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2018 (1) TMI 1719 - AT - Income TaxProvision of warranty expenses - Lesser amount of warranty claims registered on the assessee - provision of warranty expenses have been made by the assessee @0.75% in earlier years, however, in Assessment Year 2010-11 and 2011-12 it was reduced to 0.5% - HELD THAT:- In the present case as per annexure- A it seems that assessee has made ad hoc provision on the sales as a fixed percentage. The ld CIT (A) has also allowed the claim of Rs 3.5 lakhs without giving any cogent reason. Further looking at the chart titled as Annexure A by the Ld. CIT (A) which shows that the amount claimed by the assessee in the profit and loss account is a net result of opening balances of the provision for warranty added thereto amount credited in provision for warranty account during the year and reduced by the provision utilized during the year for meeting the expenditure out of the opening balances and actual warranty expenses incurred during the year over and above provision utilization. Assessee is entitled to the deduction of warranty expenses provided for, if it is made based on history and some scientific methodology but not on ad hoc basis. Therefore, we set aside the whole issue back to the file of the Ld. assessing officer with a direction to the assessee to provide the methodology of making provision of warranty expenditure which should be based on some scientific and historical basis and then grant deduction of the appropriate amount to the assessee in terms of the decision of Rotorok Controls India Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT] In the result ground No. 1 of the appeal of the assessee is allowed with above direction.
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