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2009 (12) TMI 41 - HC - Income TaxProvision of warranty – Disallowance - The assessee is engaged in the business of design, manufacture, sale, erection and commissioning of equipments and projects. In respect of the assessment year 2002-03 the assessee filed its return of income on 29.10.2002 admitting an income of Rs.36,60,370/-, after claiming relief under section 80HHC of the Act. The assessment was completed under section 143(3) of the Act on 10.03.2004. While making the above assessment, the assessing authority disallowed claims in respect of service tax and CST liability, purchase of software and provision for warranty. The assessee carried the matter on appeal before the Commissioner of Income Tax (Appeals), who confirmed the disallowance in respect of purchase of software and provision for warranty. The assessee appealed further to the Tribunal. The Tribunal remitted the issue relating to expense on computer software, however, rejected the claim in respect of warranty. – held that - the warranty became an integral part of the sale price; in other words, the warranty stood attached to the sale price of the product. Warranty provision had to be recognised because the assessee had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. The value of the contingent liability like the warrant expense, if properly ascertained and discounted on accrual basis, can be an item of deduction under section 37 of the Act. - Controls India P. Ltd. v. CIT, [2009 -TMI - 33420 - SUPREME COURT OF INDIA] – Decided in favor of assessee
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