TaxTMI 
TaxTMI 
TaxTMI 
2011 (4) TMI 1483
X X X X Extracts X X X X
X X X X Extracts X X X X
....arts. That on such industrial burners one year warranty is allowed. That the entire sale proceeds is taken as the income of the assessee, therefore, the assessee made provision for expenditure likely to be incurred in fulfilling the warranty in the subsequent year. That the provision is made at the rate of 1.5% of the sales. Considering the facts of the case, such provision for the expenditure to be incurred by the assessee in fulfilling the warranty of one year is quite fair and reasonable, the same should be allowed. He alternatively submitted that during the year under consideration the assessee made provision of ₹ 10,58,327/- and at the same time written back the provision of ₹ 9,19,458/- made in the last year. Thus, the net amount claimed against the warranty provision in the year under consideration was only ₹ 1,38,869/-. Therefore, if the assessee's claim is not accepted on merit, then the disallowance can be only ₹ 1,38,869/- and not ₹ 10,58,327/- disallowed by the AO. 4. The learned DR, on the other hand, stated that the assessee is only a trader not the manufacture of industrial burner. The warranty of any product is provided by the manufact....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for providing sales services. The assessee has also not brought on record any details or evidences in connection with the warranties provided and expenses borne by it for the warranties either during the year or in past years Since the assessee is incurring various expenses in connection with sales services under the various overheads, no separate deduction for the provisions can be allowed On this ground also, the provisions made for warranty is not admissible The claim of the assessee is therefore, rejected. The disallowance of ₹ 10,58,327/- is made to the total income." 6. At the time of hearing before us, the learned counsel for the assessee was unable to controvert the factually findings recorded by the AO. The learned DR has rightly stated that when a warranty is provided by the manufacturer for any product it is the liability of the manufacturer to fulfill such warranty. During the course of hearing before us, we had specifically asked the assessee's counsel whether there is any agreement between the assessee and the manufacturer which makes the assessee liable for fulfilling the warranty. The assessee denied the existence of such written agreement between the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision is sustained at ₹ 1,38,869/-. Accordingly, the assessee will get relief of ₹ 9,19,458/-. 7. The Ground No.2 of the assessee's appeal is against disallowance of ₹ 30,000/- out of telephone expenses, while Ground No.2 of the Revenue's appeal is against the relief of ₹ 26,102/- allowed by the CIT(A) against the disallowance of ₹ 56,102/- made by the AO. 8. We have heard both the parties and perused the material placed before us. The AO disallowed the sum of ₹ 56,102/- out of telephone expenses on the ground that certain telephone/mobile phone were at the premises belonging to the sister concern. The CIT(A) reduced the disallowance of ₹ 56,102/- to ₹ 30,000/-. The AO has not specified against the total bill of ₹ 56,102/-, how much amount was towards land line phone and how much of the mobile phone. So far as land line is concerned, if it is installed in the business premises of the assessee's associate concern and not the assessee's premises, certainly the expenditure cannot be allowed in the case of the assessee. However, mobile phone being used by the Director or the employees of the assessee, even if it has address other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....file of the AO for re-adjudication in accordance with law. 13. Last ground of the assessee's appeal reads as under: "5. The ld.AO had disallowed a sum of ₹ 7,236/- as a prior period expenses. The CIT(A) has erred on facts and in law in not considering the same in his order and thereby upholding the said disallowance." 14. It is a settled law that for claiming prior period expenditure, it is the duty of the assessee to establish that the liability for such expenditure is accrued or crystallized during the accounting year relevant to the assessment year under consideration. We find that before the AO the assessee did not furnish any evidence so as to satisfy that the liability accrued during the accounting year relevant to the assessment year under consideration. In view of the above, we do not find any infirmity in the order of the AO in this regard. The same is sustained and the ground no.5 of the assessee's appeal is rejected. ITA No.1849/Ahd/2009 15. The first ground of the Revenue's appeal reads as under: "1. The ld.CIT(A) has erred in law and on facts in deleting the addition of ₹ 5,72,626/- on account of bad debts." 16. We have heard both the parties and per....