2016 (5) TMI 114 - HC - Income Tax

Remand orders - provision made for warranty - Held that - It is an admitted fact that on the appeal filed by the revenue challenging the order passed by the Tribunal giving relief to the assessee as regards the provision made for warranty this Court placing reliance on the Judgment of the Apex Court in Rotork Controls case (2009 (5) TMI 16 - SUPREME COURT OF INDIA ) remanded the matter to the Tribunal for disposal in accordance with law. The jurisdiction of the Tribunal being a last fact finding authority is empowered to examine the documents placed by the assessee in support of its claim. It is settled law that remand is not a power to be exercised in a routine manner and should be used fairingly as an exception only when the facts warranted such course of action. When the materials are available on record the Tribunal ought to have arrived at a conclusion rather than further remanding the matter back to the Assessing Officer that too after giving a positive finding that the methodology adopted by the assessee is on a scientific and reasonable basis. We observe that no proper reasoning has been given by the Tribunal for exercising the power of remand. The directions issued by this Court while remanding the matter to the Tribunal is not considered by the Tribunal in the true spirit. It was the obligation cast on the Tribunal to examine the case of the Assessee in the light of the Judgment of the Apex Court in Rotork Controls case (supra) and to come to a decision. But remanding the matter to the Assessing Officer is in disregard to the Judgment of this Court and as such we are of the opinion that the order passed by the Tribunal is unsustainable.

Summary

Issues:
Challenge to order passed by Income Tax Appellate Tribunal regarding provision for warranty in assessment years 2002-03 and 2003-04.

Analysis:
1. The appellant, engaged in software systems and storage devices marketing, challenged the disallowance of expenditure claimed for warranty provision during assessment proceedings under Section 143(3) of the Income Tax Act, 1961. The Appellate Commissioner allowed the appeals following a Tribunal decision. The High Court remanded the matter to the Tribunal based on the Supreme Court judgment in Rotork Controls India P. Ltd. vs. Commissioner of Income-Tax, emphasizing the permissibility of making provisions for warranty if specific requirements are met.

2. The Tribunal, after reconsidering the matter post-remand, further remanded it to the Assessing Officer to verify if the provision for warranty was based on past history or actual expenditure. The appellant raised substantial questions of law regarding the Tribunal's decision to remand the matter instead of deciding it as directed by the High Court, arguing that all evidence was already available on record.

3. The High Court, after hearing arguments from both parties, found that the Tribunal's remand order went beyond the scope of the High Court's directions. It emphasized that the Tribunal, being the last fact-finding authority, should have made a decision based on the available materials instead of further remanding the matter to the Assessing Officer. The Court set aside the Tribunal's order and remanded the matter back to the Tribunal to decide in accordance with the directions issued by the High Court and the principles of law laid down by the Supreme Court.

4. The Court ruled in favor of the Assessee, setting aside the Tribunal's order and directing the Tribunal to dispose of the appeal expeditiously, preferably within three months from the date of the judgment, while leaving all contentions open for consideration.