TaxTMI 
TaxTMI 
2012 (12) TMI 714
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....opposed to law, eRs.uity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in upholding the addition of Rs.15,38,000/- being the provision for warranty debited to the profit and loss account for the year under appeal under the facts and in the circumstances of the appellant's case. 2.1 The learned CIT[A] failed to appreciate that the extent of warranty provided by the appellant was based on scientific and rationale basis having regard to the past experience and therefore, the same was allowable having regard to the ratio of the decision of the Hon'ble Supreme Court in the case of ROTORK CONTROLS INDIA PVT.LTD reported in 314 ITR 62[SC]. 3. Without prejudice to the....
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....) and submitted that the provision as on 01.04.2005 stood at Rs.66,81,000 and had increased to Rs. 82,19,000 on 31.03.2006 i.e., by Rs. 15,38,000, certain details were also furnished which has been mentioned by the ld. CIT(Appeals) in para 4 of the impugned order, for the cost of repetition, those are not being reproduced herein. 6. The ld. CIT(Appeals) after considering the submissions of the assessee, confirmed the action of the Assessing Officer by observing that the assessee though provided for warranty expenses for earlier years, had neither been able to provide it in that year or reversed it in subseRs.uent year and had kept the same in the books under the head "Extended provision for warranty". Now the assessee is in appeal. 7.....
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....asis based on past experience. The Tribunal in that case held as under:- "We have carefully considered the rival contentions and gone through the records. The Bombay Bench of the Tribunal in the case of Voltas Ltd. v Dy. CIT (supra) was concerned with an identical situation where the provision for trade guarantees during the warranty period in case of the assessee having scientifically worked out the anticipated the liabilities to be provided under mercantile system of accounting based on the past experience and in such a method of accounting based on the past experience and in such a method of accounting, no adhocism is involved The accounting method followed by the assessee ensures that the gaps between the provision and the actual exp....
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....crued on the date of sale and only the ascertainment could be said to be contingent which the assessee has estimated based on its past experience and in our opinion, the claims made by the assessee in this regard are most reasonable and are supported by some plausible material. In our view, the department is not justified in treating the liability as contingent. Following the principle laid down by several decisions of the Tribunal including that of the apex court in (1969) 73 ITR 53 (SC) (supra) we hold that the claim of the assessee is in order and should be accepted. The AO shall ensure that the assessee shall not claim the deduction again based on the expenditure in respect of warranty and after sales in the books of account maintain....
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....n ITA Nos.396 to 399/Bang/98 dated 31.5.2004 and the decision in the case of Wipro-GE Medical Systems Ltd. in ITA No.322-328/8ang)2001 dated 8.7.2002 has held that the liability towards warranty is inbuilt in the sale price itself and so the liability is not contingent but an ascertained one and to be allowed in the year of sales. We accordingly delete the disallowance of Rs. 4,92,69,808/-". 7.2 Learned Punjab and Haryana High Court in the case of CIT v Majestic Auto Ltd. (206 CTR 358) had an occasion to consider the allowability of provision for warranty claims. The P&H High Court considered the decision of the Apex Court in the case of Bharat Earth Movers Ltd. v CIT. In that case, leave encashment allowability was considered as allowab....
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.... provision which is made in respect of sales for this year is Rs.24,20,522/-. Sales made during the year are of the order of Rs.1.90 crore. It cannot be accepted that there will be no warranty claim in respect of sales effected during the year, as the warranty period has not expired. It was explained to us that warranty given by the assessee varies from 12 months to 24 months. In respect of eRs.uipments provided to Defence. warranty is extended for 24 months. Looking to the Rs.uantum of sales effected during the year, the net provision of Rs.24,20,522/- debited in profit and loss account is not excessive. The assessee has submitted that it is in the business of selling the eRs.uipment since 1995 and the provision is being made on the basis ....