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2023 (4) TMI 1053 - KARNATAKA HIGH COURTProvision for warranty in excess of 2.14 percent of sales - whether Tribunal is right in allowing the provision for warranty even thought the assessee had not made the provision on a scientific basis as laid down by the Apex Court in the case of Rotark Controls India Pvt. Ltd [2009 (5) TMI 16 - SUPREME COURT]? - HELD THAT:- In assessee’s own case [2009 (1) TMI 926 - KARNATAKA HIGH COURT] this court has answered the question of law in assessee’s favour. In the said appeal, Revenue had challenged the Tribunal’s order for A.Y. 2003-04 which had held that the warranty estimated at 2.14% was arrived based on assessee’s past experience in the Indian International market and the post sales support rendered based on the technical evaluation. In Rotork Case [2009 (5) TMI 16 - SUPREME COURT] it is held that a provision is a liability, which can be measured only by using a substantial degree of estimation and it is recognized when an enterprise has a present obligation as a result of past event;it is probable and an outflow of resources will be required to settle the obligation; and A reliable estimate can be made of the amount of obligation. Also carefully perused the tabular column furnished by Shri. Pardiwala extracted above showing the provisions made between A.Y. 2007-08 and 2017-18. He is right in his submission that the total utilization for the corresponding A.Y.s 2008-09 to 2017-18 is 95.5% of the total provision. Therefore, as held in Rotork Case, the estimate made by assessee is reliable and robust. The orders passed by the AO and confirmed by CIT(A) and the Tribunal are unsustainable in law and these appeals by the assessee merit consideration.
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