2013 (10) TMI 1533

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....On the facts and circumstances of the case and in law, the CIT(A) erred in holding that the decision of the Hon'ble Supreme Court in the case of Rotork Controls Ltd. 314 ITR 62] is applicable in this case when scientific basis of the provision of warranty is not exclusively established". 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacture and sale of automotive components, axles for tractors, cranes, earth moving cranes etc. During the course of assessment proceedings the Assessing Officer noted from notes of accounts that the assessee has made a provision for warranty of ₹ 12,70,996/-. The Assessing Officer asked the assessee to explain as to why the provision for warranty of &#....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....appellant could not prove that warranty liability was calculated on scientific basis. However, when the provision for warranty liability of ₹ 12,70,996/- is examined considering the reversal of the provision as well as the expenditure incurred during the year, it is seen that the provision for warranty liability is justified in the sense that ₹ 12,70,996/- provided on account of warranty liability during the year which was reversed back in next year and actual expenses were shown at ₹ 18.87 Lacs. Considering the fact that the warranty provisions are applicable for goods supplied by the appellant company for a period of 12 to 18 months. The actual expense of ₹ 18.87 lacs justifies the debit on account of warranty liab....