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TMI Blog2006 (7) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... short 'the Tribunal') for referring the following question of law to this court for opinion : "Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the additions of Rs. 1,29,864 on account of provision for warranty claim and of Rs. 9,49,810 on account of free service charges despite the fact that the claims made are merely provisions/contingent liabilities and hence not allowable as per the settled law?" 3. Brief facts are that the assessee-company is engaged in the business of manufacturing of Spokes, Nipples and Moped. For the accounting period ending on 31-12-1981, relevant to the assessment year 1982-83, return of income was filed by the assessee on 29-7-1982, declaring a taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me should be directed to be referred to this court for opinion. Further, it was submitted that the claim of the type in hand is nothing else but a contingent liability which is not a permissible deduction. 5. On the other hand, contention of the counsel for the assessee is that the issue being covered in favour of the assessee by various judgments including judgment of the Hon'ble Supreme Court, no question of law arises and the petition filed by the revenue should be dismissed. The same being Bharat Earth Movers v. CIT [2000] 245 ITR 428 1 (SC) and CIT v. Vinitec Corpn. (P.) Ltd. [2005] 278 ITR 3372 (Delhi). 6. In Bharat Earth Movers' case (supra), the Hon'ble Supreme Court dealing with the proposition that the assessee would be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. The judgment under appeal is set aside. The question referred by the Tribunal to the High Court is answered in the affirmative, i.e., in favour of the assessee and against the revenue." 7. Reference to a judgment of Privy Council in the case of IRC v. Mitsubishi Motors New Zealand Ltd. [1996] 222 ITR 697 would also be quite relevant for the purpose of decision of this case wherein, it was held as under: "Held, dismissing the appeal, that, although the taxpayer's liability under the warranty for each vehicle sold was contingent on a defect appearing and being notified to the dealer within the warranty period so that no liability was incurred by the taxpayer until those conditions were satisfied, regard could be had to its estimation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual quantification and discharge is deferred to a future date. Once an assessee is maintaining his accounts on the mercantile system, a liability accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy." (p. 344)
From the findings of facts recorded by the Tribunal in the present case, it is evident that the quantification on account of warranty claim and for free service has been made by applying scientific basis. That being so, we do not find any question of law arises in the present cases.
9. Accordingly, these petitions are dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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