ITAT Allows Assessee's Appeal on Warranty Provision Disallowance; Cites Covid-19 for Delayed Order Pronouncement.

The ITAT allowed the appeal of the assessee, a public limited company, regarding the disallowance of a warranty provision while computing book profits under Section 115JB of the Income Tax Act, 1961. The Tribunal set aside the disallowance under normal provisions and remanded the issue for de novo adjudication by the AO. The Tribunal justified the delayed pronouncement of the order, citing the Covid-19 pandemic and lockdown, and excluded this period from the 90-day limit. The appeal was allowed for statistical purposes, and the AO's appeal was dismissed, with the order pronounced per Rule 34(5) of ITAT Rules.

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Issues:
Appeal regarding disallowance made towards provision for warranty under computation of book profits u/s.115JB of the Income Tax Act, 1961.

Analysis:
1. The appeal in ITA No.6961/Mum/2012 for A.Y.2003-04 concerns the disallowance made towards provision for warranty of Rs. 23,48,01,000 while computing book profits u/s.115JB of the Act. The matter was recalled as the Tribunal did not adjudicate on this issue in the original appeal. The Tribunal recalled the order for the limited purpose of adjudicating on the disallowance of provision for warranty.

2. The assessee, a public limited company engaged in manufacturing vehicles, tractors, and property development, made a provision for warranty for F.Y.2002-03. The provision was made based on scientific empirical basis and past history. However, the ld. AO disallowed the sum under normal provisions of the Act and u/s.115JB. The ITAT set aside the disallowance under normal provisions to the file of the ld. AO and remanded the issue for denovo adjudication.

3. The order was pronounced after 90 days from the conclusion of the hearing. Citing a precedent, the Tribunal justified the delay due to the lockdown announced by the Government. The Tribunal highlighted the extraordinary circumstances caused by the Covid-19 pandemic and the subsequent lockdown, which disrupted judicial work. Considering the situation, the Tribunal excluded the lockdown period while calculating the 90-day limit for pronouncement of orders. The appeal of the assessee was allowed, and the appeal of the Assessing Officer was dismissed.

4. Following the judicial precedent, the Tribunal pronounced the order beyond the 90-day period. The appeal of the assessee was allowed for statistical purposes. The order was pronounced in accordance with Rule 34(5) of ITAT Rules and placed on the notice board on 29/07/2020.

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