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TMI Blog2018 (4) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing its provisions(s) of five year warranty of Rs. 28,29,848/- and Rs. 52,47,094/-; respectively. It thereafter alleges double disallowance of the said warranty provisions as expenditure actually incurred but adjusted against the relevant provision as well. It lastly avers that both the lower authorities ought to have appreciated working of its five year warranty provision made on as scientific and systematic basis. The Revenue's cross appeals ITA Nos. 2420 & 2421/Ahd/2015 on the other hand raise identical substantive ground in seeking to revive disallowance of sales and warranty commission of Rs. 1,48,80,783/- and Rs. 8,93,27,906/-; assessment year-wise. Its latter substantive ground is that the CIT(A) has erred in law and on facts in deleting disallowance of stores and spares expenses of Rs. 19,40,000/-, service operation expenses of Rs. 76,68,400/-, Rs. 88,10,000/- on salary/ wages and staff welfare expenditure in former and Rs. 91,73,000/- out of service operation expenses, Rs. 1,20,50,800/- under the head "salary and wages" and "staff welfare" expenditure; respectively in latter assessment year after admitting additional evidence thereby violating Rule 46A of the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice charges to be paid to the dealers for general clearing & maintenance service offered to every customer in the first year of sale of AC and for attending specific failure arising in functioning of AC. It was also argued that after carrying out an detailed analysis of the various activities involved in providing 1 year warranty services, actual cost involved in rendering the various activities in provision of service and working out the probability of happening of events triggering to carry out services based on the past experience, has fixed the warranty amount to be given to its Sales & Service Dealer for the different models sold by the company and thus no adhoc provisions is made. On the other hand, the Assessing Officer in remand report considered such details and accepted the method fo lowed for working of one year warranty charges. However, it was argued that appellant has not provided the failure ratio of last 5 years preceding A.Y. 2000-2001, which could justify the scientific working of one year warrant expenses and observed that appellant itself has stated that it has incurred actual expenditure of Rs. 1,76,16,550/- on account of one year warrant expenses and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the compressors happened in past and the percentage of compressor failure or a subject year is determined as ratio of number of compressors turned defective in a year to cumulative population of number of compressors used in immediate previous 5 years. It is further been explained that after obtaining failure ratio, same is multiplied with estimated cost of replacement of a compressor for next 5 years and the summation of such estimated cost of replacement of next 5 years each model wise is considered as the rate of 5 year warranty provision for such model for the relevant year. The Assessing Officer has contended that appellant has provided the working for A.Y. 2008-2009 in support of its claim and no failure ratio of year under consideration is provided. The contention of the assessing officer appears to be correct as in spite of explaining the method by which it has provided for the five year warranty expenses the appellant has not been able to give any working of- the amounts provided as warranty. The claim of the appellant thai5the Assessing Officer has not found any defects in method of providing 5 years warranty expenses including the working for A.Y. 2008-2009 as provided b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of year under consideration are identical with facts of A.Y. 2000-2001, for the reasons discussed in preceding para, entire disallowance of Rs. 52,47,094/- is upheld and the balance is directed to be deleted. The ground of appeal for both the years are accordingly, partly allowed." 4. Both the learned representatives reiterate their respective stands during the course of hearing before us. There is no dispute on the first and foremost legal principle settled in hon'ble apex court's decision in "Rotor Control" case (supra) that such a warranty provision based on scientific estimation for quantification keeping in mind the relevant business sales vis-à-vis the product manufactured and sold; is allowable as a deduction. The Revenue's case is that although their lordships have hold such a warranty provision to be allowable in specified circumstances, the assessee has failed to place on record the relevant material supportive of its claim on facts. We keep in mind the settled legal proposition and both parties' respective contentions to revert back to the facts of the instant case. The assessee admittedly is a manufacturer of air conditioner cooling units. It appears to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 9.51 FY 2005-06 69.35 32.52 13.69 FY 2006-07 77.57 77.29 FY 2007-08 89.18 81.52 FY 2008-03 111.61 70.61 FY 2009-10 231.33 FY 2010-11 324.29 Total (Rs in Lakhs) 76.12 69.35 77.57 89.18 111.61 502.78 337.98 Utilization * Year Wise FY 1999-00 - Total - FY 2000-01 7.15 5.93 13.08 FY 2001-02 11.85 11.35 4.83 1.22 29.25 FY 2001-03 7.83 10.94 12.12 2.94 2.68 36.51 FY 2003-04 3.36 7.58 8.98 10.48 4.22 34.62 FY 2004-05 3.84 13.40 20.24 16.35 16.57 9.98 0.37 80.75 FY 2005-06 7.09 2.05 16.96 24.54 22.25 29.11 16.71 118.71 FY 2006-07 10.43 29.73 29.41 30.62 33.71 133.90 FY 2007-08 10.42 30.50 34.37 37.19 112.48 FY 2008-09 12.88 43.81 47.83 104.52 FY 2009-10 13.99 41.80 55.79 FY 2010-11 13.95 13.95 Total (Rs in Lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the issue was set aside to the undersigned for fresh decision after obtaining remand report from Assessing Officer on these aspects. The details submitted in original appellate proceeding were also provided by appellant in present set aside proceeding and same were forwarded to Assessing Officer for obtaining his remand report. The Assessing Officer in remand report has accepted that appellant has submitted information, but has failed to submit corresponding bills and voucher in support of such expenditure hence he requested that disallowance of 10% expenditure may be upheld. On the other hand, appellant has argued that it has already submitted details pursuant to direction of Hon'ble Ahmedabad I.T.A.T and Assessing Officer has no where asked appellant to submit corresponding bills and vouchers. It was also submitted that the expenditure for which impugned disallowance was made are in no way related to warranty expenses. On careful consideration of entire facts related to the issue, it is noted that Hon'ble I.T.A.T. has observed that break up of various expenditure as per enclosure to statement of facts filed along with original appeal was not available with Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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