2026 (3) TMI 556

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....hort referred to as "CIT(A)"), arising out of the assessment order passed under section 143(3) rws 263 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') relating to the Assessment Year 2014-15. 2. Brief facts of the case is that the assessee filed its Return of Income for the Asst. year 2014-15 on 28-11-2014 declaring Nil income. Regular assessment u/s. 143[3] was made on 29-12-2016 determining the income under normal provisions at Rs. 7,38,27,158/- and under book profit u/s. 115JB at Rs. 15,76,68,533/-. This assessment order was found to be erroneous and prejudicial to the interest of Revenue, therefore Ld.PCIT passed revision order dated 13-02-2019 with direction to the AO to make proper inquiry in respect of the provi....

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....ion for warranty expenses of Rs. 34.48,532/- to the total income of the appellant calculated under normal provision of the Act. Therefore, the AO is directed to delete the addition of provision for warranty expenses of Rs. 34,48,532/- under normal provision of the Act and sustain this addition while calculating the book profit under section 115JB of the Act. This ground of appeal is partly allowed." 4. Aggrieved against the appellate order, Grounds of Appeal raised by the assessee in ITA No.839/Ahd/2023 read as under: "1. The Learned C.LT.(A) has erred in law and on facts of the case by adding warranty expenses of Rs. 34,48,532/- to book profit u/s. 115JB of the I.T. Act, 1961 though the same was an ascertained liability and not....

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....d liability. Similar principle has also been laid down by the Hon'ble Supreme Court in Bharat Earth Movers v. CIT (245 ITR 428) wherein it was held that a liability which has arisen in the accounting year and can be reasonably estimated is allowable notwithstanding the fact that it may have to be discharged in future. 5.1 In the present case, the provision for warranty has been created in respect of products sold during the year and is based on past data relating to warranty claims. Therefore, the liability cannot be said to be contingent or unascertained. In our considered view, such provision does not fall within the mischief of clause (c) of Explanation 1 to section 115JB. Accordingly, the addition made by the Assessing Officer while ....