TMI Blog2020 (8) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in Rotork Controls India (P) Ltd. Supra had been taken into account by the Commissioner of Income Tax (Appeals) and the estimation of provision for the AY 2008-09 has been found to be unscientific and unreasonable. Tribunal has noted that admittedly, the CIT (Appeals) has considered the same working method of provision in previous two years and allowed the provision. CIT (Appeals) did not allow the provision for warranty for the Assessment year on the ground that the ration between the actual and the provision is less than 70:100 - ratio adopted by the CIT (Appeals) is imaginary and arbitrary and is without any basis. It was also held that provision of warranty was made every year in accordance with accounting standards 29 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de provision on a scientific basis as enunciated by the Apex Court in Rotork Controls India Pvt. Ltd., vs. CIT, 314 ITR 62? (ii) Whether the Tribunal was correct in holding that the assessee is entitled for deduction when excess provision towards warranty made in the previous years is not offered to tax by reversing the entries as laid down by the Apex Court in Rotork Controls India Pvt. Ltd. Vs. CIT, 314 ITR 62? 2. Facts leading to filing of this appeal briefly stated are that assessee filed the return of income for the Assessment year 2008-09 declaring income of ₹ 2,17,18,047/-. The return was processed under Section 143(1) of the Act and was selected for scrutiny. Thereafter, a notice under Section 143(2) of the Act was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t scientifically every year. It was further held that Commissioner of Income Tax (Appeals) grossly erred in not allowing provision for warranty for the concerned Assessment year on the ground that the ratio between the actual and provision is less than 70 : 100. The Tribunal held that the warranty provision made by the assessee for the concerned Assessment year is justified and no addition is called for. In the result, the appeal preferred by the assessee was allowed. Being aggrieved, the revenue is in appeal before us. 4. Learned counsel for the revenue while referring to the decision of the Supreme Court in 'ROTORK CONTROLS INDIA (P.) LTD. VS. COMMISSIONER OF INCOME-TAX, CHENNAI', (2009) 180 TAXMAN 422 (SC) submitted that a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Supra have been taken note of while deciding the issue of estimation of provision for the Assessment year 2008-09. At this stage, it is relevant to extract para 8 of the order passed by the Commissioner of Income Tax (Appeals), which reads as under: I have considered the rival submission. I find the A.O. is not justified in holding that in all cases the provision is to be disallowed as expenditure. This has become the strict law of the past after the pronouncement of the Supreme Court in several cases that a provision can also become an allowable deduction if it is computed with a certain degree of certainty. The locus classicus on the subject M/s Rotrok Controls India Pvt. Ltd., vs. CIT (2009) 314 ITR 62 (SC) The legal principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd unreasonable. The Tribunal has noted that admittedly, the Commissioner of Income Tax (Appeals) has considered the same working method of provision in previous two years and allowed the provision. It was further held that the Commissioner of Income Tax (Appeals) did not allow the provision for warranty for the Assessment year on the ground that the ration between the actual and the provision is less than 70:100. It was further held that the ratio adopted by the Commissioner of Income Tax (Appeals) is imaginary and arbitrary and is without any basis. It was also held that provision of warranty was made every year in accordance with accounting standards 29 and the provision is worked out scientifically every year merely because, the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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