TMI Blog2009 (10) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods were being manufactured in the past and the facts show that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37, in the light of the decision of the Supreme Court in the case of Rotork Controls India P. Ltd.(2009 - TMI - 33420 - SUPREME COURT OF INDIA), tax case appeal has to be allowed by answering all questions of law in favour of the assessee and against the Revenue. - 942 of 2008 - - - Dated:- 28-10-2009 - RAVIRAJA PANDIAN K., SUNDRESH M. M., JJ. JUDGMENT K. Raviraja Pandian J.- 1. The tax case appeal is filed against the order of the Income-tax Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use, which obligates the appellant to rectify the defects in the system for a specific period. Since the rectification of defects based on the warranty is a contractual obligation, which the applicant will have to comply with, the appellant had made a scientific ascertainment of the possible liability that would arise on account of the warranty clause. A provision has been made based on such technical ascertainment on a scientific basis. The appellant has been following a consistent method of accounting on this issue since many years. However, for the assessment year 2001-02, the Assessing Officer disallowed the claim of warranty. On appeal, the Commissioner of Income-tax (Appeals) decided the issue in favour of the assessee. Despite the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT [2009] 314 ITR 62 (SC), wherein the order of this court followed by the Tribunal has been reversed by observing that (headnote) "the valve actuators, manufactured by the assessee, were sophisticated goods and statistical data indicated that every year some of these were found defective ; that valve actuator being a sophisticated item no customer was prepared to buy a valve actuator without a warranty. Therefore, the warranty became an integral part of the sale price ; in other words, the warranty stood attached to the sale price of the product. In this case, the warranty provisions had to be recognised because the assessee had a present obligation as a result of the past events resulting in an outflow of resources and a reliable esti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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