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2018 (10) TMI 1347 - AT - Income TaxDisallowance of warranty claim - allowability of provision made by assessee for warranty expenses within warranty period - allowable deduction - Held that:- The payments which were due to assessee, were being withheld by IAF against warranty claims. Undoubtedly, it is the liability of assessee as per contract to provide warranty within stipulated period to the customer i.e. IAF. Thus where there was engine failure within warranty period, then as per terms of agreement and since the enquiry had been completed in 2006, the assessee which was following mercantile system of accounting, had accounted for the said claim of warranty under the head ‘Provision for Warranty’. Such claim made by the assessee under the provisions of the Act was duly allowable as deduction in the hands of assessee, applying the ratio laid down in Bharat Earth Movers Vs. CIT [2000 (8) TMI 4 - SUPREME COURT]. It may also be reiterated that other claim of warranty provision of about ₹ 48 lakhs had been allowed by Assessing Officer. - Decided in favour of assessee
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