TaxTMI 
TaxTMI 
2014 (9) TMI 725
X X X X Extracts X X X X
X X X X Extracts X X X X
....er dated 24.12.1999, had made additions and enhanced the income to Rs. 65,63,039/- on various counts. The, present appeal is concerned with addition of Rs. 60,70,492/- made under Section 68 of the Income Tax Act, 1961 ("Act", for short). The respondent-assessee, as proprietor of M/s International Surgical Agency, had undertaken liaisoning work of sale of medical equipments etc. and had received commission of Rs. 1,41,33,516/-. The assessment order records that the assessee had to provide comprehensive warranty for first 5 years, including spares on the medical equipments sold to the customers i.e. government hospitals. She was also required to provide trouble free annual maintenance of equipments without spares for the further/next 5 yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt for fulfilment of the warranty conditions. 3. The Commissioner of Income Tax (Appeals) did not agree and reversed the aforesaid finding. He referred to the fact that the respondent-assessee had done liaisoning work for supply of medical equipments. Insofar as sale and purchase were concerned, the transactions were between the foreign suppliers and the concerned hospitals. The respondent-assessee"s work was confined to installation and maintenance of the medical equipments. The assessee had entered into an annual maintenance contracts and it was the obligation of the respondent-assessee to maintain the said equipments for the first 5 years etc. In initial year the cost of maintenance was low, but would increase in the subsequent years....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n in the balance sheet under the head "current liability" of Rs. 61,57,890/-, which included amount of Rs. 55,12,088/- and another amount of Rs. 5,58,404/- on account of local maintenance i.e. with regard to local sale and purchase of medical equipments. Other deficiencies and incorrect assumptions made by the Assessing Officer were highlighted. It was pointed out that addition of Rs. 60,70,492/- was based upon wrong assumption by adding up figures of Rs. 55,12,088/- and Rs. 5,58,404/-. Further out of this amount of Rs. 5,58,404/-, expenditure of Rs. 3,39,526/- was made in the subsequent assessment year 2008-09 and the balance amount was carried forwarded. The Commissioner of Income Tax (Appeals) has referred to the assessee"s detailed writ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... how 39% provision of sale proceeds amounts to Rs. 60,70,492/-, if made on sale. If not then how the provision was created........... In view of the above submission made by the assessee and the comments made thereupon, the matter may kindly be considered by your good self accordingly." 6. After having considered the remand report, the Commissioner of Income Tax (Appeals) found merit in the submission made by the respondent-assessee and deleted addition of Rs. 5,58,404/-. Even with regard to addition of Rs. 55,12,088/-, he upheld the contention of the assessee recording as under:- "5.8 So far as the balance amount of Rs. 55,12,088/- is concerned, there is no dispute regarding the facts of the case and the business of the assessee rega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. 7. Tribunal in the impugned order has affirmed the said finding. 8. We had asked the learned counsel for the appellant-Revenue to state whether the aforesaid income were declared in the subsequent years and had been taxed and whether on the question of bifurcation or the quantum i.e. 39%, any objection was taken by the Assessing Officer/Departmental Representative before the Tribunal on the ground that it did not represent a fair, correct and reasonable estimate, based upon past or scientific data. Before the Commissioner of Income Tax (Appeals), the respondent-assessee was directed to submit a note in this regard, which was accepted. The tribunal has referred to remand report of assessing officer in which he had reported that expe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made to the decisions of the Supreme Court in E.D. Sassoon and Co. Ltd. Vs. CIT [1954] 26 ITR (SC), Calcutta Co. Ltd. Vs. CIT [1959] 37 ITR 1 (SC) and CIT Vs. Woodward Governor India (P) Ltd. [2010]321ITR147(Delhi). 10. In Rotork Controls India (P) Ltd. Vs. Commissioner of Income Tax, Chennai [2009] 314 ITR 62(SC), while interpreting section 37 of the Income Tax Act, 1961, the Supreme Court observed that a "provision" is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of....