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2016 (12) TMI 1355 - AT - Income TaxClaim of deduction on account of provision made for warranty - Held that:- Following the ratio laid down in Rotork Controls India P. Ltd. Vs. CIT (2009 (5) TMI 16 - SUPREME COURT OF INDIA) , we hold that the value of Contingent Liability by way of recognizing the warranty liabilities, by making a provision and also following systematic method of its write back and / or utilization is an accepted accounting method adopted by the assessee and the provision made by the assessee is to be allowed as deduction in the hands of assessee. It may be clarified herein that the CIT(A) had rejected the claim of assessee in assessment year 2008-09 observing that the assessee had made provision to the extent of ₹ 32.74 crores, whereas none of the provisions made in the earlier years were much utilized. The learned Authorized Representative for the assessee in this regard has clarified that inadvertently, the same was created at ₹ 32.74 crores but ₹ 31.07 crores was written back and the deduction by way of provision of warranty was claimed only at ₹ 1.67 crores. AO had also disallowed sum of ₹ 1.67 crores only. In view thereof, we find no merit in the observations of CIT(A) in denying the claim of assessee. Applying the ratio laid down by the Hon’ble Supreme Court in Rotork Controls India P. Ltd. Vs. CIT (supra) , the assessee having fulfilled the conditions laid down by the Apex Court, we find merit in the claim of assessee and accordingly, we direct the Assessing Officer to allow the deduction on account of provision for warranty made at ₹ 1.67 crore - Decided in favour of assessee.
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