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TMI Blog2012 (8) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had been consistently making claim @ 2% of sales and, in case, in the subsequent year, the provision made is found to be excessive, balance amount is offered for income and, in case, expenditure actually incurred is found to be more, further deduction is claimed in subsequent year. Since assessee has consistently followed the system and adjustments have been made in future, no reason is seen to interfere with the system being consistently followed by the assessee - Decided in favor of assessee. - ITA No.6993/Mum/2010 - - - Dated:- 13-6-2012 - SHRI B.R. MITTAL, AND SHRI RAJENDRA SINGH, JJ. Appellant by : Ms. Aarti Vissanji Respondent by : Shri P.K.B. Menon O R D E R PER RAJENDRA SINGH, AM: This appeal by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecame an integral part of the sale price of the item. The Apex Court therefore held that provision for warranty had been rightly made by the assessee because it had incurred a present obligation as a result of past events. CIT(A) further observed that, in the present case, foundry moulding plants and sand preparation plants which were supplied by the assessee were manufactured in Germany by the parent company. The assessee manufactured and supplied only conveying and handling equipment used in their manufacture. CIT(A) also observed that the assessee had not explained the nature or justification for warranty. The assessee had not cited any past event of defects being detected so as to make warranty as integral part of sale price. CIT(A), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in clause (6) of the contract which was 12 months from the date of installation, approval and acceptance of the total plant by the party. It was also mentioned that any repaired/replaced component will be guaranteed for fresh 12 months after date of repair/replacement. It was accordingly submitted that the assessee had given full details /particulars and provision for warranty claim was allowable in view of the judgment of Hon'ble Supreme Court in the case of Rotork Controls India (P) Ltd. vs. CIT (supra), and therefore, disallowance was not justified. The ld. Departmental Representative on the other hand supported the orders of authorities below and placed reliance on the findings given in the respective orders. It was also submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee incurs the liability on account of warranty claim even though the expenditure may be actually incurred in subsequent years. Therefore, the claim of deduction on account of provision for warranty claim is allowable as deduction in mercantile system of accounting and this view is also supported by the judgment of Hon'ble Supreme Court in case of Rotork Controls India (P) Ltd. (supra). The assessee had given full details/particulars of the provisions of warranty claim and assessee had also given copies of the contracts with the parties in which there was specific provision for warranty. As regards quantum of claim the assessee had been consistently making claim @ 2% of sales and, in case, in the subsequent year, the provision m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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