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2015 (7) TMI 7 - HC - Income TaxExpenditure towards warranty claim written off - whether was neither allowable under Section 37 nor under Section 36(1)(vii) - Held that:- The assessee company voluntarily recognized and credited warranty expenses of TAFE, PSD in the assessment year 2002-03 and paid taxes on the said amount. In the subsequent year when they were sure that they are not getting any portion of the said amount, they wanted to treat it as a bad debt and write off the said claim. Accordingly, they sought for deduction of the said amount out of the total income. Once the assessee writes off a claim in its books of account treating it as a bad debt under section 36(1)(vii) read with 36(2), the assessee is entitled for deduction of the said amount. However the authorities have proceeded altogether in a different course. They are of the view that the said amount pertains to the previous year. The benefit cannot be given to subsequent year. Secondly, as the said amount is not reflected in the accounts of TAFE, PSD, the assessee is not entitled to the said benefit. In fact, the said facts would support the claim. However in the TAFE and PSD accounts is not shown in their books as due to the assessee. The assessee showing it as due and it is only because the tax is paid in the previous year and in the subsequent year amount not being recovered, it is treated as a bad debt and deduction is claimed. Thus the impugned orders passed by the authorities cannot be sustained. Decided in favour of the assessee.
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