TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 537
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....f Rs. 33,65,007/-made by assessing officer on the ground that invoices in respect of such expenses were raised in the subsequent financial year 2008-09. The learned Commissioner (Appeals) ought to have appreciated the fact that the said expenses relates to the advertisements released in the financial year 2007-08. (2) The learned Commissioner (Appeals) has erred in law and on facts in confirming disallowance of provision for warranty of Rs. 44,57,867/- made by learned assessing officer. The learned Commissioner (Appeals) ought to have appreciated the fact that out of the disallowance of Rs. 44,57,867/-, an amount of Rs. 18,19,487/- pertains to actual expenses on after sales service and such actual expenses should be allowable. (3) The learned Commissioner (Appeals) has erred in law and on facts in confirming disallowance of provision for gratuity of Rs. 13,37,283/-made by the assessing officer. The learned Commissioner (Appeals) ought to have considered the assessing officers finding in remand report that the said provisions were not routed through the profit and loss account. (4) The learned Commissioner (Appeals)has erred in law and on facts in confirming disallowance of ....
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....ing the fact that invoices were received in month of April and May 2008 confirmed the disallowance. On the other hand learned DR for the revenue supported the order of authorities below. 4. We have considered the rival submission of the parties and have considered the orders of authorities below. There is no dispute that the assessee is following Mercantile system of accounting. Further it is not in dispute that invoices related to the advertisement expenses were received by the assessee in the month of April and May 2008, though the expenses relates to the advertisement made prior to March 2008. Considering the fact that expenses relates to the advertisement expenses are related with the assessment year under consideration, the disallowance made by assessing officer and confirmed by learned Commissioner (Appeals) are deleted. In the result ground number 1 of the appeal is allowed. 5. Ground No.2 relates to the provision for warranty. The learned AR for the assessee submits that the assessee has the practice for making provision for warranty on the basis of percentage of turnover. The amount of provision for warranty is determined on the basis of analyses of empirical data failur....
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....ices to their customers. It was further observed that the assessee is not the manufacture of the items. The ld. Commissioner (Appeals) was also of the view that the warranty is not passed by the manufacture to the trader. The assessee has not filed any evidence to substantiate that after sales service, the assessee made expenses on account of warranty. The ld. Commissioner (Appeals) also examined after sale service expenses, for the relevant period, which is 1.03% of the total turnover. The ld. Commissioner (Appeals) also observed that it was the first year of the assessee into the trading. 8. In our view a provision is recognized when a enterprises has a future obligation as a result of past events, it is probable that a out flow of the recourses will be required to settle the obligation and a reliable estimation can be made for such obligation. All such factors are missing in the present case. In our humble view, the ratio of the decision of Hon'ble Supreme Court in Rotrok Control P Ltd (supra) relied by ld. AR for the assessee is not applicable on the facts of the present case. As the ratio laid down by Hon'ble Court in said case that "a present obligation as a result of a pas....
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....the figure of Rs. 13,37,283/- (Rs. 16,22,347 - Rs. 2,75,064/-). The AO confirmed that the provision of gratuity is not routed through Profit & Loss Account and a balance-sheet item. The ld. Commissioner (Appeals) on the basis of remand report furnished by assessee confirmed the action of AO holding that the provision of gratuity are not routed through Profit & Loss Account as it was a balancesheet item. We have noted that the ld. Commissioner (Appeals) confirmed the action after verification of the fact that provision for gratuity is not routed through Profit & Loss Account. The assessee has shown the provisions of gratuity as on 31.03.2008 as a liability taken over from its Associated Enterprieses (Brother International Singapore Pvt. Ltd.). In our view, the disallowance made by Assessing Officer and confirmed by ld. CIT(A) is not correct. The disallowance was made only on the ground that it was not routed through Profit & Loss A/c and was a balance-sheet item. We are conscious of the fact that balance-sheet are not sacrosanct. The assessee claimed the provision of gratuity of Rs. 13,37,283/-. During the remand proceeding assessee furnished actuarial certificate showing amount of ....