TMI Blog2012 (12) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable deduction even when amount payable by assessee is quantified and discharged in future - Thus looking to the quantum of sales effected during the year, the net provision of Rs.24,20,522/- debited in profit and loss account is not excessive. The assessee has submitted that it is in the business of selling the equipment since 1995 and the provision is being made on the basis of the past experience. Hence, CIT(A) was justified in deleting the addition - in favour of assessee. - ITA No.440/Bang/2011 - - - Dated:- 12-6-2012 - SHRI N.K. SAINI, AND SMT. P. MADHAVI DEVI, JJ. Appellant by : Shri Raghavendra R. Chakravarthy, C.A. Respondent by : Dr. Pradeep Kumar, Jt. CIT(DR) O R D E R Per N.K. Saini, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution fees as part of the costs. 3. Ground Nos. 1 4 are general in nature, so do not reRs.uire any comments on our part. The grievance of the assessee vide ground Nos. 2 and 2.1 relates to confirmation of addition of Rs.15,38,000 made by the AO on account of provision for warranty debited to the profit loss account. 4. The facts of the case in brief are that the assessee filed the return of income on 27.11.2006 declaring an income of Rs. 7,81,41,070 which was processed u/s. 143(1) of the Income-tax Act, 1961 [hereinafter referred to as the Act in short ]. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had claimed expenditure of Rs. 15,38,000 being th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. counsel for the assessee. 9. We have considered the submissions of both the parties and gone through the material available on the record. It is noticed that an identical issue having similar facts had already been adjudicated in the aforesaid referred to order dated 08.06.2007 in assessee s own case, wherein the order passed by the ld. CIT(A) in deleting the similar addition has been upheld and the appeal of the revenue was dismissed. The relevant findings have been given in paras 7 to 7.6 of the said order dated 08.06.2007 passed in ITA No.586/Bang/2006 in assessee s own case for the A.Y. 2000-01 and read as under:- 7. We have heard both the parties. This Bench in the case of Wipro GE Medical Systems Ltd. (supra) has considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale agreement. Such estimated liabilities are to be treated as trading expenses and must be allowed The revenue in this case should have accepted the assessee s claim as following the method of accounting and as shown the basis for making such claims. The assessee has provided a meager percentage of sales as provision for warranty claim during the period for which the assessee has produced the details of warranty claims. The claim shows that the warranty expenses claimed as deduction is not abnormally high and the gap between the warranty provisions and the warrant expenditure incurred have narrowed down over years and in fact, the detailed study of these expenses clearly shows that there is a perfect neutralization between the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 232) (Mum.) - ITO v Wanson (India) Ltd. (5 ITD 102)(Pune) - Jay Be Industries v DCIT (66 ITD 530) (ASR.) This Bench after considering the decisions Rs.uoted by the learned AR, held as under:- We have carefully considered the relevant facts and the arguments advanced. The only reason to disallow the sum is that the liability is a contingent liability and not an accrued liability. We are unable to accept the contention. The liability to pay for warranty claims arises no sooner the sales are effected. The appellant has provided for liability on the basis of sales made during the year. Though the exact amount cannot be Rs.uantified, however, the sum is based on the scientific approach and based on past experience. Various High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at a future date, would be a proper deduction while working out the profit and accounts of the business. 7.3 The Delhi High Court in the case of CIT v Sony India (P) Ltd. (160 Taxman 397) has held that liability arising out of a warranty is an allowable deduction even when amount payable by assessee is Rs.uantified and discharged in future. 7.4 From the above judgements, it is clear that liability on account of warranty is not a contingent liability and in a mercantile system of accounting, the same is to be provided, as such liability is incurred at the time of sale. 7.5 We have also noticed from the accounts that the assessee made a provision of Rs.65,44,404/- as provision for warranty on the basis of the sales. Since warranty per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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