TMI Blog2023 (6) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... l and rejected the contentions of the Revenue and dismissed their appeal filed before it. We hold that no error has been committed by the learned tribunal in rejecting the claim of the respondent revenue and dismissing the respective appeals. - T.A. No. 25 of 2019 With T.A. No. 37 of 2019 With T.A. No. 38 of 2019 - - - Dated:- 12-6-2023 - HON BLE MR. JUSTICE RONGON MUKHOPADHYAY AND HON BLE MR. JUSTICE DEEPAK ROSHAN For the Appellant : Mr. R.N. Sahay, Sr.S.C. For the Respondents : Mr. Anupam Anand, Advocate PER DEEPAK ROSHAN, J. T.A. 25 of 2019 has been preferred by the appellant Revenue praying therein for quashing of the order dated 15.03.2019 passed by the learned Income Tax Appellate Tribunal (ITAT); whereby the learned ITAT has dismissed the appeal of the Revenue being ITA No. 125/RAN/2017 for the Assessment Year 2012-13. Likewise, Tax Appeal No. 37 of 2019 has been preferred by the appellant Revenue praying therein for quashing of the order dated 05.04.2019 passed by the learned I.T.A.T. in I.T.A. No. 95/RAN/2017 for the Assessment Year 2007-08. Similarly, T.A. 38 of 2019 has been preferred by the revenue praying therein for quashing of the order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Income added Rs. 1626.86 Lacs. Assessee preferred an Appeal before CIT(A) being Appeal No. 165/Ran/Co/09-10. On 17.02.2017, appeal filed by the Respondent-Assessee was partly allowed. All additions except an addition of Rs. 4.79 Lacs towards Bad Debts, were deleted. The Revenue preferred an Appeal before Learned ITAT being I.T.A. No. 95/Ran/2017. On 05.04.2019, appeal filed by the revenue was dismissed. 3. Facts of T.A. No. 38 of 2019 On 26.09.2011, Assessee filed its Return declaring total income to be NIL . Return was processed under Section 143(1). On 01.08.2012, case of Respondent was selected for scrutiny. Notice under section 143(3) was issued. On 24.03.2014, assessment order was passed wherein amount claimed as business expenses under the head of Provision for Warranty Expenses amounting to Rs. 3,65,51,000/- was disallowed. Respondent-Assessee preferred an Appeal before Commissioner of Income Tax (Appeal) [hereinafter referred to as CIT(A) ] being Appeal No. 61/Ran/Oth/14-15. On 08.04.2016, appeal filed by the Respondent was allowed. All additions made by the Assessing Officer wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure made on sales promotion is allowable under Section 40(a) despite the fact that the assesse failed to discharge its onus of providing evidences in support of TDS made on the same? 4. Whether in the facts and circumstances of the case, the Impugned Judgment passed by Ld. ITAT is perverse? Tax Appeal No. 38 of 2019 1. Whether in the facts and circumstances of the case, the amount under the head of Provision of Warranty Expenses can be allowed as expenditure to the business income of the Respondent Assessee under the Income Tax Act, 1961? 2. Whether in the facts and circumstances of the case, the Respondent Assessee has complied with all the conditions laid down in the judgment of the Hon ble Supreme Court, passed in the case of Rotork Controls India Private Limited v. CIT reported in (2009) 13 SCC 283 , to be entitled the amount of Provision of Warranty Expenses as an expenditure to the business income of the respondent Assessee under the Income Tax Act, 1961 ? 3. Whether in the facts and circumstances of the case, the findings of the Ld. ITAT in the Impugned Judgment that Based on its past experience and technical estimate for warranty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is also an obligation under the contract of sale for the Assessee. Per se, incurring of liability is thus certain. It further appears that based on the past experience and technical estimate for warranty, expenses are provided in accounts on accrual basis. This is done by crediting the profit and loss account of the Assessee for its sales revenue and along with this manufacturing and other expenses and Warranty expenses are charged in account as expenses. The Assessee provides for 0.5% on sale for liabilities under the contract towards obligations/warranties. This is as per clause 6 of the statement of Accounting Policies of the Assessee company. The Assessee has been following this policy uniformly and consistently every year in the preparation of its balance sheet and profit and loss account. This provision of after sales service is then revert back by the company on expenditure of guarantee/warranty period and the amount of such expiration is then offered for taxation of income. It further transpires from the impugned order that the learned tribunal has categorically held at Paragraph 13 of the order dated 15.03.2019 passed in I.T.A. No. 176/Ran/15 that company on the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which emerges from these decisions is that if the historical trend indicates that large number of sophisticated goods were being manufactured in the past and in the past if the facts established show that defects existed in some of the items manufactured and sold then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts u/s 37 of the 1961 Act. It would all depend on the data systematically maintained by the assessee. 51. It may be noted that in all the impugned judgments before us the assessee(s) has succeeded except in the case of Civil Appeal Nos. of 2009 (Arising out of S.L.P.(C) Nos. 14178-14182 of 2007- Rotork Controls India (P) Ltd. v. Commissioner of Income Tax, Chennai, in which the Madras High Court has overrules the decision of the Tribunal allowing deduction u/s 37 of the 1961 Act. However, the High Court has failed to notice the reversal which constituted part of the data systematically maintained by the assessee over the last decade. Thus, we see that the Assessee company has not committed any error in making provisions inasmuch as large number of sophisticated goods were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, the profit and loss account are charged for such losses. Having regard to the facts, no error has been committed by the Assessee in making of Miscellaneous Provisions (iii) Provision for Leave Travel Assistance:- LTA benefit is the benefit to the employee of the Assessee which is based on the Assessee s rules which specifies Employee s Emoluments and Benefit/Compensation policy; therefore, the Assessee is following this procedure consistently. LTA is allowable to every employee as travel concession as stated in section 10(5) of the Act. It is not in the nature of some payable by the Assessee as an employee in lieu of any leave at the credit office employee as mandated u/s 43 B (f) of the Act. Accordingly, the provision would not be governed by the provisions of section 43 B(f) of the Act. (iv) Sales Promotion:- The Assessee is a capital goods manufacturer and it is a trade practice prevalent in the line of business to provide after sales service on sale of such high-technology, high value capital goods. After sales service varies from 1 year to 3 years. The Assessee therefore incurs expenditure on account of after sales service which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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