2011 (12) TMI 539 - HC - Income Tax

Tribunal Ruling: Warranty Expenses Allowed, Interest Income Deduction, Sales Tax Exclusion

The Tribunal upheld the deletion of disallowance of warranty provision expenses, citing precedent where such provisions were integral to sale price. ... - Issues involved: The judgment involves the following issues: 1. Deletion of disallowance of warranty provision expenses claimed as contingent liability.2. Allowing deduction u/s. 80IA for interest income earned on late collection of sales proceeds.3. Directing to exclude sales tax and excise duty from total turnover for deduction u/s. 80HHC.Issue A - Deletion of disallowance of warranty provision expenses: The Tribunal relied on the decision in Rotork Controls India case where warranty provision was considered integral to sale price. The warranty provision was recognized as the assessee presented obligation due to past events resulting in outflow of resources. The Tribunal dismissed the Revenue's appeal based on the precedent, hence the similar issue in the present case was not entertained.Issue B - Deduction u/s. 80IA for interest income: The Appellate Tribunal allowed deduction u/s. 80IA for interest income earned on late collection of sales proceeds, even though it was not derived from activities of the industrial undertaking. This issue has been admitted as a substantial question of law for further consideration.Issue C - Exclusion of sales tax and excise duty for deduction u/s. 80HHC: The Appellate Tribunal directed to exclude sales tax and excise duty from total turnover for computation of deduction u/s. 80HHC, despite the insertion of Section 145A of the Act. This issue has also been admitted as a substantial question of law for consideration along with other related Tax Appeal.