TMI Blog2009 (12) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ried the matter on appeal before the Commissioner of Income Tax (Appeals), who confirmed the disallowance in respect of purchase of software and provision for warranty. The assessee appealed further to the Tribunal. The Tribunal remitted the issue relating to expense on computer software, however, rejected the claim in respect of warranty. – held that - the warranty became an integral part of the sale price; in other words, the warranty stood attached to the sale price of the product. Warranty provision had to be recognised because the assessee had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. The value of the contingent liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he event of the provision for warranty not being allowed, the reversal of the provision in the current year is not also liable to be included as income and consequently the assessment is not correct? 3. The facts are: The assessee is engaged in the business of design, manufacture, sale, erection and commissioning of equipments and projects. In respect of the assessment year 2002-03 the assessee filed its return of income on 29.10.2002 admitting an income of Rs.36,60,370/-, after claiming relief under section 80HHC of the Act. The assessment was completed under section 143(3) of the Act on 10.03.2004. While making the above assessment, the assessing authority disallowed claims in respect of service tax and CST liability, purchase of softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: an enterprise has a present obligation as a result of a past event; (b) 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 and held that the provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37 of the Act. 5. Following the said judgment, this Court in the case of CIT III v. M/s. FL Smedth Ltd., Tax Case (Appeal) No.341 of 2004 by order dated 09.06.2009, after extracting paragraph 7 of the judgment of Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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