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2012 (8) TMI 271 - AT - Income TaxProvision for Warranty claim - dis-allowance on ground that assessee was following the mercantile system of accounting - Held that:- As soon as the sale is made, the assessee incurs the liability on account of warranty claim even though the expenditure may be actually incurred in subsequent years. Therefore, the claim of deduction on account of provision for warranty claim is allowable as deduction in mercantile system of accounting and this view is also supported by the judgment of Supreme Court in case of Rotork Controls India (P) Ltd(2009 (5) TMI 16 - SUPREME COURT OF INDIA ). As regards quantum of claim the assessee had been consistently making claim @ 2% of sales and, in case, in the subsequent year, the provision made is found to be excessive, balance amount is offered for income and, in case, expenditure actually incurred is found to be more, further deduction is claimed in subsequent year. Since assessee has consistently followed the system and adjustments have been made in future, no reason is seen to interfere with the system being consistently followed by the assessee - Decided in favor of assessee.
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