2011 (7) TMI 573

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....or the Respondent. JUDGMENT N. Kumar, J. - The Revenue has preferred this appeal challenging the finding of the Tribunal, which has approved the provision for warranty. 2. The Assessing Officer has allowed the provision for warranty amounting to Rs. 2.83 crores. The Commissioner in his revisional jurisdiction held, it was not allowable as expenditure. Therefore, he issued a show-cause notice ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....uctible if the incurring of the liability on account of warranty is certain and is capable of being estimated with reasonable certainty. Finally he held that the provision for warranty amounting to Rs. 2.83 crores allowed by the Assessing Officer is withdrawn. Aggrieved by the same, assessee preferred an appeal. In the appeal, the Tribunal, relying on the judgment of the High Court in the case of ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ll be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. 11. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. 12. A past event that ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... item the provision for warranty could constitute a contingent liability not entitled to deduction under section 37 of the said Act. However, when there is manufacture and sale of an army of items running into thousands of units of sophisticated goods, the past event of defects being detected in some of such items leads to a present obligation which results in an enterprise having no alternative t....