TMI Blog2012 (1) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... ), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The learned CIT (A) has erred in deleting the addition amounting to ₹ 1,42,01,453-00 made on account of disallowance of provision of warranty debited to P L Account, without appreciating the facts and circumstances under which the disallowance was made by the Assessing Officer. 3. The learned CIT(A) has erred in allowing the relief based on the submissions/details filed by the assessee during the course of appellate proceedings without giving an opportunity to the Assessing Officer to verify the genuineness of the same. 4. The learned CIT(A) has erred in allowing relief to the assessee rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The AO asked the assessee to file its objection, if any, for disallowing the same. The assessee submitted as under: As explained to you the Institute of Chartered Accountants of India have prescribed a new Accounting Standard (AS 29) by which the warranty liability has to be recognised at the time of sale and provision has to be made at the year end on the sale affected during that year based on the past trend. Based on that year sale, the warranty provision @ 4% has to be made. After adjusting the settlement the difference between the provision and settlement, the provision in that year aggregating to ₹ 1,42,01,453/- has to be made. To substantiate our claim we enclose the statement of warranty settlement during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Warranty as on 31-03-2007 1,42,01,453/- Warranty expenditure for the year 5,44,00,375/- Break - up Manufacturing 2,51,90,875/- Trading 1,16,04,994/- Imports 1,76,04,506/- Total 5,44,00,375/- 7. The ld. CIT(Appeals) deleted the addition made by the AO by following his earlier order dated 01.12.2009 for the A.Y. 2005-06. The rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late the provision for liability on a scientific basis but in A.Y. 2005-06 somehow it got a basis which impelled the CIT(A) to allow the descried relief. The relevant portion of that appeal order vide., ITA.No. 265/ AC11(1)/A-I/07-08, dated 01-12-2009. In this year also the statistics show that the total warranty provision made was only ₹ 4,0l,98,922/ - on a sale of Rs.l,13,85,67,554/- i.e., 3.5% but the actual expenditure i.e., ₹ 5,44,00,375/- was more than the provision made and hence the claim of ₹ 1,42,01,553/- made in the P/L a/c. In fact it is not a provision at all. It is actual claim of expenditure and hence allowable. Addition is deleted. 8. Now the department is in appeal. During the course of hearing, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee has made a provision of ₹ 27,20,647/- during the relevant asst. year for the claims accepted but not settled as on 31.3.2005. As held by the CIT(A), the analysis of this fact demonstrates that a scientific basis is adopted to measure the future liability on account of warranty and the expenses actually incurred is corresponding to the provision made. Therefore, we confirm the order of the CIT(A) that the estimation is fair and reasonable and no interference in the said order is called for. 11. Since the facts for the year under consideration are similar to the facts involved in the earlier year i.e., A.Y. 2005-06 in the assessee s own case, so respectfully following the earlier order of the Tribunal dated 21.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
