TMI Blog2019 (4) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... we hold that the provisions created by the assessee are required to be allowed as claimed by the assessee. Accordingly, the grounds raised by the assessee in this appeal are allowed. - I. T. A. No. 1416 /Pune/2016 - - - Dated:- 1-3-2019 - MS. SUSHMA CHOWLA Judicial Member And D. KARUNAKARA RAO Accountant Member For the Assessee : P. J. Pardiwala , authorised representative For the Department : Sanjeev Ghei , Departmental representative ORDER D. Karunakara Rao (Accountant Member).- 1. This appeal is filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-5, Pune, dated March 31, 2016 for the assessment year 2011-12. 2. The grounds raised by the assessee are as under : The appellant objects to the order dated March 31, 2016 passed by the learned Commissioner of Income-tax (Appeals)-5, Pune ( CIT (Appeals) ) for the aforesaid assessment year on the following amongst other grounds : 1. The learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of provision for warranty of ₹ 3,96,03,899 on the basis that the provision for warranty has not been created by following a scientific method. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the assessee as given in paras. 5.3, 5.4 and 5.5 of his order are extracted hereunder : 5.3 . . . However, in the appellant's case, the expenditure provided for is based only on past average and has no linking with the sales of current year. This aspect comes forth from the submissions made by the appellant. Nowhere, in the submissions made, has this been clarified nor any detailed working giving details of the provision made and linking of the same to the current year's sale has been submitted. Further, it is also clear from the chart given on page No. 62 of the submission made of subsequent expenditure, that the expenditure of 2.66 crores is incurred against provision of ₹ 3.96 crores. This amply proves that, the basis of making the above provision cannot be said to be scientific as it is not linked to the current year sales. 5.4 From the details submitted by the appellant, it is clear that there is no reversal of excess provision in case the provision is found to be excessive in any particular year. Further, the appellant itself has submitted that, the excess provision is carried forward. The appellant has submitted that, fresh claims are adjusted agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is provided in case of the tippers. Bringing our attention to page 95, learned counsel for the assessee demonstrated that it relates to paralift suspension system for which warranty is claimable. Referring to page 99, learned counsel for the assessee submitted that it deals with the warranty conditions qua the other products. By all these pages, learned counsel demonstrated that, unlike the finding of the Commissioner of Income-tax (Appeals) in the matter, the warranty is applicable to the products manufactured and sold by the assessee. Methodology of warranty is also explained in page 49 of the paper book. Warranty provisions are applicable to lift axle suspension (paralift suspension system for 8x2 trucks) system and rod tandem bogie suspensions systems. Ignoring all these above, the details submitted by the assessee both on the claimability of the warranty by the consumers and quantum of expenditure incurred by the assessee, the Commissioner of Income-tax (Appeals) and the Assessing Officer made addition on this account. 7. On the other hand, the learned Departmental representative relied heavily on the order of the Assessing Officer and the Commissioner of Income-tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Amount Reference Actual warranty claim received for the year 2010-11 1,73,30,055 Annexure 4 Add : Warranty claims likely to be accepted in future 2,45,16,733 Annexure 5 (Sub-total) 4,18,46,788 Refer page Nos. 30 to 61 Warranty provision as per P L 3,96,03,899 9. From the above, it is evident that the warranty is claimable by the consumers for which the conditions are specified. Therefore, in our view, the assessee has policy for payments towards the warranty expenses. Therefore, in principle, we do not agree with the findings of the Commissioner of Income-tax (Appeals), who held that deduction for warranty is not allowable. 10. Regarding the quantum also, we find that, by the end of this year, the assessee created provisions to the tune of ₹ 97.5 crores out of which near about ₹ 81.72 crores was already incurred by the assessee. The contents of para. 64 of the paper book with the data till the financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
