TMI Blog2019 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The disallowances were deleted by the CIT(A) and the revenue did not prefer any appeal till A.Y 2008-09. In A.Ys 2009-10 and 2010-11, dispute relating to similar disallowances travelled upto the Tribunal and the Tribunal has decided the issue in favour of the assessee and against the revenue in [ 2016 (1) TMI 1076 - ITAT DELHI] assessee had estimated the provisions for warranty on the basis of past history. The estimate of warranty made by the assessee on the basis of past history cannot be treated as a provision for any ascertained liability and allowed the provision for warranty as deduction. Thus no infirmity or perversity in the findings returned by Ld. CIT(A) in allowing the ascertained liability as allowable expenditure u/s 37( 1).- Decided in favour of assessee. - ITA No. 3185/DEL/2016 - - - Dated:- 16-5-2019 - Shri N.K. Billaiya, Accountant Member, And Shri K.N. Chary, Judicial Member For the Assessee : Shri Gaurav Jain, Adv., Ms. Deepika Agarwal, Adv, Shri Arpit Goyal, CA For the Revenue : Ms. Nidhi Srivastava, CIT, DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, This appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 3CL to the Director General (Income Tax Exemptions) within sixty days of its granting approval, c) The company shall maintain a separate account for each approved facility, which shall be audited annually and a copy thereof shall be furnished to the Secretary, Department of Scientific and Industrial Research by 31sl day of October of each succeeding year. Explanation: For the purposes of this sub-rule the expression 1 audited means the audit of accounts by an accountant, as defined in the Explanation below sub-section (2) of section 288 of the Income Tax Act, 1961. d) Assets acquired in respect of development of scientific research and development facility shall not be disposed of without the approval of the Secretary, Department of Scientific and Industrial Research. Therefore, the Income tax Rule provides for complete set of conditions which needs to be fulfill in totality for the claim of deduction u/s 35(2AB). In the instant case the assessee fulfill the conditions of rule 7A(b),(c),d) but the conditions stated in rules 7A (a) is not fulfilled. Here it is pertinent to note that as stated by assessee itself that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer was of the opinion that such provisions cannot be allowed and disallowed ₹ 3.92 crores. 7. Aggrieved by these two additions, the assessee carried the matter before the CIT(A) and reiterated its claim of weighted deduction and provision for warranty. 8. The CIT(A), after considering the facts and submissions was convinced with the claim of the assessee and deleted the additions. 9. Before us, the ld. DR strongly supported the findings of the AO. 10. The ld. AR stated that the issue relating to claim of weighted deduction has been decided by the Tribunal in assessee's own case in A.Ys 2009-10 and 2010-11 by the Hon'ble High Court and the co-ordinate bench. 11. We have given a thoughtful consideration to the orders of the authorities below. We have also gone through the decisions of the co-ordinate bench and the Hon'ble High Court of Delhi placed before us in the case law paper book from pages 2 to 29. The relevant findings of the Hon'ble High Court in ITA No. 136/2017 order dated 15.09.2017 read as under: 12. The Court is unable to concur with the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ITA No. 2228/DEL/2014 for A.Y 2010-11. The relevant findings of the co-ordinate bench in ITA No. 2228/DEL/2014 read as under: 19. AO disallowed an amount of ₹ 2,10,00,000/- being excess of actual warranty claimed out of ₹ 3,67,00,000/- made as provision for warranty by the assessee company on the ground that it was not ascertained liability. CIT (A) vide impugned order deleted the disallowance of ₹ 2,10,00,000/-. 20. The ld. AR for the assessee relied upon the order passed by coordinate Bench of the Tribunal in ITA No.2561/Del/2013 order dated 04.01.2016 for AY 2009-10 in assessee s own case and contended that there is no change of circumstances and the said 10 ITA Nos2228 2268/Del./2014 order has not been further challenged by the revenue. For facility of reference, Paras 31, 32 33 of the order (supra) are reproduced as under for ready reference :- 31. Undisputedly, assessee is engaged in the business of manufacturing and sale of commercial vehicles, tractors, two wheelers and gears. Ld. A.R. contended that various products of the company are sold along with warranty and assessee is under obligation to rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It would depend on the nature of the business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced. 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: (h) 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 defects existed in some of ht items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37. 33. The coordinate bench of Income tax Appellate Tribunal by relying upon the judgement cited as Rotork Controls India Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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