9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (9) TMI 870 - HC - Income TaxWhether the assessee is entitled to claim the commensurate deductions while generating income by way of lease rentals of its products such as gas cylinders and water cylinders and solar equipment plants etc. while computing the income of the assessee from these sources of business activity? - held no. - Decided in favor of revenue. Whether the assessee was entitled to claim an amount by way of deduction for providing a possible future warranty claim during the years of unexpired warranty periods in respect of products sold during the accounting periods in question? - held that - In the wake of the assessee not having placed any material to indicate that the method of providing for future warranty claims was based on past experience and past actual expenditure incurred due to the claims that the assessee had received the method as was sought to be placed before the authorities and as has been exempted by this court is not a method which fetches the approval of this court on the touchstone of the law laid down by the Supreme Court tin Rotork Controls India (P.) Ltd. 2009 (5) TMI 16 - SUPREME COURT OF INDIA . - Decided in favor of revenue.
Issues Involved:
1. Lease rental income taxation. 2. Allowability of warranty expenses as a deductible expenditure. Detailed Analysis: 1. Lease Rental Income Taxation: Issue: Whether the lease rental income can be brought to tax in regular assessment proceedings despite the Tribunal's finding in block assessment proceedings. Judgment Analysis: - The Tribunal had previously affirmed the Appellate Commissioner's view that the lease rental income should not be taxed in regular assessment proceedings. - The Appellate Commissioner had disallowed the deduction of lease rental income, considering it as undisclosed income from a bogus claim. - The High Court referenced its prior decision in ITA No. 2869 of 2005, which covered the same assessee for the assessment year 1997-98, and concluded that the lease rental income should indeed be taxed. - Conclusion: The question was answered in favor of the revenue, affirming that the lease rental income should be taxed in regular assessment proceedings. 2. Allowability of Warranty Expenses: Issue: Whether the provision for warranty claims, being a contingent liability, is an allowable revenue expenditure. Judgment Analysis: - The Tribunal and the Appellate Commissioner had allowed the provision for warranty claims as a deductible expenditure under Section 37 of the Income Tax Act, based on a supposed "perfectly scientific basis." - The Assessing Officer had disallowed this provision, arguing that it did not qualify as a present liability and thus could not be deducted under Section 37. - The High Court examined the Supreme Court's decision in Rotork Controls India (P.) Ltd. v. CIT, which allowed such provisions based on past experience and systematic methodology. - The High Court found that the assessee did not provide sufficient material or evidence to justify the provision for warranty claims based on past experience or actual incurred expenses. - The High Court criticized the Tribunal's order for lacking detailed reasoning and merely endorsing the Appellate Commissioner's view without proper examination. - Conclusion: The High Court reversed the decisions of the Tribunal and the Appellate Commissioner, restoring the Assessing Officer's order disallowing the provision for warranty claims. The provision for warranty claims was not considered an allowable expenditure due to the lack of supporting material and evidence. Summary: - The High Court ruled that the lease rental income should be taxed in regular assessment proceedings, aligning with its previous decisions. - The provision for warranty claims was not allowed as a deductible expenditure due to insufficient evidence and lack of a systematic methodology, as required by the Supreme Court's guidelines in Rotork Controls India (P.) Ltd. v. CIT.
|
