TaxTMI 
TaxTMI 
2023 (8) TMI 883
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.... its appeal, the Revenue has raised the following grounds:- "1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred to delete the addition made on disallowance of Rs 3,45,17,000/- being provision of warranty, when in fact provision was contingent in nature and same was not based on actual basis. 2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred to delete the addition made on disallowance of Rs 3,45,17,000/- being provision of warranty, when in fact provision was not estimated by assessee on scientific basis and same was excess in nature and AO disallowed only the excess provision when no satisfactory scientific report was submitted by the assessee during th....
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.... and served on the assessee. During the assessment proceedings, it was observed from the financials filed by the assessee that the assessee has shown long-term provisions of Rs. 3,45,17,000, as provisions for warranty and free service coupons. It was further observed that in the computation of income filed by the assessee, it has not added back that provision to its total income. Since the provision claimed by the assessee is contingent and unascertained liability which is not an allowable expense and should not be allowed as a deduction, the assessee was asked to show cause as to why the provision be not added to its total income. In response thereto, the assessee filed its submissions. However, the Assessing Officer ("AO") vide order date....
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.... deduction was involved in the case of Parent Company of Appellant i.e. Mahindra & Mahindra Ltd. The Hon'ble ITAT in its judgment in the case of Mahindra and Mahindra Ltd vs DCIT(2020) in 117 taxmann.com 578 (Mumbai ITAT) allowed the said claim for Provision of warranty Expenses. The relevant part of judgment is reproduced as under:- "In view of this, it could be safely concluded that there is no dispute with regard to the claim of deduction for provision for warranty based on scientific working and analysis made by the assessee and in order to avoid multiplicity of proceedings and especially in view of the fact that the issue is squarely covered by the decision of the Hon'ble Supreme Court and Hon'ble Jurisdictional Hi....
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....eriod/mileage provided that the defects in the vehicle noticed by the buyer are covered by the warranty. It is for such warranty expenses that the provision is created and claimed as a deduction. As per the assessee, the warranty expenses are determined on the basis of actual sales and warranty expenses of the last 5 years. Basis such working the average rate per vehicle sold is computed and extrapolated for the next 2 years. Accordingly, the provision is made at different rates for different vehicles (models) worked out on past historical data. The scientific working done by the assessee, as noted in the impugned order on pages 8-9, is as under:- "The said scientific working done is explained below: a) Whenever any custom....