TMI Blog2019 (1) TMI 1792X X X X Extracts X X X X X X X X Extracts X X X X ..... gure, which cannot be said to be unscientific, by any stretch of imagination. Such decisions, taken in normal commercial prudence, cannot be interfered with or superseded by the tax authorities. Tribunal was perfectly justified in holding that the revisional proceedings under section 263 of the Act in such circumstances were not at all justified. Accordingly, we answer the question of law, framed above, in favour of the assessee - T. C. A. No. 970 of 2010 - - - Dated:- 4-1-2019 - Dr. Vineet Kothari And Dr. Ms. Anita Sumanth JJ. For the Appellant : T. Ravikumar, Senior Standing Counsel For the Respondent : R. Vijayaraghavan JUDGMENT DR. VINEET KOTHARI J. - 1. The Revenue has filed this appeal under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on October 18, 2006 through which the Assessing Officer had called for a detailed note on the provision for warranty in the course of assessment. Para 6.2 of the impugned order of the learned Commissioner of Income-tax clearly brings out this position. Learned Commissioner of Income-tax has also mentioned at para 8.2 of this order that the assessee had filed a detailed note as annexure VI to its reply dated November 2, 2006 to the Assessing Officer, wherein the process adopted for ascertaining the provision was given by it and the asses see had also furnished a work out of the warrant provisioning. Once the details regarding the provision was asked by the Assessing Officer and reply furnished by the assessee, just because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated that goods being manufactured had showed defects therein, then provision made for warranty in respect of such goods would be entitled to deduction under section 37 of the Act. Only three conditions specified by the hon'ble apex court are that there is a present obligation as a result of past event, there is probability that the outflow of resources would be required to settle such obligation and a reliable estimate would be made on the amount of obligation. Here the assessee has delineated the process adopted for ascertaining the provision, as also furnished work-out of warranties and had submitted it to the Assessing Officer and assessment was completed obviously after considering such records submitted by the assessee. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of this court in the case of Renowned Auto Products Mfrs. Ltd. v. ITO [2013] 354 ITR 127 (Mad) and CIT v. Forbes Campbell Finance Ltd. [2013] 352 ITR 602 (Mad), urged before us that the provision made for the year in question to the extent of ₹ 303.17 lakhs was excessive when compared to the actual claims made by the customers against the provision made for warranty charges in the previous years and, therefore, the Commissioner was justified in disallowing the same in section 263 revisional proceedings for the year in question. 5. On the other hand, the learned counsel for the respondent-assessee submitted that the assessee had been consistently following the practice of making a provision for warranty for about 1.59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or similar percentage year after year follows a rationale and scientific method of making a provision for such warranty. The actual claims made by the customers against such warranty provision cannot be the sole criteria, to be labelled as the scientific method, as contended by the Revenue, before us. It is the consistency and the commercial prudence of the assessee, in which the assessee chose to make a provision for warranty based on his total turnover figure, which cannot be said to be unscientific, by any stretch of imagination. Such decisions, taken in normal commercial prudence, cannot be interfered with or superseded by the tax authorities. 7. Therefore, we are of the view that the learned Tribunal was perfectly justified in ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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