2011 (7) TMI 573

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..... INDIA] allowing the claim of provision for warranty stating that, "with making of provision on the basis of estimated present value of contingent liability holds good during the assessment years in question qua warranty claims". No substantial question of law arises for consideration in this appeal.
N. KUMAR AND RAVI MALIMATH, JJ. M.V. Seshachala for the Appellant. Kalil Kapoor, Sanat Kapoor, Ankit Gupta, Saurav Kumar, Bela Kapoor and Mallahrao for the Respondent. JUDGMENT N. Kumar, J. - The Revenue has preferred this appeal challenging the finding of the Tribunal, which has approved the provision for warranty. 2. The Assessing Officer has allowed the provision for warranty amounting to Rs. 2.83 crores. The Commissioner in his re .....

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..... der of the Assessing authority was restored. Aggrieved by the same, the present appeal is filed. 3. Heard the learned counsel for the parties. 4. The question that is involved in this appeal is now clearly covered by the judgment of the Apex Court in the case of Rotork Controls' India (P.) Ltd. v. CIT [2009] 314 ITR 62/180 Taxman 422 wherein the Apex Court has held as under: "10. What is provision? This is the question which needs to be answered. A provision is recognized when (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resource will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not me .....

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..... ase, the appellant has been manufacturing and selling valve actuators. They are in the business from assessment year 1983-84 onwards. Valve actuators are sophisticated goods. Over the years appellant has been manufacturing and selling valve actuators in large numbers. The statistical data indicates that every year some of these manufactured actuators are found to be defective. The statistical data over the years also indicates that being sophisticated item no customer is prepared to buy valve actuator without a warranty. Therefore, warranty became integral part of the sale price of the valve actuator(s). In other words, warranty stood attached to the sale price of the product. These aspects are important. As stated above, obligations arisin .....

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