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2012 (7) TMI 662 - HC - Income TaxProvision for ascertained liability or contingent liability - Treatment of the provision for installation and service charges - Tribunal treated it as an ascertained liability and hence an allowable deduction - Held that:- The provision for the service charges payable by the assessee by way of warranty provision is not made on any scientific data. Admittedly, the provision made was only on ad hoc basis, a fact which is recorded by the Tribunal. - The said fact is further strengthened by the fact that even though the warranty period is for one year and the assessee has to make payment to the service provider as and when a demand is made, normally such payment claim has to come during the period of warranty or within a reasonable time. Even though the agreement that the assessee had with the service provider is not placed before this Court, nor was it placed before the authorities below, nevertheless, a reading of the Commissioner's order relating to the assessment year 1992-93 makes the facts clear by reason of the fact that more than 60% of the provision remained unpaid even after more than two years since the date of sale. Provision was made for the service charges based on past obligation - Held that:- If really the provision made was otherwise based on past experience, certainly, the figures would not have stayed as having a correlation to the sales, or for that matter, as the Commissioner of Income Tax (Appeals) observed, more than 60% of the provision would not have remained unpaid even after more than two years from the date of sale - setting aside the order of the Tribunal thereby restoring the order of the AO as Tribunal committed a serious error in law in holding that such ad hoc provision would nevertheless qualify for deduction - in favour of Revenue.
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