2019 (1) TMI 1792

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.... law, on which the appeal was admitted, is quoted below : "Whether on the facts and circumstances of the case, the Tribunal was right in quashing the revision order of the Commissioner of Income-tax with respect to the provision for warranty ?" 3. The learned Tribunal below has found that the provision made for warranty given by the assessee, who manufactures and sells auto components to its customers, to the extent of Rs. 303.17 lakhs for the year in question was based on the percentage of the turnover and, therefore, the same was computed, based on a scientific method adopted by the assessee consistently from year to year, and, following the decision of the hon'ble Madras High Court in the case of CIT v. Rotork Controls India Ltd. ....

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....y him. Even in Schedule R, Note No. 7 which is a part of the final accounts of the assessee-company, it is mentioned that provision for product warranty claims were estimated at a percentage of sales on past experience. Tax auditors had clearly specified that such provision was not a contingent liability and the assessee had relied on the decisions of this Tribunal as well as those of the hon'ble Jurisdictional High Court in this regard. No doubt, at the time when the learned Commissioner of Income-tax had passed an impugned order under section 263, the decision of the hon'ble jurisdictional High Court in Rotork Controls India Ltd. (supra) was on the side of the Revenue, that the provision for warranty claim was a contingent liabili....

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....e nor in the computation statement, the assessee had pointed out such losses to be that of amalgamating company and set off as to have been claimed under section 72A of the Act. Even in the audit report, this factum was not mentioned. No doubt, the assessee had filed a copy of the order of the High Court approving the amalgamation but this by itself would not be sufficient to hold that there was sufficient disclosure by the assessee and application of mind by the Assessing Officer. The hon'ble Jurisdictional High Court would have approved a scheme of amalgamation, but quantum of loss that would be available to the amalgamated company for set off from that of amalgamating company would require examination. There is nothing on record to s....

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....The learned counsel also submitted that since the said method was consistently followed by the assessee year after year, making of such a provision on the said scientific and reasonable basis could not have been questioned by the Revenue, much less by initiating revisional proceedings under section 263 of the Act. 6. Having heard the learned counsel for the parties, we are of the opinion that the appeal filed by the Revenue has no merit and the learned Tribunal was justified in setting aside the revisional proceedings under section 263 of the Act. The judgments relied upon by the learned counsel for the Revenue do not apply on all fours to the facts of the present case, as, in the facts before the court in the judgments cited, the court ha....