Suspicion, Technicalities & Guesswork Cannot Replace Evidence: Delhi ITAT

Plasser India Pvt. Ltd. Vs JCIT (ITAT Delhi)

Suspicion, Technicalities & Guesswork Cannot Replace Evidence-Delhi ITAT Demolishes Ad-Hoc Tax Additions

In a comprehensive ruling involving multiple disallowances, the Delhi ITAT granted major relief to Plasser India Pvt. Ltd. and strongly disapproved arbitrary, ad-hoc and technically driven additions made by the Assessing Officer without proper inquiry or supporting material.

The assessee, engaged in manufacturing and supplying railway track maintenance machines and spare parts to Indian Railways, had faced several additions including disallowance of 80G donations, trade payables, guarantee charges, royalty, technical fees, software write-offs, warranty provisions and bad debts.

One of the key issues related to software licences purchased from Sage Software Solutions which were never put to use and later written off as obsolete. While the lower authorities treated the expenditure as capital in nature and denied deduction, the ITAT held that once the software licences had become unusable and commercially irrelevant, there was no purpose in retaining them in the balance sheet. The Tribunal observed that the fact that the software was never actually put to use was not decisive and allowed the write-off.

The Tribunal also upheld deletion of disallowance under section 80G where the AO had denied deduction merely because certain technical particulars were allegedly absent in donation receipts. The ITAT noted that donations were made through account-payee instruments and the genuineness of the donee institutions was never disputed.

On the issue of ₹1.01 crore ad-hoc disallowance of trade payables, the Tribunal strongly criticised the AO for making a flat 5% addition without identifying even a single bogus creditor. The assessee had already furnished addresses, ledger accounts and supporting documents of major creditors. The ITAT held that additions based purely on suspicion and conjecture without independent verification are unsustainable in law.

Relief was also granted in respect of bank guarantee charges paid to Indian banks and associated enterprises for furnishing guarantees to Indian Railways. The Tribunal accepted that such charges were routine business expenditure and did not result in creation of any capital asset or enduring benefit.

The ITAT further upheld deletion of massive disallowances relating to royalty and technical service fees paid to associated enterprises. The Bench observed that similar payments had been accepted in earlier years and even Transfer Pricing Officers had found them to be at arm’s length. It also held that once a transaction falls within transfer pricing jurisdiction, the AO cannot independently determine its allowability without proper TP reference.

On the issue of warranty provisions, the Tribunal followed the Delhi High Court ruling in the assessee’s own case and the Supreme Court decision in Rotork Controls India Pvt. Ltd., reiterating that scientifically estimated warranty provisions based on past experience are allowable deductions.

Regarding bad debts written off relating to deductions made by Indian Railways from bills, the ITAT restored the matter for limited verification under section 36(2), while reiterating the Supreme Court principle in TRF Ltd. that post-1989, actual proof that debt became bad is not necessary once it is written off in books.

Ultimately, the Tribunal allowed the assessee’s appeal and dismissed the Revenue’s appeal, reaffirming that tax assessments cannot be driven by ad-hoc percentages, procedural nit-picking or unsupported assumptions when documentary evidence is already on record.

FULL TEXT OF THE ORDER OF ITAT DELHI

These cross appeals preferred by the assessee and the revenue against the order dated 22.08.2025 passed by the Ld. National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in DIN & Order No. ITBA/NFAC/S/250/2025-26/1079904412(1) arising out of the order dated 28.12.2019 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the Adl/JCIT, Special Range 7, Delhi for AY: 2017-18.

2. Heard and perused he records. Plasser India Private Limited (“Appellant”) is engaged in the business of manufacturing and supply of railway track maintenance machines (RTMMs) and its spare parts. The appellant filed its original return of income on 30 November 2017 declaring total income of Rs.1,038,215,490/- under/normal provisions of the Act and book profit of Rs.681,326,684/- under section 115JB of the Act. The return of income filed by the Appellant was selected for electronic assessment by the Assistant Commissioner of Income-tax, Special Range 7, New Delhi (‘Ld.AO’). On completion of the assessment proceedings, the Ld.AO passed the assessment order under section 143(3) of the Act dated 28 December 2019 and assessed the total income at Rs.1,171,27,060/- wherein, the following additions/disallowances were made:

(a) Disallowance of deduction u/s 80G amounting to Rs.2,511,688/-.

(b) Disallowance under other trade payables amounting to Rs.10,137,719/-.

(c) Disallowance of guarantee charges amounting to Rs.11,727,119/-.

(d) Disallowance of royalty and technical service expenses amounting to Rs.87,316, 122; and

(e) Disallowance of provisions and write off amounting to Rs.21,918,918/-.

3. We first take up the grounds in appeal of the assessee and we find that ld. Counsel has primarily relied the decision in the case of Maruti Udyog Ltd. Vs. CIT, Delhi (High Court of Delhi); Binani Cement Ltd. Vs. CIT, (High Court of Calcutta); Chief CIT V. O.K. Play India Ltd. [2012] 346 ITr 57/206 Taxman 57/20taxmann.com403 (Pun & Har); Indian Aluminium Co. Ltd. Vs. CIT [2016] 384 ITR 386/239 Taxman 51/68 taxmann.com 205 (Cal.); CIT v. Varinder Agro Chemicals Ltd. [2009] 309 ITR 272 (Pun & Hary) to contend that when asset is no more usable and specially is of the nature of software license then the corresponding expenditure is allowable being written off and the same has been countered by ld. DR by submitting that the software was never put to use.

3.1 The is dealt by ld.CIT(A) with observing following legal and factual aspects;

“Ground No.9:

9. The ninth ground of appeal is that the Ld.AO has grossly erred in disallowing the debit balance written off amounting to Rs. 1,16,49,200/-without appreciating the facts of the case, evidence as filed and provisions of the Act.

9.1 The facts of the issue are that during the financial year relevant to the assessment year under consideration, the appellant has written off a debit balance of Rs.1,16,49,200/-. The said debit balances pertain to intangible assets in the nature of software purchased from Sage Software Solutions Private Limited, which were never put to use and had become unusable. During the appellate proceedings, the appellant contended that the amount written off ought to be allowed as an expenditure, and therefore the Assessing Officer erred in disallowing the same.

9.2 I have carefully considered the facts of the case, the submissions of the appellant, and the assessment order. From the details furnished, it is observed that the appellant had purchased software licenses from Sage Software Solutions Private Limited during the Financial Years 2014-15 to 2016-17, which were credited to WIP and subsequently written off during the Financial Year 2016-17. The appellant has claimed such write-off as revenue expenditure in the relevant assessment year. The only contention raised by the appellant is that since the software purchased was never put to use, the write-off should be allowable as an expenditure. However, it is an admitted position that the expenditure incurred by the appellant was towards acquisition of software, which constitutes an intangible asset falling within the capital field. Thus, the claim of the appellant that the amount written off is allowable as revenue expenditure cannot be accepted

9.3 It is a well-settled position in law that expenditure incurred for acquisition of software is capital in nature, as it provides enduring benefit to the assessee. The Hon’ble Supreme Court in CIT v. Southern Switchgear Ltd. [1998] 232 ITR 359 (SC)held that capital expenditure cannot be claimed as deduction under section 37(1) of the Act. The Hon’ble Delhi High Court in Sharp Business Systems v. CIT [2012] 254 CTR 233 (Del.) also categorically held that software expenditure, being an intangible asset, is capital in nature and only depreciation under section 32 is allowable. In the present case, the appellant has not demonstrated any exceptional circumstance to justify treating the write-off of software as a revenue expenditure. The mere fact that the software was discarded or not put to use does not alter the inherent capital nature of the expenditure. In other words, an assessee can claim deduction only by way of depreciation under section 32 of the Act in respect of a capital asset which has been put to use, however, a direct write-off of such capital expenditure as a business expenditure is impermissible. Accordingly, following the binding judicial precedents referred to above, it is held that the expenditure written off towards software is capital in nature and not allowable under section 37(1) of the Act. Therefore, the action of the Assessing Officer in disallowing the written off amount is upheld and the addition made is hereby confirmed. In view of the above discussion, Ground No. 9 stands Dismissed.”

3.1 We have considered the rival contentions in this regard and are of the considered view that when an intangible asset becomes obsolete or is no more required for business operation there is no point to keep such an asset in the balance sheet and the fact that it was put to use or is of not any consequence and the same has been rightly written off by the assessee. However, ld. tax authorities below have gone on the principal that as acquisition of software is of capital expenditure providing enduring benefit only depreciation is allowable. However, what escaped their attention was that assessee had purchased software licenses and where the same become no more relevant they were rightly written off. Thus, we sustain ground raised in the appeal of the assessee.

4. Coming to the appeal of the department we find that ld. DR has primarily relied assessing officer’s findings, however, with regard to the grounds raised by the department when we consider reasoning given by the ld. CIT(A) we find that there is no error and ld. CIT(A) has taken reasonable view. As for completeness with reproduce the relevant observation of ld. CIT(A), which narrates all relevant facts and conclusions of ld. CIT(A).

“4. The fourth ground of appeal relates to the disallowance of deduction under section 80G of the Act amounting to Rs.25,11,688. The grievance of the appellant is that the Ld. AO erred in disallowing the claim without appreciating the evidences filed and the legal provisions. The AO disallowed the deduction mainly on the ground that the exemption letter was not enclosed with the donation receipt and further that the 80G certificates issued carried certain terms and conditions.

4.1 I have carefully considered the submissions of the appellant as well as the Paper Book filed, which contains copies of donation receipts and the 80G certificates issued by the Income-tax Authorities. It is observed that the appellant had duly submitted the donation receipts and supporting certificates during the course of assessment proceedings. It is also pertinent to note that the AO has not disputed the existence or genuineness of the donee institutions nor has he doubted the fact of payment. The disallowance has been made purely on certain technical grounds. On perusal of the donation receipts, it is evident that the donations were made through account-payee cheques/RTGS and were duly acknowledged by the recipient institutions by issuing proper donation receipts. Once the genuineness of the donation is established and the done organizations are approved under section 80G, there is no justification in denying the deduction merely for want of some technical compliance. If the AO had any doubt on the correctness of the certificates or receipts, it was incumbent upon him to make necessary independent verification. Without undertaking such inquiry and without granting adequate opportunity to the appellant, the disallowance is not sustainable. Accordingly, I find no merit in the action of the AO in disallowing the deduction claimed. The AO is directed to allow the deduction claimed under section 80G of the Act amounting to Rs.25,11,688. In view of the above discussion, Ground No. 4 stands Allowed.

5. The fifth ground of appeal is that the ld. AO has grossly erred in disallowing an amount of Rs.1,01,37,719/- (being 5% of the total liability of Rs.20,27,54,380/-) under the head “Other Trade Payables” on an ad-hoc basis, by arbitrarily treating the same as inflated/non-existent liability, without properly appreciating the facts of the case, the evidence filed, and the provisions of the Act.

5.1 I have carefully considered the submissions made by the appellant, the relevant show cause notice issued by the Assessing Officer, and the details of sundry creditors furnished by the appellant before the Assessing Officer, which also form part of the Paper Book. The facts leading to the said disallowance are that vide show cause notice dated 10.12.2019, the appellant was called upon to explain as to why the liability shown under the head “Other Trade Payables” should not be treated as non-existent in the absence of proof of payment. In response, the appellant, vide submission dated 19.12.2019 furnished detailed explanations along with particulars of the services availed and also produced ledger accounts in respect of service amounts exceeding Rs.2,00,000. These records clearly demonstrated that the payments were duly made to all the suppliers included under “Other Trade Payables”. Despite the documentary evidence placed on record, the Ld. AO, without pointing out any specific defect, discrepancy, or non-verification in the submissions, proceeded to make an arbitrary disallowance of 5% of the total creditors of Rs.20,27,54,380/-, amounting to Rs. 1,01,37,719.

5.2 It is observed that vide notice u/s.142(1) of the Act dated 23.11.2019, the appellant was specifically asked to submit the details of trade payables, which were duly furnished by the appellant vide letter dated 28.11.2019. Subsequently, the AO issued a show cause notice on 10.12.2019, the relevant extract of which is reproduced below:

“Please refer to reply no. 2 of submission dated 28.11.2019. The assessee has submitted details of paid-up sundry creditors as Annexure-4. In this regard, please submit the proof of payment made to the parties as per the annexure. Please explain why the sundry creditors should not be treated as non-existent in case of non-furnishing of proof of payment during the year.”

5.3 From the above notice, it is evident that the AO only required the appellant to furnish proof of payments to the creditors and simultaneously without any further inquiry, cast a presumption that non-furnishing of such proof would render the sundry creditors non-existent. This approach clearly reflects that the disallowance was made in an ad-hoc manner, without issuing a proper and specific show cause notice, and without assigning any cogent reasons. It is seen from the submissions and the relevant documents filed by the appellant that complete details of sundry creditors were furnished, including their addresses and ledgers of major creditors exceeding Rs.2,00,000, duly evidencing the payments made. If the Assessing Officer had any doubts regarding the sundry creditors, it was incumbent upon him to independently verify the genuineness of the same. By furnishing the aforesaid details, the appellant has duly discharged the onus of establishing the genuineness of the creditors. Consequently, the ad-hoc disallowance made by the Assessing Officer is not sustainable in law. It is further evident from the assessment order that the Assessing Officer has not brought any adverse material on record to doubt or disprove the genuineness of such sundry creditors. Hence, the disallowance of 5% of the trade payables is arbitrary, unjustified, and based purely on surmises and conjectures. It is a settled position in law as upheld by various judicial authorities that the Assessing Officer cannot resort to disallowance of sundry creditors without bringing on record any cogent material to establish that the creditors are non-genuine nor is there any provision under the Act which permits an ad-hoc disallowance of sundry creditors. Accordingly, the Assessing Officer is directed to delete the ad-hoc addition of Rs. 1,01,37,719. In view of the above discussion, Ground No. 5 stands Allowed.

Ground No.6:

6. The sixth ground of appeal is that the Ld. AO has grossly erred in disallowing guarantee charges amounting to Rs.1,17,27,119/- on an arbitrary basis, without appreciating the facts of the case, evidences filed, and provisions of the Act.

6.1 It is observed that the Assessing Officer disallowed the guarantee charges on the ground that the submissions made by the appellant did not completely explain the charges debited in respect of its customers and the reimbursements made. During the appellate proceedings, however, the appellant furnished a detailed explanation regarding the disallowance. The appellant submitted that the guarantee charges were paid to various banks for providing guarantees to customers in India, primarily Indian Railways, as per the terms of the contracts. Further, the guarantee charges included reimbursements to its Associate Enterprises for arranging bank guarantees on behalf of the appellant, which are purely business expenditures allowable under section 37(1) of the Act.

6.2 I have carefully considered the submissions made and the details of the bank guarantee charges furnished by the appellant both before the Assessing Officer and during the appellate proceedings. It is observed that the appellant has paid guarantee charges to Indian banks as well as to one of its Associate Enterprises and has also filed a detailed bifurcation along with sample supporting evidence. The appellant has further pointed out that such guarantee charges were consistently allowed as deduction in earlier assessment years. The documentary evidence on record clearly demonstrates that the charges were paid to Indian banks for guarantees issued in connection with the import of components for Indian Railways, which is the primary customer of the appellant engaged in the business of manufacturing and supplying railway track maintenance machinery and spare parts. It is a settled principle of law that while expenditure incurred on acquisition of machinery is capital in nature, guarantee commission/charges stand on a different footing. By themselves, such charges do not result in the creation of any capital asset nor do they confer an enduring benefit. In the present case, the guarantee charges paid for import of components are revenue in nature and hence allowable as deduction under section 37(1) of the Act. It is also noticed that a part of the guarantee charges was paid to a non-resident Associate Enterprise. Such payment constitutes an “international transaction” within the meaning of the transfer pricing provisions and, therefore, falls within the jurisdiction of the Transfer Pricing Officer. The Assessing Officer, accordingly, has no authority to make a separate adjustment on this account. Since the appellant has furnished all necessary documents substantiating the payments made and considering that the claim has been consistently accepted in earlier years, I find no justification for the disallowance made by the Assessing Officer. The addition on account of bank guarantee charges is, therefore, directed to be deleted. In view of the above discussion, Ground No. 6 stands Allowed.

Ground No. 7:

7. The seventh ground of appeal is that the Ld.AO has grossly erred in disallowing the entire royalty expenses amounting to Rs.7,68,33,330/- and technical service fees amounting to Rs. 1,04,82,792l- on erroneous reasoning without giving a show cause notice as alleged by the Ld.AO and without providing an opportunity of being heard by the Appellant.

7.1 The brief facts leading to the disallowance of royalty expenses and technical service fees is that the appellant has not submitted the nature and purpose of royalty payment and whom it was paid. Further the appellant has failed to submit the details of withholding tax paid and the name and address of the person to whom it was paid. The appellant during the appellate proceedings stated that the complete details of the royalty and technical fees paid was provided to the AO during the assessment proceedings and the AO disallowed these entire expenses without affording a show cause notice.

7.2 The disallowance of royalty expenses and technical service fees arose on the ground that the appellant had not furnished the details regarding the nature and purpose of the royalty payments, nor the particulars of the recipients. Further, the appellant was stated to have failed to provide the details of withholding tax deducted as well as the name and address of the persons to whom the payments were made.

7.3 During the appellate proceedings, the appellant submitted that the complete details of royalty and technical service fees, along with supporting evidence, had already been furnished before the Assessing Officer during the course of assessment. It was further contended that despite having all relevant information on record, the Assessing Officer proceeded to disallow the entire expenditure without issuing a show cause notice or providing an opportunity of being heard.

7.4 I have carefully gone through the submissions made by the appellant as well as the details of the royalty and technical fees furnished during the assessment proceedings, which also form part of the Paper Book. It is observed from the assessment order that the Assessing Officer issued a show cause notice dated 10.12.2019 requiring the appellant to explain as to why the royalty and technical fees should not be disallowed in the absence of supporting documentary evidence. In response, the appellant filed a detailed reply dated 17.12.2019, which was duly placed on record. However, despite such compliance, the Assessing Officer proceeded to disallow the royalty and technical fees on the flimsy ground that the appellant had failed to establish the commercial and business expediency of the expenditure and to furnish details of withholding tax paid. Such observation has been made by the Assessing Officer while completely disregarding the comprehensive details and supporting evidence furnished by the appellant during the assessment proceedings.

7.5 It is further seen from the audited annual accounts that during the relevant financial year the appellant has paid royalty and technical fees to its Associate Enterprise. Importantly, similar payments have been consistently accepted by the Assessing Officer in earlier assessment years as being incurred wholly and exclusively for the purposes of business. For Assessment Years 2010-11 and 2011-12, the payments made to the Associate Enterprise were referred to the Transfer Pricing Officer, and the TPO accepted the same to be at arm’s length. It is also on record that the appellant has paid royalty at the rate of 5% on domestic sales and 8% on export sales, which is well within the limits prescribed under FEMA Rules. Further, as per CBT Instruction No. 3 of 2016, it is clear that the Assessing Officer is mandated to refer international transactions to the Transfer Pricing Officer where transfer pricing issues are involved. Accordingly, if the AO is of the view that the royalty/technical fees paid to the Associated Enterprise is excessive, the matter must be referred to the TPO, and the AO cannot himself determine the arm’s length price. Various Courts and Tribunals have consistently held that the AO has no jurisdiction to determine the ALP of an international transaction without reference to the TPO, and any such disallowance is legally unsustainable.

7.6 In the present case, the appellant had furnished during the assessment proceedings complete details of the royalty and technical fees paid, along with particulars of withholding tax deducted thereon. In view of these facts, there is no justification for disallowance of the said expenditure. The AO is, therefore, directed to delete the addition made on account of disallowance of royalty and technical fees amounting to Rs.7,68,33,330/- and Rs.1,04,82,792/- respectively. In view of the above discussion, Ground No. 7 stands Allowed.

Ground No. 8

8. The eight ground of appeal is that the Ld.AO has grossly erred in disallowing the provision of warranty expenses amounting to Rs.96,55,996/-by ignoring the relevant jurisdictional High Court decision in Appellant’s own case and Hon’ble Supreme Court of India’s decision and without appreciating the facts of the case, evidence as filed and provisions of the Act.

8.1 The facts of the case are that during the assessment proceedings, the Assessing Officer called for details of the provisions made towards warranty. As the appellant did not substantiate the allowability of the expenses, the AO disallowed the claim holding that such provisions cannot be allowed as deduction. During appellate proceedings, the appellant submitted that the provision was created in pursuance of the warranty obligation undertaken in respect of supplies made to Indian Railways under binding contracts, for which even a bank guarantee was required to be furnished. The appellant further contended that similar provisions were accepted in subsequent assessment years, and reliance was also placed on the judgment of the Hon’ble Supreme Court in the case of Rotork Control (India) P Ltd.

8.2 I have carefully considered the submissions and the details filed by the appellant. It is observed that the provision was made strictly in terms of the warranty obligation arising from contractual commitments. The Hon’ble Delhi High Court, in the assessee’s own case, has allowed such provision, and further, the provisions made in subsequent years were also accepted in assessment. It is a settled legal position that provision for warranty expenses is allowable where it is created on the basis of past experience and on a scientific method of estimation. Furthermore, it is also important to note that the company is in its business operation for decades and in such a scenario, having a scientific basis to study and compute the warranty charges would be reliable. In the present case, the AO has not recorded any adverse finding that the provision was not made in accordance with the consistent formula followed by the appellant in earlier years. Therefore, in view of the ratio laid down by the Hon’ble Supreme Court in Rotork Controls India (P) Ltd. v. CIT [314 ITR 62], the provision for warranty expenses is held to be allowable under section 37(1) of the Act. Accordingly, the AO is directed to delete the addition of Rs.96,55,996/- made towards warranty provision. In view of the above discussion, Ground No. 8 stands Allowed.

Ground No.10:

10. The tenth effective ground raised by the appellant is that the AO erred in disallowing the bad debts written off amounting to Rs.6,13,722 without appreciating the fact of the case and evidence filed and provisions of the Act.

10.1 The brief facts are that the AO disallowed the claim of bad debts written off on the ground that the appellant had not furnished the relevant annexures/details to substantiate the claim, and hence, the same remained unverifiable.

10.2 During the appellate proceedings, the appellant submitted that the bad debts written off and debited in the Profit & Loss Account represent billed amounts not recoverable from customers, namely, the Indian Railways. It was explained that various Zonal Railways deducted/remitted amounts from the appellant’s bills on account of (i) travel miles of service engineers for attending the machines under AM throughout India, as calculated by Railways as per their manuals, and (i) delays in repair/maintenance work under AMC clauses. The appellant further submitted that non-furnishing of detailed annexures during assessment proceedings was inadvertent and without any mala fide intention.

10.3 I have carefully considered the submissions and perused the assessment order. The AO disallowed the claim merely on the ground of non-furnishing of annexure. From the ledger of bad debts written off, it is noticed that the amounts written off are essentially deductions made by Indian Railways from the bills raised by the appellant.

10.4 It is a settled position of law, as held by the Hon’ble Supreme Court in TRF Ltd. v. CIT (323 ITR 397), that after 1.4.1989, it is sufficient if the bad debt is written off as irrecoverable in the books of account of the assessee and the assessee is not required to establish that the debt has in fact become bad during the relevant year. However, the deduction is allowable only if the conditions of section 36(2) are satisfied, namely-

1. the debt must have been taken into account in computing the income of the previous year or any earlier year, and

2. it must be written off as irrecoverable in the books of account of the assessee.

10.5 In the present case, since the AO has not examined whether the conditions of section 36(2) of the Act are fulfilled, the matter requires verification. Accordingly, the AO is directed to verify whether the impugned bad debts written off were amounts taken into account in computing the income of the appellant in the relevant or earlier years, and if so, allow the same as deduction. If the appellant fails to substantiate the fulfilment of section 36(2), the disallowance shall stand confirmed. Subject to this direction, the Ground No. 10 stands partly allowed for statistical purposes.

5. To be precisely conclude we find that with regard to disallowance of deduction u/s 80G of the Act assessing officer had made a disallowance by not doubting the donations or the entitlement of the done but due to absence of certain facts in the receipt while ld. CIT(A) has taken into consideration the fact of donation being made by account payee cheque/RTGS which was duly acknowledged recipient institution by issuing proper donation receipts. Thus, without raising any inquiry from the said organization doubt the genuineness for lack of certain information in the receipts was not justify and ld. CIT(A) has rightly allowed grounds.

5.1 Coming to the disallowance on adhoc basis made on account of non trade payables by treating the same as inflated/non existing liability the ld. CIT(A) has examined the material on record to conclude that complete details of sundry creditors were furnished including address and ledgers of major creditors exceeding Rs.2 lakhs duly evidencing the payments made. Thus, adhoc disallowance has been rightly deleted as the same was without any cogent material to establish that creditors were not genuine.

5.2 In regard to the disallowance of guarantee charges made by the assessing officer we find that assessing officer had found them to be not supported by evidence while ld. CIT(A) has considered the fact that guarantee charges were paid to various banks to provide guarantees to customers in India and primarily Indian Railways. Such guarantee charges were consistently allowed as in earlier assessment years. Thus, the conclusions drawn by the ld. CIT(A) deserves no interference.

5.3 As with regard to disallowance of royalty expenses and technical fee whereby ld. CIT(A) has concluded that assessee was not given any show cause notice for the same while before ld. CIT(A) all details were filed and CIT(A) has taken into consideration the fact that these payments have been examined in earlier years by the Transfer Pricing Officer and found to be at arm’s length. Thus, conclusions drawn by ld. CIT(A) require no interference. 5.4 As with regard to disallowance of warrantee expenses we find that Hon’ble Delhi High Court in assessee’s own case had allowed such provision of the warrantee and ld. CIT(A) has relied the same. Thus, there is no substance in the ground of department.

6. As a consequence of aforesaid discussion the grounds raised in appeal of assessee are allowed and of the department are rejected. The appeal of the assessee is allowed and appeal of the department is dismissed with consequence to follow as above.

Order pronounced in the open court on 22.05.2026