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Erbis Engineering Company Ltd. Versus The Deputy Commissioner of Income Tax, Company Circle II (1)

2015 (7) TMI 657 - MADRAS HIGH COURT

Warranty amount inclusive of the sale amount - whether is an accrued liability or a contingent liability? - Tribunal following the decision of CIT v. Rotork Controls India Ltd. and others, (2007 (2) TMI 200 - MADRAS High Court) came to hold that since the warranty provision made as against the liability had not crystallized against the assessee, the plea of the assessee seeking deduction is unsustainable - Held that:- The decision of this Court in Commissioner of Income Tax v. Rotork Controls In .....

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would be entitled to deduction from the gross receipts under section 37. The order of the Tribunal stands set aside and the matter is remanded to the Assessing Officer to pass appropriate orders in the light of the decision of the Supreme Court cited supra. - Decided in favour of assessee for statistical purposes. - T.C.(A).No.379 of 2008 - Dated:- 8-7-2015 - R. Sudhakar And S. Vimala,JJ. For the Appellant : Mr. Rahul Balaji For the Respondent : Mr. R. Hemalatha Standing Counsel JUDGMENT (Deliv .....

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Ltd. and others, (2007) 293 ITR 311? (ii)Whether the judgment of this Court reported in Commissioner of Income Tax v. Rotork Controls India Ltd. and others, (2007) 293 ITR 311 is in direct conflict to the judgment of the Supreme Court in the case of Bharat Earth Movers v. Commissioner of Income Tax, (2000) 245 ITR 428? (iii)Whether the warranty amount which is inclusive of the sale amount is an accrued liability or a contingent liability? 2.1. The facts in a nutshell are as under: The appellant .....

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ired warranties and claimed deduction. However, the Assessing Officer disallowed the claim of the unexpired warranties on the ground that the liability is unascertained and, therefore, the same cannot be considered as proper deduction. He further held that under the mercantile system of accounting, which the appellant follows, a deduction in respect of a contract liability for warranty can be allowed only if the liability has accrued in the relevant accounting period. 2.3. Assailing the said ord .....

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thers, (2007) 293 ITR 311 came to hold that since the warranty provision made as against the liability had not crystallized against the assessee, the plea of the assessee seeking deduction is unsustainable. Accordingly, the Tribunal set aside the order passed by the Commissioner of Income Tax (Appeals) and allowed the appeal. 2.5. Challenging the said order, the assessee has filed this appeal on the questions of law referred supra. 3. At the time of hearing of the appeal, the learned counsel on .....

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