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TMI Blog2011 (12) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... lub subscription for obtaining corporate membership is a revenue expenditure and not capital expenditure as held by the Assessing Officer? (2) Whether the Tribunal was correct in holding that provision for post-sale customer service which is a contingent liability should be allowed as an expenditure despite the same having been not incurred by the assessee during the current assessment year? (3) Whether the Tribunal was correct in reversing the findings of the Assessing Officer that exchange rate variation gains had to be excluded from the total turnover and export turnover for computation of deduction under Sec.80HHE of the Act in view of the Explanation (c) to Section 80HHE of the Act which contemplates only actual amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction under Sec. 80HHE of the Act in view of Explanation (e) to Sec. 80HHE of the Act which contemplates only actual amount of foreign exchange received in India and the said finding was also set aside in appeal. Being aggrieved by the order passed by the appellate authority allowing the appeal filed by the assessee, Revenue preferred appeal in ITA No. 471/Bang/2003 on the file the Tribunal and the Tribunal by order dt. 9.9.2005 dismissed the appeal filed by the Revenue. 5. Being aggrieved by the same, this appeal is filed by the Revenue in which above said substantial questions of law has to be considered. The first substantial question of law has already been answered by this Court in ITA No. 3232/2005 dt. 4.11.2011 by holding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the estimate made towards expenditure is based upon past expenditure as also scientifically maintained accounts by the assessee and cannot be said to be contingent as the said amounts claimed towards after sale service in a sum of Rs. 2,19,18,587/- towards post sales customers support, was well founded. The appellate authorities have set aside the order passed by the Assessing Officer. 7. The learned counsel appearing for the appellants submitted that in view of the recent decision of the Hon'ble Supreme Court which is rendered after the decision of the Tribunal dt. 9.9.2005 in the case of Rotork Controls India (P.) Ltd. v. CIT [2009] 314 ITR 62/180 Taxman 422, the matter is required to be reconsidered by the Tribunal as in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized the cost incurred to earn that revenue including warranty cost have to be fully provided for. When valve actuators are sold and the warranty costs are an integral part of that sale price then the appellant has to provide for such warranty costs in its account for the relevant year, otherwise the matching concept fails. In such a case the second option is also inappropriate. Under the circumstances, the third option is most appropriate because it. fulfils accrual concept as well as the matching concept. For determining an appropriate historical trend, it is important that the company has a proper accounting system for capturing relationship between the nature of the sales, the warranty provisions made and the actual expenses incurred ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was also possible. Therefore, the appellant has incurred a liability, on the facts and circumstances of this case, during the relevant assessment year which was entitled to deduction under s. 37 of the 1961 Act. Therefore, all the three conditions for recognizing a liability for the purposes of provisioning stands satisfied in this case. It is important to note that there are four important aspects of provisioning. They are provisioning which relates to present obligation, it arises out of obligating events, it involves outflow of resources and lastly it involves reliable estimation of obligation. Keeping in mind all the four aspects, we are of the view that the High Court should not to have interfered with the decision of the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having regard to the facts of the said case and has stated that in each case all the conditions to be satisfied are to be considered. 11. On perusal of the order passed by the Tribunal we find that the above said factors which are required to be satisfied, have not been considered by the Tribunal and the Tribunal has only considered the past experience and the expenses incurred in the previous year, on the basis of which the claim was made. Under the circumstances, the Tribunal being the final authority on the question of fact, is required to consider the claim made by the assessee with reference to the decision in Rotork Controls India (P.) Ltd.'s case stated (supra). 12. Accordingly, we refrain from expressing any opinion on the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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