances, it is held that, the Assessing Officer has rightly allowed the depreciation @10% and disallowed differential depreciation of Rs.11,71,648/-. Therefore, the assessee's objection rejected. However, the AO is directed to adopt revised WDV for granting depreciation in subsequent year.”

6. In view of the above, since the Ahmedabad Tribunal in the case of Bosch Rexroth in ITA number 930/Ahd/2015 has decided this issue in favour of the assessee, ground number 1 of the assessee’s appeal is allowed.

Ground of Appeal No. 2: The DRP erred in disallowing expenses amounting to ₹ 15, 21, 424/- under section 40(a)(ia) of the Act:

7. The brief facts regarding this Ground of Appeal are that the Assessing Officer made disallowance of expenses under Section 40(a)(ia) of the Income 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 9 - Tax Act, 1961, due to the Assessee's failure to deduct tax at source (TDS) on certain payments made for labor, annual maintenance contracts (AMC), and professional charges. During the assessment proceedings, it was observed that the Assessee had made payments to several parties, including Drives India Ltd., Indian School of Business, System Advisors Software Services Pvt. Ltd., Hagglunds Drives AB, and Concept Information, amounting to Rs. 15,21,424. These payments were made without complying with the tax deduction requirements specified under Sections 194J and 194C of the Income Tax Act.

8. Ld. Assessing Officer observed that the payments included amounts such as Rs. 1,00,000 and Rs. 14,21,424 for which the Assessee did not deduct TDS as mandated by the law. The AO highlighted that the Assessee failed to deduct the appropriate TDS on payments made under Section 194J, which relates to professional fees, and Section 194C, which pertains to payments to contractors. Furthermore, the AO noted that the tax, once deducted, must be deposited with the Government by the end of the financial year, a requirement that the Assessee did not fulfill. The Assessee was asked to explain why the payment of Rs. 15,21,424 should not be disallowed due to these infractions. In response, the Assessee provided details of payments made to various parties, claiming they were TDS liable, but the AO found that despite being responsible for deducting tax on the total amount, the Assessee failed to do so. The Assessee did not offer any satisfactory explanation for this non-compliance. Accordingly, Ld. Assessing Officer held that given the clear requirements under Sections 194J and 194C of the Act, and the Assessee’s inability to demonstrate compliance, that the facts of the assessee’s case warranted disallowance under Section 40(a)(ia) of the Act. Ld. Assessing Officer observed that section 40(a)(ia) of the Act disallows 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 10 - any expenditure claimed by an Assessee that is not in accordance with the provisions for tax deduction. Accordingly, the AO disallowed the total payment of Rs. 15,21,424, citing the Assessee’s failure to adhere to the tax deduction provisions. It was noted that the Assessee did not file any objections before the Hon'ble Dispute Resolution Panel (D.R.P.) in Ahmedabad, reinforcing the decision to disallow these expenses based on the outlined failures to comply with the legal requirements.

9. On going to the facts of the instant case, we are of the considered view that there is no infirmity in the order of the assessing officer, so as to call for any interference with respect to this ground of appeal. The assesse has furnished no plausible explanation to justify non-deduction of taxes.

10. In the result, ground number 2 of the assessee’s appeal is dismissed.

Ground number 3: DRP erred in upholding disallowance of devaluation of inventory amounting to ₹ 1,40,79,555/-

12. The assessee is in appeal before us against the aforesaid order passed by DRP confirming the aforesaid addition in the hands of the assessee. Before us, the counsel for the assessee submitted that the issue of devaluation of inventory is covered by the decision of Tribunal in the assessee’s case for assessment year 2010-11 in wherein the assessee’s appeal has been allowed in it’s favour by the Tribunal, vide the aforesaid order. Accordingly, in view of the aforesaid order, the issue may be decided in favour of the assessee. It would be useful to reproduce the relevant extracts of the order of ITAT dated 17-05-2023, wherein this issue has been decided in favour of the assessee, for ready reference:

41. Ground No.8 reads as under: “On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing devaluation of inventory amounting to Rs.1,79,46,564. While making the addition, the Ld. AO erred in law and on facts on the following: i. in disregarding the stock valuation made by the Appellant as per AS 2 and section 145A of the Act; ii. in not appreciating the fact that no adverse remark is made by the Auditors in the audit report; iii. in disregarding the contention of the Appellant that the current method of valuation of inventory has been followed consistently over the past years; The Appellant prays that the aforesaid addition be deleted.

42. Briefly stated facts are that the AO noted on verification of the details of inventory that the assessee has reduced the value of closing stock by an amount of Rs.1,79,49,564/- being written off of slow moving stock. On being asked to justify and explain its claim, the assessee responded by stating that devaluation of stock had been done following the method of accounting prescribed under AS-2 for valuation of inventories requiring inventories to be valued at cost or net realizable value, whichever is lower, which practice the assessee had been consistently following in the past also, and which was in accordance the provisions of section 145A of the Act also. The AO however was not satisfied with the reply of the assessee for the reason that, he noted, while the assessee had reduced the value of cost of inventory by almost 50%, but had not supported this reduction in value with any evidence or logic. The AO noted that the assessee was manufacturer of hydraulic and pneumatic equipments and parts, and these items did not get decayed easily. The AO held that devaluation in accordance with the AS-2 was to be done on inventory only, in case they were damaged or had become whole or partially obsolete or their selling price has declined and the assessee has failed to prove with evidence that they became obsolete, damaged or declined in selling price of inventories so devalued by it. The assessee further contended before the AO that it had system for devaluing assets based on scientific evaluation of its stock wherein on the basis of age of inventory, a percentage valuation in its value had been worked out by the company to cover its loss in value which the company had noted inversely proportionate to the holding period of inventory. The AO however rejected this contention of the assessee also stating that the assessee had failed to identify the items which it had devalued. Accordingly not satisfied with the explanation of the assessee that the devaluation of its inventory to the extent of Rs.1,79,49,564/-, the AO had proposed disallowance of the same. The assessee objected to this disallowance.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 17 - 50. On going through all the orders of the authorities below, we find that the assessee’s claim of devaluation of stock to the extent of Rs.1,79,49,564/- was disallowed primarily for the reason that the assessee was unable to file any justification for devaluation in value of stock. The DRP went to the extent of stating that claim of devaluation was not allowable to the assessee since it was earning profits on sale of spare, and there was no question of any value in the value of its stock/inventory so as to justify the devaluation. We have carefully gone through the submissions made by the assessee before the lower authorities to which our attention was drawn, and we find that the assessee had explained and demonstrated to the lower authorities that devaluation of inventory so done related to the slow moving inventory. It was pointed out by the assessee to the authorities below that on account of passage of time, such inventory loses its value in terms of market price for various reasons, such as on account of new products coming into the market, demands for the same no longer remain, and so on. The assessee had contended that its technical team had devised a basis for write off the value on slow moving assets based on age-wise analysis and details thereof were also furnished. It was also pointed out that the assessee consistently following the system all along and the system was in compliance with AS-2 and section 145A of the Act also. The assessee, we have noted, had furnished details of each and every inventory which it had devalued, substantiating its basis of the devaluation on age-wise analysis giving complete details of last date on which inventory was purchased showing that they were slow moving items, and based on age-wise analysis adopted by the assessee company, assets were accordingly devalued.

Now we shall come to the assessee’s appeal for assessment year 2011-12: 13. The assessee has taken the following grounds of appeal:

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 18 - A.Y. 2011-12) “1. On the facts and circumstances of the case and in law the Learned Income-tax Officer. Ward-1(1)(3) Ahmedabad (Ld. AO) and the Learned Joint Commissioner of Income-tax Transfer Pricing Officer (Ld TPO) under the directions of Honourable Dispute Resolution Panel (Hon’ble DRP), erred in making an upward adjustment of Rs 2.22 61.539/- in relation to the international transaction of payment of Infrastructure Consultancy and support charges to Associated Enterprise (AE) The Appellant prays that the addition made by the Ld AO TPO in relation to the international transaction of payment of Infrastructure Consultancy and support charges to AE be deleted 2. On the facts and circumstances of the case and in law the Ld AO/TPO under the directions of Hon'ble DRP erred in making an upward adjustment of Rs 51.07.133/ in relation to international transaction of payment of Information Technology Consulting Charges to AE The Appellant prays that the addition made by the Ld AO TPO in relation to the international transaction of payment of Information Technology Consulting Charges to AE be deleted 3. On the facts and circumstances of the case and in law the Ld AD TPO under the directions of Hon'ble DRP erred in making an upward adjustment of Rs 93.10.417/-in relation to the international transaction of payment of Guarantee Fees to AE The Appellant prays that the additions made by the Ld AO/ TPO in relation to the international transaction of payment of Guarantee Fees to AE be deleted 4. On the facts and circumstances of the case and in law the Ld AO under the directions of Hon’ble DRP erred in classifying office equipment under the head "furmture and fittings” instead of "plant and machinery and thereby disallowing differential depreciation of Rs 10.42.795/- by restricting the claim of depreciation on office equipment to ten percent. The Appellant prays that the additions made by the Ld AO in relation to the disallowance of differential depreciation by classifying office equipment under the head "furniture and fittings instead of "plant and machinery be deleted 5. On the facts and circumstances of the case and in law the Ld AO under the directions of Hon'ble DRP erred in disallowing devaluation of inventory amounting to Rs 3,10,39,552/-. The Appellant prays that the additions made by the Ld AD in relation to the disallowance of devaluation of inventory be deleted 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 19 - 6. On the facts and circumstances of the case and in law the Ld AO under the directions of Hon’ble DRP erred in disallowing amount written off towards Loose tools in profit and loss account amounting to Rs 4,67,37,977/- The Appellant prays that the additions made by the Ld AO in relation to the disallowance of writing off towards Loose tools be deleted 7. On the facts and circumstances of the case and in law the Lid AO under the directions of Hon'ble DRP erred in disallowing provision for doubtful debts amounting to Rs 111 10 300/under section 36(1)(vii) of the Income-tax Act 1961 The Appellant prays that the additions made by the Ld AO in relation to the disallowance of provision for doubtful debits be deleted The Appellant craves leave to add alter amend or withdraw all or any of the Grounds of Appeal” Ground No. 1: DRP erred in making upward adjustment of Rs. 2,22,61,539/- in relation to international transaction of payment of infrastructure consultancy and support charges to AE:

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 22 - 18. Accordingly, in interest of justice, ground number 2 of the assessee’s appeal is restored to the file of assessing officer for de novo adjudication in line of the arguments made by the counsel for the assessee which are to the effect that if the expenses have been capitalised as capital work in progress and that no expense has been claimed, and therefore, the expense should not be disallowed. The assessing officer is directed to verify the precise amount of expenses which have been capitalised and thereafter, taking into consideration the arguments of the assessee on this issue, pass appropriate orders in accordance with law.

Ground number 1: DRP erred in making upward adjustment of Rs. 51,07,133/-in relation to international transaction of payment of information Technology Consulting Charges to AE:

21. The assessee is in appeal before us against the aforesaid order of DRP, confirming the additions made by the assessing officer. Before us, at the outset the counsel for the assessee submitted that the issue is now squarely covered in favour of the assessee by the Ahmedabad Tribunal in assessee’s own case for ITA number 930/Ahd/2015. Therefore, in view of the observations of Ahmedabad Tribunal, in relation to the same set of facts, the issue now stands decided in favour of the assessee.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 25 - 22. In response, the learned DR placed reliance on the observations made by the DRP/assessing officer in their order, with respect to this ground of appeal.

“3. Ground No.1, 2 & 3 raised by the assessee, it was pointed out, related to the issue of adjustment made to the international transaction of payment for information technology consultancy charges to the AE of the assessee amounting to Rs.4,84,28,143/-, the ALP of which was determined by the TPO at NIL, holding, it was only in the nature of stewardship and supervisory services. All these grounds are being dealt with by us together. The said grounds read as under:

1.

2. On the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP erred in making the adjustment on account of Information Technology Consulting Charges ignoring that: i. the Appellant had supported the claims for need and rendition of the services with appropriate evidences while demonstrating the benefits received therefrom; ii. there was commercial rationale and expediency in availing the services from the AEs; and iii. the Appellant is not required to establish the benefit arising out of the said services. The Appellant therefore prays that the above adjustment be deleted.

3. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP erred in determining the arm's length price of the Information Technology Consulting Charges at NIL.

4. On the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP, erred in making adjustment of Rs. 52,91,667/- in relation to the international transaction of payment of guarantee fees to AE. The Appellant 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 26 - prays that the additions made by the Ld. AO / TPO in relation to the international transactions of payment guarantee fees to AE be deleted.

5. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in classifying office equipment under the head "furniture and fittings" instead of "plant and machinery" and thereby disallowing differential depreciation of Rs.11,71,648 by restricting the claim of depreciation on office equipment to ten percent. Appellant prays that the aforesaid addition be deleted. On the facts and in the circumstances of the case and in law, the Ld. AO erred in disallowing seminar expenses, exhibition expenses and advertisement expenses amounting to, Rs.32,82,122 under section 40(a)(ia) of the Act without appreciating the fact that the payments were not subject to IDS. The Appellant prays that the aforesaid addition be deleted.

7. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing provision for advertisement expenses amounting to Rs. 85,500 by considering it as an ad hoc provision without appreciating the break-up of the' said expense and the fact that taxes had been withheld and deposited to the credit of government on the said provision amount. The Appellant prays that the aforesaid addition be deleted.

8. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing devaluation of inventory amounting to Rs. 1,79,46,564. While making the addition, the Ld. AO erred in law and on facts on the following: i. in disregarding the stock valuation made by the Appellant as per AS 2 and section 145A of the Act; ii. in not appreciating the fact that no adverse remark is made by the Auditors in the audit report; iii. in disregarding the contention of the Appellant that the current method of valuation of inventory has been followed consistently over the past years; The Appellant prays that the aforesaid addition be deleted.

9. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in capitalising interest expense amounting to Rs.59,12,913 to the capital work-in-progress ('CWIP') without any basis. It is prayed that the interest be allowed u/s 36(1)(iii) of the Act since it is for the purpose of business.”

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 27 - 4. The ld.counsel for the assessee before us contended that IT consultancy expenses to the tune of Rs.4,84,28,143/- were incurred by the assessee on account of support received from its AE for implementation and trouble-shooting of SAP software, RAINBOW, acquired by it . It was pointed out that this SAP software was customized for the requirement of the Bosch group. For the roll out of this software to the assessee, the regional team of consultants from US,Europe, AsiaPacific, worked on site as well as provided support from legacy system. It was pointed out that during the implementation process various meetings were held to discuss various transactions and concept for functionality of the same in SAP. As evidence, it was pointed out, the list of employees of AE working on SAP implementation was filed; copy of schedule reflecting time and agenda of various sessions conducted during the implementation of SAP for various modules; minutes of meeting reflecting trouble shoot/guidance for different types of transactions, management of various databases and procedures in day-to-day business operations, viz. outgoing payments, guarantees given, customer master, invoice processing, salary interference, vendor master were submitted. Our attention was invited to description of IT technology services submitted to the TPO vide letter dated 26.6.2013 placed before us a PB page no.119 as under: “1. Bosch Group entities are provided Information Technology solutions and support sendees so as to have economical and reliable solutions of high quality for the benefit of Bosch Group on a global basis. BRIL is also provided such support so that its activities are aligned with the Bosch Group strategy at a global level.

3. For drives and control business, this customized SAP is called Rexroth Application Integration for Business Optimisation Worldwide ('RAINBOW').

4. During the year under consideration, BRIL was allocated charges for SAP consulting. For roll out of any SAP software, the regional team (US, Europe, Asia Pacific) of consultants work on site as well as provide the support for roll out from legacy system to RAINBOW. They charge for consultancy and travel costs of consultants.

5. It is important to note here that, these services received by BRIL are availed in both the segments i.e. Manufacturing and Trading segments. Hence the value of these international transactions has been allocated between manufacturing and trading activities by using sales value as a basis of allocation. Sales made by the manufacturing division are INR 207.57 crores and trading division is INR 185.89 crores i.e. the allocation ration being 50.89/6 and 49.11% respectively.

6. Sample invoices for the service are enclosed herewith as Annexure — K 1.1 5. Our attention was drawn to various invoices raised on account of the said services by its AE placed at PB Page No.120 to 124 and also agreement for rendering of services of AE, placed before at PB Page No.115 to 117. Our attention was also drawn to the list of 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 28 - employees who worked on the SAP project placed before us at PB page no.522; schedule of sessions conducted during the implementation of SAP at page no.523 to 524; minutes of meeting reflecting trouble shoot/guidance of different modules of SAP at PB page no.525 to 553, and certificate from hotel for stay of personal engaged in SAP implementation was also filed and placed before us at PB Page No.554 to 555, which were submitted to the DRP also.

6. The ld.counsel for the assessee contended that the above evidences sufficiently demonstrated that the assessee had actually required such support from its AE and had also received benefit from such services. He thereafter drew our attention to the finding of the DRP dismissing the assessee’s objection at para-5 of his order as under: “5. IT consulting charges_-The payment is claimed to have been made to avail support in relation to the implementation of SAP module in respect of the issues faced in initial implementation. This is in relation to the implementation of RAINBOW. This amount has not been capitalised. 5.1 We find from the details furnished by the assessee that the description of the services rendered under this head is sketchy, the payment has been made to more than one AE. The assessee has not been able to explain as to how the maintenance cost of a software purchased for Rs.2.91 cr can be as high as 1.47 cr in a single year. Further it is seen from the annual accounts of the assessee company that a huge amount of Rs 3.10 cr. has been shown as paid to Robert Bosch Engineering and services Ltd on account of IT support including online support for SAP implementation, as per the details furnished before the AO. Besides the TPO has already allowed the charges paid in the name of I.T. Support charges amounting to Rs 1.46 cr. In such circumstances we agree with the TPO that services under this head were either not delivered at all or were merely in the nature of supervisory guidance to ensure alignment of the systems with the group's integrated system. Therefore we reject the assesee's objections in this regard and confirm the adjustment proposed by the TPO to this extent.”

7. Referring to the above, the ld.counsel for the assessee pointed out that the DRP held that the services were not delivered and in any case were only in the nature of supervisory and support services and accordingly upheld the findings of the TPO determining the ALP of these transactions to be NIL. Ld. Counsel for the assessee argued that in view of all the evidences and explanation filed by the assessee as above the DRP was incorrect in holding that no services were rendered to the assessee. He further pointed out that the DRP concurred with the finding of the TPO that no services were rendered on this count or they were merely supervisory services ,on the basis that quantum of charges paid by the assessee for these services was disproportionately higher in relation to the cost of the software for the implementation of which these services were procured by the assessee. He pointed out that the DRP had taken note that while software purchased for Rs.2.91 crores, the maintenance cost claimed by the assessee as IT consultancy charges, was as high as Rs.1.47 crores, and based on this, the 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 29 - DRP held that the assesseeactually hadnot received any benefit on this count. The ld.counsel for the assessee contended that this cannot be the basis for holding that the assessee had not procured any service on account of IT consultancy, more particularly, when all evidences in this regard, as noted above, were filed by the assessee. The ld.DR on the other hand relied on the order of the DRP/TPO.

9. In view of the same, we do not agree with the AO/DRP that no services were rendered by the AE to the assessee on account of IT consultancy services, and we therefore, direct the deletion of the adjustment made to the same by treating the ALP of the said services at NIL as opposed to Rs.1,47,36,729/- claimed by the assessee.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 30 - In view of the above, ground nos.1, 2 & 3 raised by the assessee are allowed.” 24. We observe that since the matter is covered on this issue in favour of the assessee, and the relevant observations which have been reproduced above.

Ground number 3: DRP erred in making upward adjustment of ₹ 93,10,417/- in relation to international transaction of payment of guarantee fees to AE

27. The assessee is in appeal before us against the aforesaid order passed by the DRP confirming the additions in the hands of the assessee on this issue. Before us, the counsel for the assessee submitted that the of payment of guarantee fee is covered by the honourable Tribunal in the assessee is case for assessment 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 32 - year 2010-11 in ITA number 930/Ahd/2015, wherein the assessee’s appeal has been allowed in it’s favour by the Tribunal on this issue, vide the aforesaid order. Further, the counsel for the assessee submitted that the Gujarat High Court has also confirmed the position for assessment year 2009-10. Accordingly, in view of the offer aforesaid order, the issue may be decided in favour of the assessee.

28. It would be useful to reproduce the relevant extracts of the order of ITAT dated 12-07-2024, wherein this issue has been decided in favour of the assessee, for ready reference:

“2. The present appeal filed by the assessee deals with the matter for A.Y. 2010-11, recalled vide order of the Tribunal dated 24-1-2024 in MA No.85/Ahd/2023 in IT(TP)AO.930/Ahd/2015. In the said MA, it was pointed out that the assessee had raised the issue of addition made by the AO/TPO on account of adjustment of Rs.52,91,667/- in relation to the international transaction of payment of guarantee fees to AE and the assessee sought the deletion of the same before the Tribunal in its above appeal. This issue was raised in ground no.4 in ITA No.930/Ahd/2015. However, the Tribunal vide impugned order dated 31-5-2023 confirmed the upward adjustment so made by the lower authorities and dismissed the claim of the assessee. It was further pointed out that the Tribunal while confirming the order of the lower authorities did not appreciate the fact that similar addition made by the Department for the A.Y. 2009-10 was deleted by the ITAT by holding that the payment for guarantee commission was justifiable, and therefore, the finding of the Tribunal for the impugned year is contrary to its earlier decision on the similar issue. Therefore, this being a mistake apparent on record of the case and the Tribunal found merit in the contention of the assessee decided to reconsider the issue and decided to recall the order of Tribunal qua dated 31-5-2023 to the limited purposed of adjudication of Ground No. 4 only.

3. Therefore, now we decide on the ground number 4 with this order which is as follows: “4. On the facts and in the circumstances of the case and in law, the Ld. AO/ TPO under the directions of Hon'ble DRP, erred in making adjustment of Rs. 52,91,667/- in relation to the international transaction of payment of guarantee fees to AE.” The Appellant prays that the additions made by the Ld. AO / TPO in relation to the international transactions of payment guarantee fees to AE be deleted.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 33 - On the Ground of appeal:

4. The issue involved in this ground relates to the TP adjustment made in relation to international transactions of payment of guarantee fees by the assessee to its AE amounting to Rs.52,91,667/- the Arm’s Length Price(ALP) of which was determined at NIL by AO/TPO, objection of the assessee to which, was dismissed by the DRP. 4.1. The facts relating to the issue are that during the impugned year, the assessee has availed Rs.100 crores borrowing from its group company viz. Bosch Ltd., Bangalore, and interest rate charged thereon was at the rate of 11%. For the said purpose, one of the AEs of the assessee i.e. Robert Bosch Gmbh acted as guarantor and charged guarantee fee at the rate of 0.75% per annum to the assessee for the guarantee provided. During the impugned year, the assessee accordingly paid guarantee charges of Rs.52,91,667/-. The TPO found that no services for guarantee had been rendered by the AO; no distinct benefit had accrued to the assessee in form of reduction in the interest rate on account of guarantee and the transaction sought to be propagated by the assessee as comparable adopting CUP method was not comparable. Accordingly, the transaction of the AE giving guarantee on behalf of the assessee company was benchmarked at NIL, as no service of any value was found rendered and upward adjustment to the extent of Rs.52,91,667/- was proposed to be made by the TPO. The relevant finding of the TPO in this regard at para 6 of his order are as under:

6. As clearly brought out in the show cause letter issued to the assessee and the discussion made above following distinct features are noted in respect of this transaction. i. The loan has been taken from a related party Bosch India. The guarantee has also been supplied by a group entity Robert Bosch GmbH, Germany. ii. There does not appear to have been any distinct insistence by the lender for guarantee. No evidence of this nature was furnished by the assessee to this office. iii. There is no evidence of third parties also insisting on guarantee for giving loan to the assessee. iv. The assessee had sufficient reserves as well as assets to support the loan and a collateral guarantee was neither needed nor demanded. It had no other charge on these assets. v. A unilateral group policy imposing guarantee on the assessee and seeking charges for the same cannot be regarded as a service rendered to the assessee. vi. Since no service has been rendered by the AE, no charge can be attributed to the transaction of giving guarantee to the assessee company. vii. No distinct benefit has accrued to the assessee in the form of reduced interest rate on account of guarantee.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 34 - viii. The loan was to acquire capital assets which itself would have served as a collateral. Hence, an additional guarantee did not serve any purpose. ix. The transaction sought to be propagated as CUP is incomparable due to the following reasons: a. The loan transaction is not a simple transaction. it is a composite transaction with short term funding along with the funding in the nature of guarantee to be provided by the bank to the assessee. b. The loan transaction is for working capital purposes while the loan obtained on the strength of guarantee was utilised for capex. c. The nature of the loan transaction was short term funding while the loan from related party is in the nature of long-term funding. x. Without prejudice, it is seen that the bank has provided the funds in the nature of guarantee for bank guarantees, shipping guarantees, bid bonds, performance bonds and export guarantees to the assessee, after obtaining the counter guarantee from the assessee. This clearly means that the bank has covered is risk and after coverage of such-risk, no guarantee fees has been charged from the assessee. In the case of loan from related party it is very clear that the risk of granting the loan to the assessee was negligible on account of the healthy reserves, and working capital position of the assessee and thus the risk of the lender was adequately covered. Therefore, on the same lines on which no guarantee fee was charged by the bank no guarantee should have been charged from the assessee also. 6.1 In light of the above discussion, the transaction of the AE giving guarantee on behalf of the assessee company is benchmarked at NIL' as no service of any value as been rendered. Hence, a downward adjustment in the payment for guarantee to the extent of Rs 52,91,667/- is required to be made. Accordingly, the income of the assessee, is required to be adjusted upwards to the extent of Rs.52,91,667/-.” 4.2. The Ld.DRP confirmed the finding of the Ld.TPO and, accordingly, rejected the objection filed by the assessee. 4.3. Upon reconsideration of Ground No. 4 in the present appeal for the assessment year (A.Y.) 2010-11, we are required to adjudicate the matter concerning the Transfer Pricing (TP) adjustment made by the Assessing Officer (AO)/Transfer Pricing Officer (TPO) and upheld by the Dispute Resolution Panel (DRP) concerning the payment of guarantee fees to the Associated Enterprise (AE).

5. During the course of hearing before us, the Ld. Senior Counsel for the assessee highlighted the fact that during the F.Y. 2009-10 the assessee availed a short-term loan of Rs.10 crore from Deutsche Bank bearing an interest rate of 16% p.a. While for further short-term fund requirements totalling to Rs.100 Cr, assessee opted for extending the ongoing short-term borrowing @ 11% from the group company Bosch Ltd. Lender being 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 35 - listed company wanted guarantee / security. The assessee availed this guarantee from the AE - Robert Bosch Gmbh by paying 0.75% guarantee fees. Thus, the effective rate of interest at which it paid interest to the group company was 11.75% including guarantee fee of 0.75% paid to AE. This arrangement has which has benefited the assessee. 5.1. The Ld.Senior Counsel for the assessee also contended that the Tribunal has deleted the addition made by the Department in A.Y. 2009-10 on similar facts in assessee’s own case. He further stated that the said order of tribunal was challenged by the Revenue in Hon’ble Jurisdictional High Court in Tax Appeal No. 886 of 2018 and the Hon’ble High Court vide order dated 23.7.2018 upheld the order of the Tribunal, and in the light of the same, the inconsistent findings in the present comparable issue requires to be relooked into. A copy of decision of the Hon’ble High Court is placed on record.

6. The Ld.Departmental Representative supported the finding of the Tribunal on the impugned issue.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 36 - 8. In view of the above and for the reasons stated above, we concur with the orders passed by the learned CIT(A) as well as learned ITAT. As observed hereinabove, no substantial questions of law arise. Under the circumstances, the present appeal deserves to be dismissed. It is, accordingly dismissed.” 7.1. We observe that the assessee demonstrated that the effective borrowing cost, including the guarantee fee, was (11.75%) lower than the bank's quoted interest rate (16%), thus justifying the economic rationale for the guarantee fee. 7.2. The TPO did not present compelling evidence to establish that the guarantee fee was unwarranted. The benefits derived, as seen in lower interest rates and favorable operating margins, substantiate the transaction's arm's length nature. 7.3. For A.Y. 2009-10, the Tribunal had deleted a similar addition, justifying the payment of guarantee commission. This decision was upheld by the Hon’ble Gujarat High Court, which noted the consistency of the assessee's operating margin and the benefit of lower borrowing costs compared to bank rates, thereby justifying the guarantee fee. 7.4. The present case mirrors the facts and circumstances of A.Y. 2009-10, where the addition was deleted by the Tribunal and upheld by the Hon’ble Gujarat High Court. Consistency in judicial decisions is crucial to maintain legal certainty and fairness. 7.5. In light of the above considerations, we find that the TP adjustment made by the AO/TPO and upheld by the DRP is unjustified. The addition of Rs.52,91,667/- on account of the guarantee fee payment to AE is hereby deleted. Accordingly, ground raised by the assessee is allowed.

8. In the result, the appeal of the Assessee is allowed.”

29. We observe that since the matter is covered on this issue in favour of the assessee and the relevant observations which have been reproduced above.

30. Accordingly, ground number 3 of the assessee’s appeal is allowed.

31. Ground number 4 (depreciation on office equipment) and ground number 5 (disallowance of the valuation of inventory) has already been discussed and decided in favour of the assessee by dealing with ground numbers 1 and 3 of the assessee’s appeal for assessment year 2010-11.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 37 - 32. Accordingly, ground number 4 and 5 of the assessee’s appeal for assessment year 2011-12 are allowed.

Grounds of Appeal Number 6: DRP erred in disallowing amount of towards used tools in the profit and loss account amounting to ₹ 4,67,27,977/-

33. The brief facts in relation to this Grounds of the assessee company had been following a practice of inventorizing loose tools and amortizing their cost over a period of five years. In the current financial year, the assessee made a significant change to this accounting policy. Specifically, machinery spares that are regularly used but not directly associated with fixed assets were reclassified as loose tools, leading to their immediate expensing upon issue to production. Additionally, the unamortized portion of loose tools from previous years, which had been amortized proportionally over five years, was fully expensed in the current year, resulting in an additional charge of Rs. 4,67,37,977/-. The assessing officer disallowed this additional charge. In presenting its case before the AO, the assessee submitted that, according to Section 145(2) of the Income Tax Act and Notification SO 69(E) dated January 25, 1996, a change in accounting policy is permissible if it leads to a more appropriate presentation of financial statements. The Appellant submitted that the change was genuine and would be consistently applied in the future. To support its position, the Appellant cited several judicial precedents, including Chainrup Sampatram v. CIT, CIT vs. Andhra Prabha Ltd., Indo-Commercial Bank Ltd. v. CIT, and ACIT vs. Shree Balkrishna Jewellers. The AO, in the draft order, raised several objections to the change in accounting policy. Firstly, the Assessing Officer contended that a method of accounting once established must be consistently followed in subsequent years, implying that changes were not permissible. The 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 38 - assessee countered this by arguing that the change was made for better financial presentation, and failing to allow such adjustments would render Section 145 ineffective. The AO was also of the view that the consistency of the accounting method is crucial, since the method employed in the past should continue. The assessee responded by clarifying that the phrase "method of accounting regularly employed" encompasses both past methods and any newly adopted methods, as long as they are consistently followed. The assessee submitted that restricting the interpretation of this phrase would negate the intention of the Statute allowing for accounting policy changes. Another contention from the AO was that the change in accounting policy was not permissible since it resulted from a shift in the accounting system. The assessee clarified that there was no change in the valuation method for loose tools; they had been valued at the lower of cost or net realizable value both before and after the transition to a new software system (i.e. SAP). In additional submissions to the DRP, the assessee reiterated that the change in accounting policy was justified as it led to a more appropriate financial representation, which had not been feasible under the limitations of the previous accounting system. The assessee submitted that the valuation method for loose tools had not altered, and therefore, the conclusions drawn by the AO and DRP regarding the change in valuation were incorrect. However, the DRP agreed with the view of the AO, and held that there had indeed been a change in the valuation method and that the transition to a new ERP system did not justify altering the accounting treatment of closing stock. The DRP upheld the AO's position and in view of findings from the Luxor Writing Instruments judgment, thereby rejecting the assessee's claims.

448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 39 - 34. The assessee is in appeal before us against the aforesaid order passed by DRP, disallowing the claim of the assessee. The counsel for the assessee reiterated the submissions made before the lower authorities and submitted that the change was essential for accurate financial reporting. The Ld. Counsel for the assessee submitted that historically, the Company had a practice of inventorizing loose tools and amortizing their cost over five years. Starting from the financial year 2010-11, the Company reclassified machinery spares frequently used and not directly associated with fixed assets as loose tools. This led to expensing these tools in the accounts when issued to production, rather than amortizing them. Consequently, the Company recognized an additional charge of ₹4,67,37,977/- in the profit and loss account, which was subsequently disallowed by the Ld. Assessing Officer (AO) on multiple grounds. Regarding the non-permissibility of changing the accounting methods, the assessee submitted that Section 145(2) of the Act allows changes in accounting policy when they lead to a more appropriate financial statement. The Assessee referred to relevant Notification SO 69(E) dated January 25, 1996, and submitted that any significant change must be disclosed in the financial statements. This assertion was supported by various judicial precedents, including the judgment of the Hon’ble Madras High Court in CIT vs. Andhra Prabha Ltd., where a change in accounting practice was deemed acceptable when it was bona fide and consistently followed. Ld. Counsel for the assessee further argued that the AO’s interpretation of "regularly employed method" was flawed. The Assessee submitted that the term includes both historical methods and any new method adopted, as long as it is consistently followed thereafter. This is pivotal because if the AO's argument were valid, it would invalidate the provisions allowing for changes in accounting policy, contrary to legislative intent. Ld. Counsel for the assessee relied on several case 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 40 - laws to support its position that a bona fide change in accounting method, even if it temporarily affects revenue, should be accepted as it aligns with accepted accounting practices. Ld. Counsel for the assessee further submitted that the change in the accounting system resulted in an inappropriate reduction in stock valuation. Ld. Counsel for the assessee submitted that there was no actual change in the valuation method of loose tools; rather, the change pertained to the timing of expenses recorded in the profit and loss account. The method of valuation remained consistent, where inventories were valued at the lower of cost or net realizable value, corroborated by notes in the financial statements from prior years. Further, Ld. Counsel for the assessee distinguished the case of Luxor Writing Instruments Pvt. Ltd. vs. DCIT, on the ground that this case was distinguishable, as the change in Luxor was linked to an ERP transition that altered valuation methods fundamentally, unlike the Assessee's situation where the underlying valuation principle remained unchanged. Furthermore, Ld. Counsel for the assessee submitted that the decision to amend its accounting policy was influenced by the transition to a new ERP system (SAP), which allowed for better tracking of consumables. Previously, under an outdated system (FOXPRO), it was impractical to monitor loose tools after issuance. The switch to SAP facilitated accurate accounting practices, making it sensible to treat issued tools as consumables and expense them accordingly. Ld. Counsel for the assessee submitted that this change aligns with industry standards and does not adversely affect revenue. The new policy emphasized adherence to Accounting Standard 1, ensuring proper disclosure of the change in accounting policy in the financial statements, and noted the absence of any adverse comments from statutory auditors regarding this matter. Accordingly, Ld. Counsel for the assessee 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 41 - contended that the shift in accounting practice complies with Section 145 of the Act, warranting allowance of the related expense in its entirety.

Ground number 7: DRP erred in disallowing provision for doubtful debts amounting to ₹ 1, 11, 19, 399/-under section 36(1)(vii) of the Act:

39. The assessee is in appeal before us against the aforesaid order passed by DRP, disallowing the claim of the assessee. We observe that the Bangalore Tribunal in the case of M/s. Robert Bosch Engineering and Business Solutions Pvt. Ltd in while dealing with an identical situation, made the following observations:

The brief facts of the case are as follows: The assessee is a company engaged in the business of development software, dealing in automotive components, etc. For the assessment year 2011-2012, the return of income was filed on 25.11.2011, admitting total income of Rs.62,89,17,687. The assessment u/s 143(3) r.w.s. 144C of the Act was completed vide order dated 28.01.2016, wherein the assessment was completed at Rs.174,07,49,300. Subsequently, the CIT issued notice dated 12.09.2016 u/s M/s.Robert Bosch Engineering and Business Solutions Pvt.Ltd. 263 of the Act. The reasons for issuance of the notice was regarding the claim of provision for bad and doubtful debts amounting to Rs.45,54,137. According to the CIT, the AO has not considered the allowability of a sum of Rs.45,54,137, which was debited to the profit and 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 44 - loss account as doubtful advances. The reasons given in the show cause notice, reads as follows:- "An amount of Rs.45,54,137/- being provision or doubtful debts was debited to P & L a/c (schedule M) and the same was not an allowable expenditure. Hence, the provision or doubtful advance should have been added back to the taxable income."

4. The assessee filed objections vide its letter dated 21.09.2017. The assessee stated as follows:- ".......As stated earlier, the assessee has not only charged to its P&L account amount of Rs.45.54 as provision for Doubtful debts, but has also simultaneously reduced i.e. obliterated the provision from the value of Debtors in its Balance Sheet. Accordingly, what emerges is that the assessee has effectively written of its Debtors value to the extent of Rs.45.54 lakhs from its Balance Sheet as irrecoverable. Hence, the assessee submits that such amount should be allowed as deduction for the purpose of computation of income of the assessee as envisaged under section 36(1)(va) of the Act."

5. In this context, the assessee stated that it amounts actual of write off of debts and relied on the following judicial pronouncements:- (i) CIT v. M/s.Sandvik Asia Limited [ITA Nos.563 C/w 564/2006 (judgment dated 21st February, 2012)] - Karnataka High Court. (ii) Vijaya Bank v. CIT [(2010) 323 ITR 166 (SC)] M/s.Robert Bosch Engineering and Business Solutions Pvt.Ltd.

6. However, the CIT rejected the contentions raised by the assessee and passed the impugned order directing the A.O. to duly verify the claim of provision for bad and doubtful debts, afresh. The relevant finding of the CIT, reads as follows:- "5................. It is clear from the P & L A/c that the issue in question is clearly mentioned as provision for doubtful debts and the facts in the case laws cited are distinguishable from the facts of the present case.

7. Aggrieved by the order of the CIT, passed u/s 263 of the Act, the assessee has filed this appeal before the Tribunal. The assessee has filed a paper book enclosing therein the show cause notice u/s 263 of the Act, objections raised to the show cause notice, the extract of audited financial statements, the details of provisions for bad and doubtful debts and the 448/Ahd/2016 Hagglunds Drives (India) Pvt. Ltd./ Bosch Rexroth (India) Pvt. Ltd. vs. DCIT&ITO Asst. Year –2010-11 & 2011-12 - 45 - judicial pronouncements relied on. The learned AR submitted that the issue in question is squarely covered by the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. M/s.Sandvik Asia Limited (supra), which was followed by the Tribunal in assessee's own case for assessment year 2010-2011 in IT(TP)A No.1556 & 1582/Bang /2014 (order dated 16.09.2020).

8. The learned Departmental Representative strongly supported the orders of the Income Tax Authorities.