TMI Blog2013 (7) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of warranty was not stated so, but described as provision towards the liquidity damages. We do not find that the description of the claim would govern the claim on the provision for warranty when the terms of the agreement specifically provided that the liquidated damages was for non performance. Given the above fact, one can not reject the claim for provision made towards the warranty on the performance of the machineries supplied - Following the decision of ROTORK CONTROLS INDIA P. LTD v. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA] - Decided in favour of assessee. Regarding rectification expenses - Held that:- it was stated that the said provision was based on the information that some of the equipments supplied by the company required repair and replacement and that technical team estimated such expenses for making provision in the account. The claim thus based on materials and the information of the technical team - Deduction allowed - Decided in favor of assessee. - TCA. No. 38 of 2010 - - - Dated:- 3-6-2013 - Chitra Venkataraman And K. B. K. Vasuki,JJ. For the Appellant : Dr. Anita Sumanth For the Respondent : Mr. T. Ravikumar Standing Counsel for Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee placed before us the order of this Court rendered in the assessee's own case in T.C.(A). No. 341 of 2004 dated 9.6.2009 relating to assessment year 1999-2000 and T.C.No. 35 of 2008 dated 7.12.2009 for the assessment year 2002-03, wherein the Division Bench of this Court had followed the earlier order passed by this Court in Tax Case (Appeal). No. 341 of 2004 dated 9.6.2009. In both these decisions, this Court following the decision of the Apex Court in the case of ROTORK CONTROLS INDIA P. LIMITED v. CIT (2009) 314 ITR 62, held that a provision is a liability which can be measured only by using a substantial degree of estimation. Taking note of nature of the business, nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee, this Court held that the assessee would be entitled to deduction under Section 37 of the Act for the provision made for the warranty. Thus, learned counsel for the assessee submitted that the facts of the present case are not different from that of the earlier decided issues. It is further submitted that T.C.(A).No.341 of of 2004 was taken on appeal by the Revenue before the Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Production capacity 135 MTPD (100% rated) L.D. @ Rs.7.6 lakhs for every full 1% (one percent) shortfall in the capacity subject to maximum Rs.38.00 lakhs shall be applicable. Quality of Product (Purity of Lime) 82% as available CaO (at 80% rated capacity) L.D. @ 7.6 lakhs for every 1% shortfall in purity of lime subject to maximum Rs.38.00 lakh shall be applicable. Fuel consumption 1512 Kcal/ kg (155 kg/T at 80% rated capacity) L.D. @ Rs.3.04 lakh for every 1 kg/T increase in fuel consumption subject to maximum Rs.38.00 lakh shall be applicable. Electric power consumption 37 KWH/T (80% rated capacity) L.D. @ Rs.1.52 lakh for every 1 KWH / MT increase in power consumption subject to a max. Rs.38.00 lakh shall be applicable. Emission level 80 Mg/Nm3 (wet basis) (at 100% rated capacity) L.D. @ Rs.7.6 lakhs for every 5 mg/ Nm3 increase in emission level subject to a max Rs.38.00 lakh shall be applicable. Rectification Expenses:- During the completion stage of the project, some of the equipments supplied by us require some repairs or replacement. Our technical team estimate such kind of expenses and intimate the accounts for such provisions. We make provision for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on did not fall under the provision towards warranty. Consequently, no deduction could be allowed in respect of the same. It is neither a provision created towards liquidated damages nor a provision created on a scientific basis or a provision created on the basis of the actual expenditure incurred by the company during the past years, nor it is an ascertained liability. Thus, the Commissioner of Income Tax (Appeals) allowed a sum of Rs.1,13,21,638/- alone following Income Tax Appellate Tribunal's order in the appellant's own case and rejected the claim of the balance provision of Rs.40 lakhs. 10. On appeal before the Income Tax Appellate Tribunal, the Tribunal referred to the reasoning of the Commissioner of Income Tax and by following the decision of this Court referred to above, rejected the assessee's case. The assessee's contention is that the provision made towards the non performance guarantee is more in the nature of warranty. Thus, the company assured quality and performance and on any shortfall agreed for damages making provision based on the performance capacity of the machineries supplied. Based on the materials available, on the assured capacity of the machinery and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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