TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 273
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....s raised identically worded grounds in all the three years except the quantum. Hence, we will take the facts and grounds from assessment year 2011-12 and decide the issue. The relevant grounds read as under:- 2. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of provision for warranty amounting to Rs. 5.66 crore. 2.1 The Commissioner of Income tax (Appeals) erred in holding that the appellant had adopted a flat rate on the turnover of truck and non truck segment eventhough the assessee company is adopting the rate which changes from year to year based on previous year experience. 2.2 The Commissioner of Income tax (Appeals) ought to have appreciated that warranty is an estimate based on previous experience and that actual expenditure may not match the provision and any excess or shortage in the provision is made is adjusted in the subsequent year. Rotork Controls India P.Ltd Vs. CIT, 314 ITR 62(SC). 3. Briefly stated facts are that the assessee is engaged in the business of manufacturing of tyres. We noted that this matter travelled up to ITAT and ITAT in ITA Nos.641 to 645/Chny/2018 dated 09.05.2018 set aside the matter back to the file of the ....
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....he provision for warranty in the case under consideration can constitute a contingent liability not entitled to deduction u/s 37 as per the decision of the Hon'ble Supreme Court. (d) The appellant could not establish satisfactorily that all the conditions prescribed by the Hon'ble Supreme Court are satisfied. (v) In view of the above and also for the reasons stated by the AO in the appeal effect order as well as findings of the Hon'ble DRP for the AY 2014-15, it is concluded that the facts and circumstances of the case under consideration are different and distincuishable from the facts and circumstances of the case of Rotork Controls India Pvt. Ltd., vs. CIT, 180 Taxman 422(SC) Aggrieved assessee came in appeal before us. 5. Now before us, the ld.counsel for the assessee filed completed details of provision for warranty working for three assessment years as under:- Provision for warranty workings for the Assessment Year 2011-12 Particulars Reference Truck Non truck Total April Total 2010 to September 2010 October 2010 to March 2011 April 2010 to September 2010 October 2010 to March 2011 Sales for the relevant preceding 12 month period A 2724.83 ....
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....urrent year (AY 2013-14) Sales for the year ended 31.3.2012 D 2231.96 2370.18 2361.78 2416.47 Average % of outstanding warranty E 15.08% 72.61% 24.09% 80.95% Provision for outstanding warranty as on March 2013 F=D*E*C 2.98 18.89 2.62 9.85 34.35 Add: Additional claims G 13.80 Less: Disputed claims H -0.65 Total provision for the year ended 31.3.2013 I=F+G-H 47.50 Opening provision as on 1.4.2012 J 37.36 Net amount debited to P&L as warranty expenses K=I-J 10.14 Actual warranty expenses debited to P&L 115.97 5.1 The ld.counsel for the assessee stated that assessee has given scientific basis of this warranty in respect of tyres sold to truck segment and non-truck segment as is clearly reflecting from the above charts. When a query was put to ld.counsel for the assessee that what happened in assessment year 2010-11, the ld.counsel for the assessee filed copy of Tribunal's order in ITA No.740/Mds/2014, dated 15.05.2015 wherein Tribunal has remitted back the matter to the file of the AO to re-decide the issue on the basis of directions. The ld.counsel stated that this issue is p....
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....old then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the 1961 Act. It would all depend on the data systematically maintained by the assessee. It may be noted that in all the impugned judgments before us the assessee(s) has succeeded except in the case of Civil Appeal Nos. of 2009 - Arising out of S.L.P.(C) Nos.14178-14182 of 2007 - M/s. Rotork Controls India (P) Ltd. v. Commissioner of Income Tax, Chennai, in which the Madras High Court has overruled the decision of the Tribunal allowing deduction under Section 37 of the 1961 Act. However, the High Court has failed to notice the "reversal" which constituted part of the data systematically maintained by the assessee over last decade." The ld.counsel stated that once the provision for warranty is calculated on scientific basis, warranty should have been allowed as expenses u/s.37(1) of the Act as revenue expenditure. 6. On the other hand, the ld. Senior DR relied on the orders of the lower authorities. 7. We have heard rival contentions and gone through facts and circumstances of the case. We noted from the order of CI....
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....t in the case of Bharat Earth Movers V. CIT (245 ITR 428) held that if a business liability has definitely arisen in a financial year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though actual quantification with accuracy may not be possible, if these requirements are satisfied, the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. In the present case, the assessee has not produced any basis on which the provision of warranty was determined before the Assessing Officer. However, it has produced actual working of warranty before the Commissioner of Income-tax(Appeals). Therefore, it is not clear that what extent the liability actually required in the assessment year under consideration while framing the assessment by the Assessing Officer. The provision made whether on actual quantification or not, was not veri....