Warranty provision deduction turns on reliable estimation of an ascertained liability; remand ordered for fresh verification.

Provision for warranty is deductible only if it represents an ascertained liability supported by a scientific and reliable estimate based on technical inputs, past experience, and actual subsequent expenditure. Where the factual basis and estimation methodology are not examined in sufficient detail, the claim requires fresh verification rather than outright acceptance or rejection. The warranty provision was therefore remanded to the Assessing Officer for re-examination after verification and after giving the assessee an opportunity of hearing.

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Issues: Whether the provision for warranty was an allowable deduction as an ascertained liability or a disallowable contingent liability, and whether the matter required fresh examination by the Assessing Officer.

Analysis: The warranty obligation arose from the underlying customer contracts and was linked to the revenue recognised during the year. The allowance of such provision depended on whether the estimate was made on a scientific and reliable basis, with reference to technical inputs, past experience, and subsequent actual expenditure. As the factual basis and methodology of the estimate were not examined in sufficient detail, the proper course was to verify the claim afresh.

Conclusion: The disallowance of the warranty provision was set aside and the issue was remanded to the Assessing Officer for fresh adjudication after verification and after giving the assessee an opportunity of hearing.

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