2013 (9) TMI 887

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Advocates. For the Respondent : Mr. Amol Sinha, Sr. Standing Counsel & Mr. Rahul Kochar, Advocate. ORDER Sanjiv Khanna, J. (Oral): Having heard counsel for the parties, the following substantial question of law is framed:- "Whether the Income Tax Appellate Tribunal was justified in disallowing actual warranty expenses of Rs.12,53,441/- and Rs.48,54,522/- on account of provision for ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....w has been taken by Delhi High Court in Commissioner of Income Tax versus Whirlpool of India Limited, 2011 (242) CTR (Del) 245 wherein it has been observed that provision for warranty should be based on actuarial valuation with reference to the products sold during the year. This amount can be treated as expenditure under Section 37(1) on the principle of matching. Further, depending upon the past....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he aforesaid chart that the assessee had incurred total expense of Rs.39,84,608/- (Rs.27,31,167/- + Rs.12,53,441/-). However, provision for warranty expenses was made for Rs.48,54,522/-. In other words, the assessee in the profit and loss account had debited an amount of Rs.61,07,963/- (Rs.48,54,522/- + Rs.12,53,441/-). The tribunal in paragraph 26 of the impugned order has noticed that the appell....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e for matching can be allowed but the amount claimed should have some rational and scientific basis and it cannot be on mere ipsi dixit. This is clear from the two decisions in Woodward Governor India Limited (supra) and Whirlpool of India Limited (supra). In the last decision it has been held that provision for warranty has to be on actuarial valuation. 9. In view of the aforesaid position, we....