Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (8) TMI 1593 - AT - Income TaxProvision of warranty - deduction u/s 37 denied - assessee had failed to maintain systematic data in support of its claim for provision of warranty - Assessee’s contention that such warranty was necessary and was part of contract of sale - CIT(A) deleted the addition - HELD THAT:- As per accounting system regularly followed by assessee, such provision was made @ 2% of sales and would written back if in excess at the expiry of warranty period. CIT(A) observed that assessee’s case is squarely covered by the decision of M/s. Rotork control India Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT] wherein observed that the valve actuators manufactured by the assessee, were sophisticated goods and statistical data indicated that every year some of these were found defective; that valve actuators being a sophisticated items, no customer was prepared to buy a valve actuator without a warranty. Therefore the warranty became an integral part of the sale price; in words the warranty was attached to the sale price of the product. In this case the warranty provision had to be recognized because the assessee had a present obligation as a result of past event resulting in outflow of resources and reliable estimate could be made of the amount of obligation. As assessee had incurred a liability during the assessment year which was entitled to deduction u/s 37 - Facts being similar, so, following same reasoning, CIT(A) was justified in granting relief to assessee. This reasoned factual finding of CIT(A) needs no interference from our side - Decided against revenue.
|