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2013 (4) TMI 176 - AT - Income TaxProvision for warranty disallowed - Held that:- The facts are not in dispute that the assessee has made provision for warranty expenditure in the year of sale on the basis of past experience using scientific method. It was disallowed by the A.O. on the ground that the said provision for warranty is a contingent liability. Tribunal in assessee's own case for A.Y. 2005-06 while relying on the decision of Rotork Controls India (P) Ltd. vs. CIT (2009 (5) TMI 16 - SUPREME COURT OF INDIA) decided the similar issue in favour of the assessee stating that warranty was an integral part of sale price as the warranty stood attached to the sale price of the product. It was also observed that warranty provisions have to be recognized because an assessee had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of obligation. Therefore the assessee had incurred the liability which was an allowable deduction under section 37 - assessee's appeal stands allowed.
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