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2012 (12) TMI 714 - AT - Income TaxProvision for Warranty – disallowance as assessee not following any scientific way of debiting the expenditure - Held that:- As decided in CIT Versus Vinitec Corporation Pvt. Ltd. (2005 (5) TMI 54 - DELHI HIGH COURT) warranty liability is not a contingent liability. If the assessee is maintaining the accounts on mercantile system on liability accrued, though to be discharged at a future date, would be a proper deduction while working out the profit and accounts of the business. As decided in CIT v Sony India (P) Ltd. [2006 (4) TMI 457 - DELHI HIGH COURT] liability arising out of a warranty is an allowable deduction even when amount payable by assessee is quantified and discharged in future - Thus looking to the quantum of sales effected during the year, the net provision of Rs.24,20,522/- debited in profit and loss account is not excessive. The assessee has submitted that it is in the business of selling the equipment since 1995 and the provision is being made on the basis of the past experience. Hence, CIT(A) was justified in deleting the addition - in favour of assessee.
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