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2017 (4) TMI 235 - AT - Income TaxDisallowance of claim of Provision for warranty expenses - AO took the view that the amount provided by the assessee for warranty claims is excessive and disproportionate to the actual present obligation as a result of past events - CIT-A allowed claim - Held that:- FAA has examined the claim of the assessee by following the principles laid down in the case of Rotork Controls (India) Ltd (2009 (5) TMI 16 - SUPREME COURT OF INDIA ) and has further noticed that the assessee has spent a sum of ₹ 85,28,300/- in the succeeding years out of the warranty amount provided for during the instant year. The machinery sold by the assessee are imported second hand machines and hence they may require frequent attendance/repairs. Since the assessee has been declaring profits at a higher level year after year, the Ld CIT(A) has also observed that the creation of provision and reversal of the same are revenue neutral. In any case, a business man would provide for such warranty claims on estimated basis for possible claims only and it is not necessary that the provision so made should be fully spent. The actual expenditure would depend upon the warranty claims actually lodged by the customers, which may vary year after year. In the instant case, it is not the case of the AO that the assessee has provided for amount at an excessive figure in order to suppress the profits. Hence, in our considered view, the Ld CIT(A) has taken judicious view of the matter and the same does not call for any interference. - Decided against the revenue.
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