2007 (9) TMI 626

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....nt years 1987-88 to 1989-90. 2. The Tribunal by exercising its power under section 256(1) of the Income-tax Act, 1961 ('the Act') has referred the following questions of law for determination of this Court:- "(i)Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that provision of warranty for repairs/replacement is an existing liability at the time of sale and is allowable as deduction? (ii)Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that the credit in the Modvat account is not to be treated as the income of the assessee although the assessee is ultimately entitled for set off of this amount against the payment of Excise Duty to this ex....

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....se of Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1. While disagreeing with the submissions made by the assessee, the Assessing Officer disallowed the claim of provision of Rs. 2,74,119 for alleged inbuilt liability under the head of 'Warranty'. Similarly, in respect of assessment years 1988-89 and 1989-90, the Assessing Officer disallowed the claimed amounts of Rs. 8,85,274 and Rs. 14,03,843 respectively. 5. Against the orders of the Assessing Officer, the assessee preferred three appeals. The CIT(A) rejected the appeals confirming the view of the Assessing Officer holding that the assessee was making claim of the deduction of warranty twice, i.e., once on the basis of estimated provisions ranging between 2 per cent to 6 per cent depending u....

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....wn in cash. The CIT(A) agreed with the plea of the assessee and deleted the addition. Against this deletion, the revenue filed an appeal before the Tribunal and the Tribunal has concluded that the amount of modvat credit cannot be treated as total income of the assessee and uphold the view of the CIT(A). 8. After hearing learned counsel for the parties and perusing the record with their able assistance, we are of the considered view that the matter is not res integra and the questions as referred by the Tribunal have already been decided against the revenue. 9. Insofar as the first question is concerned, a Division Bench of this Court has already decided a similar question against the revenue in the case of CIT v. Majestic Auto Ltd. [....