DCIT, Circle - 11, Kolkata, Kolkata v. M/s. Lexmark International (India) Pvt. Ltd., Kolkata

ITA 490/KOL/2011 | 2004-2005
Pronouncement Date: 04-11-2011 | Result: Dismissed

Appeal Details

RSA Number 49023514 RSA 2011
Assessee PAN AAACL6752B
Bench Kolkata
Appeal Number ITA 490/KOL/2011
Duration Of Justice 7 month(s) 10 day(s)
Appellant DCIT, Circle - 11, Kolkata, Kolkata
Respondent M/s. Lexmark International (India) Pvt. Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 04-11-2011
Assessment Year 2004-2005
Appeal Filed On 24-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE /AND ! . '# . ) [BEFORE SRI MAHAVIR SINGH JM & SHRI C. D. RAO AM] $ $ $ $ / I.T.A NO. 490/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2004-05 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. LEXMA RK INTERNATIONAL (INDIA) CIRCLE-11 KOLKATA. PVT. LTD. (PAN: AAACL 6752 B) (*+ /APPELLANT ) ( -*+/ RESPONDENT ) DATE OF HEARING: 31.10.2011 DATE OF PRONOUNCEMENT: 04.11.2011 FOR THE APPELLANT: SHRI S. K. ROY FOR THE RESPONDENT: S/SHRI HIMANGSHU PATEL & B IKASH KR. JAIN . / ORDER PER MAHAVIR SINGH JM ( ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-20 MUMBAI IN APPEAL NO. CIT(A)20/9(2)/I.T.55/2010-11 DATED 18.11.2010. ASSESSMENT WAS FRAMED BY DCIT- 9(2) MUMBAI U/S. 143(3) OF THE INCOME TAX ACT 196 1 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004-05 VIDE DATED 22.12. 2006. THE PENALTY IN DISPUTE WAS LEVIED BY DCIT- 9(2) MUMBAI U/S 271(1)(C) OF THE A CT VIDE HIS ORDER DATED 29.03.2010. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL OF REVEN UE IS AGAINST THE ORDER OF CIT(A) DELETING THE PENALTY LEVIED BY ASSESSING OFFICER U/ S. 271(1)(C) OF THE ACT. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS.4 38 550/- LEVIED SECTIO N 271(1)(C) OF THE I. T. ACT 1961. 3. THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.11 .2004 FOR THE RELEVANT ASSESSMENT YEAR 2004-05. ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 22.12.2006 AND ASSESSED INCOME AT RS.12 22 423/- BY MAKING ADDITI ON OF RS.7 11 823/- ON ACCOUNT OF DISALLOWANCE OF WARRANTY EXPENSES AND RS.5 10 600/- ON ACCOUNT OF MARKED UP EXPENSES ON ACCOUNT OF ADJUSTMENT IN TRANSFER PRICING IN RES PECT OF INTERNATIONAL TRANSACTIONS. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS NOTICED THAT WARRANTY EXPENSES ON SALES ARE IN THE NATURE OF PROVISIONS M ADE BY ASSESSEE IN THE BALANCE SHEET AT RS.7 11 823/- AND ACCORDING TO HIM THE EXPENSES IN THE NATURE OF PROVISIONS ARE NOT ALLOWABLE. ACCORDINGLY HE DISALLOWED WARRANTY EXP ENSES PROVISIONS AT RS.7 11 823/-. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE HA S NOT MADE ADJUSTMENT IN RESPECT OF 2 ITA 490/K/2011 LEXMARK INTERNATIONAL (I)(P) LTD. A.Y.2004-05 INTERNATIONAL TRANSACTION IN VIEW OF TRANSFER PRICI NG AUTHORITYS ORDER DATED 18.12.2006 TO VARIOUS EXPENSES AT RS.5 10 600/- AND ACCORDINGLY HE MADE ADJUSTMENT IN ARMS LENGTH PRICE TO ASSESSEES INTERNATIONAL TRANSACTIONS. AS SESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS. THE ASSESSING OFFICER REQUIRED THE AS SESSEE TO EXPLAIN AS TO WHY PENALTY U/S. 271(1)(C) OF THE ACT R.W.S. (1) THERETO FOR FILING OF INACCURATE PARTICULARS OF INCOME BE NOT IMPOSED ON THE ASSESSEE. THE ASSESSEE REPLIED VIDE LETTER DATED 26.12.2006 AND 25.03.2010 STATING THAT IT HAD NEITHER CONCEALED ANY PARTICULA RS OF INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. IT WAS ARGUED THAT WHERE TW O VIEWS ARE POSSIBLE ON DIFFERENCE OF OPINION BETWEEN THE ASSESSING OFFICER AND THE ASSES SEE WHICH ITSELF CANNOT EXPOSE THE LATER TO PENALTY U/S. 271(1)(C) OF THE ACT. HE RELI ED ON CERTAIN CASE LAWS OF VARIOUS HIGH COURT BUT THE ASSESSING OFFICER AFTER DISCUSSING VA RIOUS CASE LAWS AND PARTICULARLY RELYING ON UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSOR S (2008) 306 ITR 277 (SC) LEVIED PENALTY U/S. 271(1)(C) OF THE ACT AT 100%. AGGRIEV ED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO DELETED THE PENALTY BY RELYING ON THE D ECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. ATUL MOHAN BINDAL (2009) 317 ITR 1 (SC) AND ALSO CIT VS. RELIANCE PETRO PRODUCT P. LTD. (2010) 322 ITR 158 BY STATING THAT THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME AS IT HAS MADE A CLAIM WH ICH WAS HELD NOT SUSTAINABLE IN LAW BUT PARTICULARS OF CLAIM WAS NOT FOUND TO BE INCORRECT OR FALSE ONLY CLAIM WAS SAID TO BE NOT PERMISSIBLE UNDER THE LAW. ACCORDINGLY HE CANCELLE D THE PENALTY IMPOSED BY ASSESSING OFFICER. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. FIRST IN RESPECT TO PROVISIONS FOR WARRANTY EXPENSES THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MARKETING AND DISTRIBUTION OF PRINTERS AND PRINTERS ACCESSORIES THROUGH ITS MARKETING OFFICE AT MUMBAI AND IN LINE WITH GENERAL TRADE PRACTICE IN CASE OF ELECTRONIC CONSUMER DURABLES ALL PRINTERS ARE SOLD WITH A WAR RANTY COVER OF ONE YEAR. ACCORDING TO ASSESSEE ANY DEFECTS DETECTED BY CUSTOMERS DURING THE WARRANTY PERIOD COST OF REPAIRS OF SUCH DEFECTIVE PART ARE TO BE REQUIRED TO BE BORNE BY ASSESSEE AND SUCH EXPENSES ARE TERMED AS WARRANTY EXPENSES. DURING THE YEAR UND ER CONSIDERATION THE ASSESSEE INCURRED WARRANTY EXPENSES AT RS.66 55 545/- WHICH INCLUDES PROVISION OF RS.7 11 823/- LIKELY TO BE INCURRED DURING THE UNEXPIRED WARRANTY PERIOD IN RESPECT OF SALES MADE DURING THE YEAR. IT WAS ARGUED THAT THIS WARRANTY EXPENSES CANNOT BE PREDICTED WITH CERTAINTY AT THE TIME OF SALES. HENCE PROVISION OF WARRANTY EXPENSES WAS M ADE ON SCIENTIFIC BASIS AND ON THE BASIS OF PAST EXPERIENCE USING AN APPROPRIATE STATI STICAL FORMULA FOR ESTIMATION OF WARRANTY LIABILITY. THE ASSESSEE HAS ADOPTED A STATISTICAL F ORMULA TO DETERMINE THE WARRANTY PROVISION FOR EACH MONTH AND ACCORDINGLY ACCOUNTED FOR. HE S TATED THAT THE PROVISIONS FOR WARRANTY 3 ITA 490/K/2011 LEXMARK INTERNATIONAL (I)(P) LTD. A.Y.2004-05 EXPENSES WERE CLAIMED IN VIEW OF THE DECISION OF TH IS TRIBUNAL IN THE CASE OF VOLTAS LTD. VS. DCIT 64 ITD 232. HE ALSO RELIED ON THE DECISIO N OF HONBLE APEX COURT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. VS. CIT (2009) 31 4 ITR 62 WHEREIN HONBLE APEX COURT HAS HELD AS UNDER: THUS THE DECISION ON THE WARRANTY PROVISION SHOUL D BE BASED ON PAST EXPERIENCE OF THE COMPANY. A DETAILED ASSESSMENT OF THE WARRAN TY PROVISIONING POLICY IS REQUIRED PARTICULARLY IF THE EXPERIENCE SUGGESTS TH AT WARRANTY PROVISIONS ARE GENERALLY REVERSED IF THEY REMAINED UNUTILIZED AT T HE END OF THE PERIOD PRESCRIBED IN THE WARRANTY. THEREFORE THE COMPANY SHOULD SCRU TINIZE THE HISTORICAL TREND OF WARRANTY PROVISIONS MADE AND THE ACTUAL EXPENSES IN CURRED AGAINST IT. ON THIS BASIS A SENSIBLE ESTIMATE SHOULD BE MADE. THE WARRA NTY PROVISION FOR THE PRODUCTS SHOULD BE BASED ON THE ESTIMATE AT YEAR END OF FUTU RE WARRANTY EXPENSES. SUCH ESTIMATES NEED REASSESSMENT EVERY YEAR. AS ONE REAC HES CLOSE TO THE END OF THE WARRANTY PERIOD THE PROBABILITY THAT THE WARRANTY EXPENSES WILL BE INCURRED IS CONSIDERABLY REDUCED AND THAT SHOULD BE REFLECTED I N THE ESTIMATION AMOUNT. WHETHER THIS SHOULD BE DONE THROUGH A PRO RATA REVE RSAL OR OTHERWISE WOULD REQUIRE ASSESSMENT OF HISTORICAL TREND. IF WARRANTY PROVISIONS ARE BASED ON EXPERIENCE AND HISTORICAL TREND(S) AND IF THE WORKI NG IS ROBUST THEN THE QUESTION OF REVERSAL IN THE SUBSEQUENT TWO YEARS IN THE ABOVE EXAMPLE MAY NOT ARISE IN A SIGNIFICANT WAY. IN OUR VIEW ON THE FACTS AND CIRC UMSTANCES OF THIS CASE PROVISION FOR WARRANTY IS RIGHTLY MADE BY THE APPELLANT-ENTER PRISE BECAUSE IT HAS INCURRED A PRESENT OBLIGATION AS A RESULT OF PAST EVENTS. THER E IS ALSO AN OUTFLOW OF RESOURCES. A RELIABLE ESTIMATE OF THE OBLIGATION WAS ALSO POSS IBLE. THEREFORE THE APPELLANT HAS INCURRED A LIABILITY ON THE FACTS AND CIRCUMST ANCES OF THIS CASE DURING THE RELEVANT ASSESSMENT YEAR WHICH WAS ENTITLED TO DEDU CTION UNDER SECTION 37 OF THE 1961 ACT. THEREFORE ALL THE THREE CONDITIONS FOR R ECOGNIZING A LIABILITY FOR THE PURPOSES OF PROVISIONING STANDS SATISFIED IN THIS C ASE. IT IS IMPORTANT TO NOTE THAT THERE ARE FOUR IMPORTANT ASPECTS OF PROVISIONING. T HEY ARE PROVISIONING WHICH RELATES TO PRESENT OBLIGATION IT ARISES OUT OF OBL IGATING EVENTS IT INVOLVES OUTFLOW OF RESOURCES AND LASTLY IT INVOLVES RELIABLE ESTIMA TION OF OBLIGATION. KEEPING IN MIND ALL THE FOUR ASPECTS WE ARE OF THE VIEW THAT THE HIGH COURT SHOULD NOT TO HAVE INTERFERED WITH THE DECISION OF THE TRIBUNAL I N THIS CASE. 5. HE ALSO RELIED ON THE HONBLE DELHI HIGH COURT D ECISION IN THE CASE OF CIT VS. ERICSSION COMMUNICATIONS PVT. LTD. (2009) 318 ITR 3 40 WHEREIN IT HAS HELD AS UNDER: THE ASSESSEE COMPANY IS ENTITLED TO MAKE PROVISION FOR THE WARRANTY CHARGES HOLDING THE SAME TO BE A DEFINITE BUSINESS LIABILIT Y ALLOWABLE AS A DEDUCTION DURING THE YEARS UNDER CONSIDERATION SINCE THE SAME IS BASED ON A SCIENTIFIC BASIS AND A CONSISTENT POLICY APPLIED BY THE ASSESSEE COM PANY THROUGHOUT THE WORLD INCLUDING INDIA AND THAT CONSISTENT APPLICATION OF THE SAME PRINCIPLE OVER THE YEARS WOULD REMOVE ANY ADVANTAGE WHICH ACCORDING TO THE REVENUE THE ASSESSEE MAY HAVE BY DEFERRING OF ITS INCOME TO THE EXTENT O F WARRANTY PROVISION TO THE NEXT YEAR. HOWEVER LD. COUNSEL IN ALL FAIRNESS ALSO STATED TH AT THE HONBLE APEX COURT IN THE CASE OF ROTORK CONTROLS INDIA (P)LTD. VS. CIT AND CIT VS. W IPRO GE MEDICAL SYSTEMS LTD. AND HEWLETT PACKARD INDIA (P) LTD. (2009) 314 ITR 62 HA S CLEARLY DISALLOWED THE PROVISIONS FOR WARRANTY EXPENSES BUT ALLOWED THE EXPENSES UNDER TH E MATCHING CONCEPT IF REVENUE IS RECOGNISED ON COST INCURRED TO EARN REVENUE INCLUDI NG WARRANTY THE COST HAS TO BE FULLY PROVIDED FOR. IN THE PRESENT CASE BEFORE US THE A SSESSEE COULD NOT PROVIDE THAT THE ACTUAL 4 ITA 490/K/2011 LEXMARK INTERNATIONAL (I)(P) LTD. A.Y.2004-05 AMOUNT HAS BEEN REVERSED. IT IS NOT THE CASE OF REV ENUE THAT THE DECISION TAKEN BY THE COMPANY ON WARRANTY PROVISION IS NOT BASED ON PAST EXPERIENCE AND THE ESTIMATES OF WARRANTY PROVISION REMAINED UNUTILIZED AT THE END O F PERIOD PRESCRIBED IN THE WARRANTY. THE PRINCIPLES LAID DOWN BY HONBLE APEX COURT IN T HE CASE OF ROTORK CONTROLS INDIA (P) LTD. (SUPRA) I.E. PROVISIONING WHICH RELATES TO PRE SENT OBLIGATION IT ARISES OUT OF OBLIGATING EVENT IT INVOLVES OUTFLOW OF RESOURCES AND IT INVO LVES RELIABLE ESTIMATE OF OBLIGATION ALL THESE PRINCIPLES ARE NOT NEGATED BY REVENUE IN THE PRESENT CASE BEFORE US. EVEN OTHERWISE THE DETAILED FACTS WERE AVAILABLE BEFORE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS COMPLETED BY AO U/S. 143(3) ON 22.12.20 06. THE ASSESSEE HAS DISCLOSED COMPLETE PARTICULARS IN RESPECT OF WARRANTY PROVISI ONS AND MADE A CLAIM WHICH WAS NOT SUSTAINABLE IN LAW IN VIEW OF JUDGMENT OF AO. BUT IN ANY CASE THAT DOES NOT MEAN THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME AND THIS VIEW OF OURS GETS SUPPORT FROM THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCT P. LTD. (SUPRA) WHEREIN IT IS HELD AS UNDER: WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE AS A MATTER OF FACT THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTERS DICTIONARY TH E WORD INACCURATE HAS BEEN DEFINED AS : NOT ACCURATE NOT EXACT OR CORRECT ; NOT ACCORDING TO TRUTH ; ERRONEOUS ; AS AN INACCURATE STATEMENT COPY OR TRANSCRIPT. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTI CULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION TH EY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RE TURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A M ERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MA DE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF TH E ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED B Y THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS THEREFORE REITERATED BEFORE US THA T THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASS ESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT ; IT AMO UNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACC OUNTS CAN TAKE EITHER OF THE TWO FORMS ; AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDU LENTLY ; (II) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AM OUNT) CLAIMED AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND THEREFORE BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE AS THE ASSE SSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN WHICH DETAILS IN THEMSELVES WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS T HE CONCEALMENT OF INCOME ON ITS 5 ITA 490/K/2011 LEXMARK INTERNATIONAL (I)(P) LTD. A.Y.2004-05 PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CL AIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE W HICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF W OULD NOT IN OUR OPINION ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IF WE ACCEPT T HE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON THE ASSESSEE WILL INVITE PE NALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT MADE IN SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 23 VST 249 AS REGARDS THE PENA LTY ARE APPOSITE. IN THE AFOREMENTIONED DECISION WHICH PERTAINED TO THE PENA LTY PROCEEDINGS UNDER THE TAMIL NADU GENERAL SALES TAX ACT THE COURT HAD FOU ND THAT THE AUTHORITIES BELOW HAD FOUND THAT THERE WERE SOME INCORRECT STATEMENTS MADE IN THE RETURN. HOWEVER THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNT S OF THE ASSESSEE. THIS COURT THEREFORE OBSERVED (PAGE 251) : SO FAR AS THE QUESTION OF PENALTY IS CONCERNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORPORATED IN THE APPELLANTS ACCOUNT BOOKS. WHERE CERTAIN ITEMS WHICH ARE NOT IN CLUDED IN THE TURNOVER ARE DISCLOSED IN THE DEALERS OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES INCLUDES THESE ITEMS IN THE D EALERS TURNOVER DISALLOWING THE EXEMPTION PENALTY CANNOT BE IMPOSE D. THE PENALTY LEVIED STANDS SET ASIDE. THE SITUATION IN THE PRESENT CASE IS STILL BETTER A S NO FAULT HAS BEEN FOUND WITH THE PARTICULARS SUBMITTED BY THE ASSESSEE IN ITS RETURN . THE TRIBUNAL AS WELL AS THE COMMISSIONER OF INCOM E-TAX (APPEALS) AND THE HIGH COURT HAVE CORRECTLY REACHED THIS CONCLUSION AND T HEREFORE THE APPEAL FILED BY THE REVENUE HAS NO MERITS AND IS DISMISSED. FURTHER IN RESPECT TO ADDITIONAL COST ADDED BY TP O AND AO FOR COST PLUS MARK UP FOR MAKING ADJUSTMENT IN THE INTERNATIONAL TRANSACTIONS ON ACCOUNT OF SOFTWARE DEVELOPMENT SERVICES IT IS THE SIMILAR ISSUE WHAT WAS IN WARRA NTY PROVISION. ACCORDING TO AO IT MADE ADJUSTMENT AT 10% ON AUDIT FEE BANK CHARGES INTER NET AND TELECOMMUNICATION CHARGES LEASE RENT PROFESSIONAL/LEGAL CHARGES AND TRAINING AND SEMINAR CHARGES AND ADJUSTED THE FIGURES AT RS.5 10 600/- AND ALSO LEVIED PENALTY DE SPITE THE FACT THAT THESE DETAILS WERE AVAILABLE BEFORE THE ASSESSING AUTHORITIES. WE FIN D THAT THESE EXPENSES WOULD HAVE BEEN INCURRED BY AE (ASSOCIATED ENTERPRISE) IRRESPECTIVE OF THE FACT WHETHER SUCH SERVICES HAVE BEEN RENDERED OR NOT AND ACCORDINGLY IT CANNOT BE SAID THAT SUCH EXPENSES FORMS PART OF NORMAL COST FOR THE PURPOSE OF COMPUTATION OR ADJUS TMENT TO TRANSFER PRICING TRANSACTIONS UNDER COST PLUS MARK UP. EVEN OTHERWISE THIS IS A HIGHLY DEBATABLE ISSUE AND FACTS WERE AVAILABLE BEFORE THE LOWER AUTHORITIES AS WE HAVE CARRIED OUT DISCUSSION ON THE ABOVE ISSUE OF WARRANTY PROVISION OF EXPENSES IN SIMILAR CIRCU MSTANCES THE PENALTY ON THIS ISSUE CANNOT BE SUSTAINED. 6 ITA 490/K/2011 LEXMARK INTERNATIONAL (I)(P) LTD. A.Y.2004-05 IN VIEW OF THE ABOVE DISCUSSION AND CASE LAWS OF HONBLE APEX COURT AS RELIED UPON WE CONFIRM THE ORDER OF CIT(A) DELETING THE P ENALTY LEVIED BY AO ON BOTH THE ISSUES. 6. IN THE RESULT APPEAL OF REVENUE IS DISMISSED. 7. ORDER PRONOUNCED IN OPEN COURT ON 04.11.2011. SD/- SD/- . '# '#'# '# . ! (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED : 4 TH NOVEMBER 2011 /0 %12 3 JD.(SR.P.S.) . 4 5 6 5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT DCIT CIRCLE-11 KOLKATA. 2 -*+ / RESPONDENT M/S. LEXMARK INTERNATIONAL (INDIA) PV T. LTD. DLF IT PARK BLOCK-1 5 TH FLOOR NEW TOWN RAJARHAT KOLKATA-700 156.. 3 . .% ( )/ THE CIT(A) KOLKATA 4. .% / CIT KOLKATA 5 . >? % / DR KOLKATA BENCHES KOLKATA -5 / TRUE COPY .%@/ BY ORDER 2 /ASSTT. REGISTRAR .