I.T.A. Nos. 369 and 370/Del/2013, (Assessment Year: 2008-2009;2009-2010). Case: DCIT, (LTU) Vs Caparo Maruti Ltd.. ITAT (Income Tax Appellate Tribunal)
| Case Number | I.T.A. Nos. 369 and 370/Del/2013, (Assessment Year: 2008-2009;2009-2010) |
| Counsel | For Appellant: Gagan Sood, Sr. DR and For Respondents: Ved Jain, C.A. and Ranu Jain, Adv. |
| Judges | G.C. Gupta, Vice President and T.S. Kapoor, Member (A) |
| Issue | Income Tax Act |
| Judgement Date | March 04, 2015 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
T.S. Kapoor, Member (A), (ITAT Delhi 'B' Bench)
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These are two appeals filed by Revenue against separate orders of Ld. CIT(A) both dated 16.10.2012. Both these appeals were heard together and therefore, for the sake of convenience, a common and consolidated order is being passed. The grounds of appeal taken by Revenue in both these years are reproduced below:
I) I.T.A. No. 369/Del/2013 (Assessment Year 2008-09:
On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,66,16,709/- holding that it was an ascertained liability and not contingent liability.
II) I.T.A. No. 370/Del/2013 (Assessment Year 2009-10):
On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 9,20,54,942/- holding that it was in ascertained liability and not contingent liability.
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The brief facts of the case as coming out form assessment orders are that the assessee is engaged in the business of manufacture, job work and trading of sheet metal components and allied components. The assessee is making supplies to Maruti Suzuki India Ltd. and is one of the various vendors. During the financial year ending 31.03.2008 and 31.03.2009, the assessee while finalizing its accounts, reduced its profits by debiting sales and by crediting the account of other liabilities by an amount of Rs. 6,37,47,120/- and Rs. 9,20,54,942/- in the two years. However, the amount in Assessment Year 2008-09 was reduced to Rs. 2,66,16,709/-. The said adjustment was reported in its balance sheets vide notes to account which read as under:
16. During the year, company has received amendment to purchase order from MSIL (Formerly MUL) for Model L Components and received payments accordingly. The same is in excess of the price settlement, which is subject to MSIL management approval. Pending final settlement, a provision has been made for different amount of Rs. 6,37,47,120/- and shown under current liabilities by way of reduction from sale.
2.1 Similar reporting was made in Assessment Year 2009-10 vide note No. 16 which reads as under:
16. During the year, provision has been made for different amount of Rs. 92,054,942/- on account of amortization, price of adjustments etc. against certain models billed to MSIL the same is presently in the process of reconciliation/settlement, hence has been shown under the head 'Other Liabilities' by way of reduction from sale.
2.2 The above adjustment entries were claimed to have been passed on account of downwards revision of provisional prices from the original prices. The assessee had submitted that as per basic price agreement with Maruti, the billing is done on tentative prices and with continuous negotiations the prices are revised upwards or downwards as the case may be.
2.3 The A.O. after raising queries in this regard held that in fact, assessee had created provisions which were unascertained liabilities and therefore, were not allowable and therefore he made the additions.
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Aggrieved, the assessee filed appeals before Ld. CIT(A) and Ld. CIT(A) deleted the additions by holding as under:
"i) Assessment Year 2008-09:
During the year under consideration the appellant company has supplied 33,551 car sets to MSIL. A car set consists of 17 parts. These parts were developed by the appellant company and after approval, the tentative rate was fixed for each of the part. The rate fixed initially for 17 parts in aggregate was Rs. 6169 per car set. The appellant company accordingly issued sales invoices to MSIL at these rates. Since these were provisional rates subject to adjustment, there were certain discussion between the appellant company and the Maruti Suzuki India Ltd. and after discussion, an interim settlement was reached on 11th February, 2008 where the price was re-fixed at Rs. 4269 per car set. Consequent to this, reduction in the price during the year of Rs. 1900 per car set. The appellant company reduced the sales of 33,551 car sets by Rs. 6,37,47,867 and finalized its accounts and filed its return of income accordingly. In the Balance Sheet the assessee company disclosed the above fact by way of...
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