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2012 (12) TMI 210 - HC - Income TaxBook profit u/s 115JB - Provision for warranty @4% of total sale value of products on scientific analysis - as provision for diminution in the value of assets - in case of a manufacture and sale of one single item the provision for warranty could constitute a contingent liability not entitled to deduction u/s 37 - obligations arising from past events have to be recognized as provisions as a result of past events resulting in an outflow of resources. As decided by court in case of M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] in concluding such warranty provisions were not contingent liabilities would apply with greater force to negate the claim by the revenue that such provisions are made for diminution in the value of any asset, so as to be covered by Explanation 1(i) to Section 115 JB of the Act - no substantial question of law arises for consideration. Provision in respect of “slow moving finished goods” - held that:- Assessee is dealing with sophisticated medical consumables which are used by the large public and if an inventory is not moving for sufficiently long period, it is considered to be non-productive or non-useable. The assessee had identified through SAP computer programme which took into consideration each and every item of slow moving finished goods lying at the end of each year and contained information in that regard. The assessee has properly identified such stock and has also followed in accordance with commercially accepted accounting principles of valuation and has put the realizable value for the purpose of valuing the same - CIT(A) was correct in law and on facts to have deleted the addition made by the AO which was based not taking into consideration the hard realities of assessee's business - The addition in our view, is properly deleted - concurrent findings as to the scientific and reasonable method adopted by the assessee in the facts of this case have been recorded after the facts were gone into in detail by the appropriate authorities. The Court does not find any reasons to disturb the said findings. On this ground too the revenue's claim has to fail. In view of the decision CIT Vs. Hindustan Zinc Ltd. [2007 (5) TMI 195 - SUPREME COURT], decided in favor of assessee.
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