TMI Blog2015 (8) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... imate of the post sales expenses to be incurred by the assessee in respect of goods supplied by it. Therefore, on these facts, the ratio of the above decisions Rotork Controls India P. Ltd. v. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA ] and Vinitec Corporation Pvt. Ltd. [2005 (5) TMI 54 - DELHI High Court] and Ericssion Communications P. Ltd. [2009 (9) TMI 710 - Delhi High Court] would be squarely applicable. Respectfully following the same, we uphold the order of the learned Commissioner of Income-tax (Appeals) and dismiss the appeals filed by the Revenue. - Decided against revenue. - ITA No.5699/Del/2011, ITA Nos.4598/Del/2013, 4599/Del/2013 & 4600/Del/2013 - - - Dated:- 28-1-2015 - SHRI H.S. SIDHU AND SHRI J.S. REDDY, JJ. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble apex court in the case of Rotork Controls India P. Ltd. v. CIT [2009] 314 ITR 62 (SC) held as under (headnote) : A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when : (a) an enterprise has a present obligation as a result of a past event ; (b) it is probable that an outflow of resources will be required to settle the obligation, and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. The principle is that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and its obligation arising from the warrant. 6. Similarly, the hon'ble jurisdictional High Court in the case of Ericssion Communications P. Ltd. [2009] 318 ITR 340 (Delhi) held (headnote) : . . . dismissing the appeal, that the policy and principles with respect to provisions for warranties which were made by the assessee was not simply an ad hoc method without any scientific basis. The scientific basis was consistently applied by the assessee for its business throughout the world. It was not as if the assessee took a huge benefit year after year by making a huge provision because in fact it was only the provision which was made in the first year which was carried forward in the subsequent years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The hon'ble apex court in the case of Rotork Controls India P. Ltd. [2009] 314 ITR 62 (SC) has also held that a reliable estimate is to be made in respect of warranty obligation. Therefore, the question remains whether the provision for after sales service obligation on account of warranty given by the assessee is reasonable or not. The Commissioner of Income-tax (Appeals) in his order for the assessment year 2010-11 at page 4 of his order has given the provision made for post sales expenses by the assessee and the actual expenditure incurred. The same is reproduced below for ready reference : Historical trend of post sales expenses booked on estimate basis and actual expenses incurred (in rupees) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less than the expenditure incurred. Only in two years, in the financial years 2002-03 and 2008-09, the provision marginally exceeded the actual expenditure incurred. From the above chart, it is evident that the provision made by the assessee was a fair and reasonable estimate of the post sales expenses to be incurred by the assessee in respect of goods supplied by it. Therefore, on these facts, the ratio of the above decisions of the hon'ble apex court and the hon'ble jurisdictional High Court would be squarely applicable. Respectfully following the same, we uphold the order of the learned Commissioner of Income-tax (Appeals) and dismiss the appeals filed by the Revenue. 9. In the result, all the appeals of the Revenue are dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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