TaxTMI 
TaxTMI 
2023 (8) TMI 591
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....rusal of the appeal would show that the following questions of law have been proposed: "(i) Whether on the facts circumstances of the case and in law, ld. ITAT erred in deleting the addition of Rs. 3,19,98,632/- made by the Assessing officer on account of provision for warranty? (ii) Whether on the facts and circumstances of the case ld. ITAT erred in deleting of Rs. 17,61,99,671/- made by Assessing officer on account of provision for liquidated damages claimed in the profit and loss account by the Assessee even when the provisions are unascertained liabilities, hence were not admissible under the provision of Income Tax Act, 1961? (iii) Whether on the facts and circumstances of the case ld. ITAT erred in deleting....
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....hort, "CIT(A)"] with the following observations: "17. While appreciating the above submissions, LD. CIT (A) has not dealt with the contract in the relevant clauses based on which he has agreed with the submissions of assessee that revenues and liabilities are capable of being estimated with reasonable level of certainty. Hon'ble Supreme Court in the case of Rotork Controls India (supra) has held that a provision is recognised when an enterprise has a president obligation as a result of past event; that is it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made on the amount of the obligation. If these conditions are not met no provision could be recognised. ....
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.... noted by the judgment of the Supreme Court in Rotork Controls India Pvt. Ltd. v. CIT 314 ITR 62 (SC), which turned down the Revenue's contention that such provisions are "contingencies" or "unascertained liabilities. It is submitted that having regard to the restricted nature of the claim which is more by way of appreciation of the precedents, the course adopted by the ITAT was not appropriate; rather it should have decided the issue. Learned counsel for the respondent urges that the issue with respect to such provision - i.e. for liquidated damages and warranty is pending adjudication before the ITAT for another year in the assessee's case. Having regard to the statements made, the Court is of the opinion that t....
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.... Debited to P/L AY 2004- 05 135,314,238 196,651,910 20,452,238 311,513,910 176,199,672 AY 2005- 06 311,513,910 29,602,855 4,643,188 110,046,185 226,427,392 24,959,667 AY 2006- 07 226,427,392 59,373,585 44,391,108 79,030,343 162,379,526 14,982,477 AY 2007- 08 162,379,526 102,684,554 70,272,572 50,392,194 144,399,314 32,411,982 10.1 A perusal of the chart would show that in a given AY, there is an opening balance, followed by the amount provided towards liquidated damages in a given AY and the amount utilized in the very same period. The table also adverts to the closing balance under the provision made for liquidated damages. 10....
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....) The contract contained a provision for imposition of liquidated damages for delay in supply. The rate for imposition of liquidated damages was pegged at 0.5% of the value of the delayed supply for each week of delay, or part thereof for the period up to 10 weeks, and thereafter, the rate would stand enhanced to 0.7% of the value of the delayed supply for each week of delay or part thereof for another 10 weeks of delay. [Clause 15.2 of the contract executed between the respondent/assessee and BSNL captures this aspect of the matter]. (iii) The AO disallowed the provision amounting to Rs. 17,61,99,671/-, which was the difference between the provision created during the year i.e., Rs. 19,66,51,910/- and the amount actually utilized ....
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....ed damages accounts. Therefore, the impugned amount was not only the provision but the actual amount of the liquidated damages pertaining to the period of delay falling within the previous year relating to the assessment year under consideration. The learned CIT(A) categorically stated that the assessee was following this method consistently. We, therefore, do not see any valid ground to interfere with the factual findings given by the learned CIT(A) and accordingly do not see any merit in the ground raised by the Department." [Emphasis is ours] 14. A careful perusal of the said paragraph would show that the Tribunal has made no reference to either the clause relating to liquidated damages or the agreement which was operable bet....