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2017 (5) TMI 293 - AT - Income TaxAddition on account of warranty provisions - Held that:- We find that exercise of warranty claim during the year is from the provision account which does not affect profit and loss account. Under new policy percentage of last 8 quarters of warranty cost vs. last 8 quarterly sales were used for making the warranty expenses provision. We find that the assessee is manufacturing a product which requires warranty and the assessee has adopted reversing excess provision. The assessee is making provision of warranty applying the percentage of cost to the turnover based on past record making the process more scientific bringing into higher degree of accuracy. The assessee is following mercantile system of accounting. Therefore, we are of the view that the issue in controversy is squarely covered by the decision in the case of Rotork Controls India (P) Ltd. vs. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA ] wherein allowed the claim of provision for warranty stating that, "with making of provision on the basis of estimated present value of contingent liability holds good during the assessment years in question qua warranty claims - Decided in favour of assessee. Disallowance on account of provision for bad and doubtful debts - Held that:- Following the decision the case of T.R.F. Limited [2010 (2) TMI 211 - SUPREME COURT] we are of the view that the assessee’s claim of bad debt and doubtful debt is covered by the decision of the Hon'ble Supreme Court and as per the decision of the Hon'ble Supreme Court wherein the Hon'ble Supreme Court has categorically restored this matter to the file of the Assessing Officer to examine whether the bad debt or part thereof has been written off in the accounts of the assessee, the matter has to be examined by the Assessing Officer de novo and considering all the above aspect, the matter may be decided. We, therefore, restore this issue to the file of the Assessing Officer to do the needful after providing the assessee reasonable opportunity of being heard.
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