2015 (8) TMI 552

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....8, 2005-06, 2009-10 and 2010-11. 2. In all these appeals, the only ground raised by the Revenue is against the deletion of 50 per cent. disallowance out of provision of warranty by the learned Commissioner of Income-tax (Appeals). 3. The facts of the case are that the assessee derives income from manufacturing and sale of engineering goods. The assessee made the provision for warranty in respect of after sales service year after year. The Assessing Officer disallowed 50 per cent. of such provision in respect of after sales service which is deleted by the learned Commissioner of Income-tax (Appeals) in each year following the decision of the hon'ble apex court in the case of Rotork Controls India P. Ltd. v. CIT [2009] 314 ITR 62 (S....

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....ss receipts under section 37." 5. That hon'ble jurisdictional High Court in the case of Vinitec Corporation Pvt. Ltd. [2005] 278 ITR 337 (Delhi) held (headnote) :                ". . . affirming the decision of the Tribunal, that the warranty clause was part of the sale document and imposed a liability upon the asses see to discharge its obligation under that clause for the period of warranty. It was a liability, which was capable of being construed in definite terms, which had arisen in the accounting year, although its actual quantification and discharge might be deferred to a future date. Once the assessee is maintaining his accounts on the mercantile system,....

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.... for the additional difference on account of a higher turnover. It was only this difference of net amount which was additionally debited in the provision account because the difference in the earlier years was credited and a reversal entry made to the profit and loss account by the non-utilised amount being offered to tax as income. The consistent application of the policy of provision removed any issue of mala fides or dishonest intention on the part of an assessee for defer ring its income because it could be that in a particular year actual warranty claims may exceed the provision which was made. Thus, the provision for the warranty charges was a definite business liability allowable as a deduction during the years under consideration." ....

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....enses incurred against provision in f-uture years (provide information year-wise) Shortage/Excess Turnover of year FY 2001-02 7,75,000 8,25,750 -50,750 11,57,70,881 FY 2002-03 34,99,650 34,96,605 3,045 17,87,90,298 FY 2003-04 19,99,749 20,01,525 -1,776 15,14,70,832 FY 2004-05 31,34,420 32,70,870 -1,36,450 20,23,46,463 FY 2006-07 2,63,50,000 2,65,92,843 -2,42,843 NA FY 2007-08 3,03,00,000 3,21,04,403 -18,04,403 NA FY 2008-09 2,46,00,000 2,44,70,158 +1,29,842 NA FY 2009-10 90,00,000 91,02,376 1,02,376 NA   8. In the above chart, the figures for nine years have been given and we find that the provision was al....