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2009 (10) TMI 627 - HC - Income TaxDisallowance of claim of provision of warranty - warranty is based on a scientific method and that it was based on past practice and experience - warranty expense, if properly ascertained and discounted on accrual basis can be an item of deduction under section 37 - It would depend on the nature of the business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced – Held that:- historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts show that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37, in the light of the decision of the Supreme Court in the case of Rotork Controls India P. Ltd.(2009 - TMI - 33420 - SUPREME COURT OF INDIA), tax case appeal has to be allowed by answering all questions of law in favour of the assessee and against the Revenue.
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