TaxTMI 
TaxTMI 
2018 (1) TMI 1719
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....nfirming a disallowance of Rs. 1574953/- out of the total of Rs. 1924953/- being provision for warranty expenses claimed by the appellant in its return of income. 1.1 That while upholding the disallowance of Rs. 1574953/- the ld CIT(A) has failed to appreciate that the appellant had created the provision of the basis of past history and the same was based on a scientific and reliable method and as such, the disallowance sustained by the ld CIT(A) deserves to be deleted." 3. The assessee has raised the following grounds of appeal for the AY 2011- 12:- "1. That the ld CIT (A) has erred on facts and in law in confirming a disallowance of Rs. 2325950/- out of the total of Rs. 2675450/- being warranty expenses claimed by the appellant in ....
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..../-. The assessee preferred appeal before the ld CIT(A), who confirmed the disallowance of Rs. 1574953/- treating it as excessive liability claimed by the assessee and allowed the deduction of Rs. 3.5 lacs as a reasonable and justified. Therefore, the assessee is in appeal before us. 5. The ld Authorised Representative vehemently submitted that assessee is creating provisions as a percentage of sales from Assessment Year 2007- 08 @0.5% of the sales. Such provision is in accordance with accounting standard 29 and it is carried on to the provisions which is ascertained and not contingent. He stated that as sales is inclusive of the cost of warranty the above amount is charged to the profit and loss account and when actual expenditure are incu....
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....expenses were also not incurred from Assessment Year 2011-12 to 2013-14. For the Assessment Year 2010-11 there is a meager expenses of Rs. 1.18 lacs. The Hon'ble Supreme Court in case of Rotorok Control India pvt. Ltd (supra) has held that any provision made by the assessee because of warranty expenditure to meet the future requirement of setting goods right on account of warranty clause in agreement crystallizes as definite liability and is an allowable expenditure. It was further held by the Hon'ble Supreme Court that if the provision is made which is based on historical trends and is supported by warranty condition at the time of sale then, the assessee is entitled to deduction of the above claim u/s 37 of the Act. In the present....