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TMI Blog2015 (7) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... [2009 (5) TMI 16 - SUPREME COURT OF INDIA] in the aforesaid decision wherein held that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and in the past if the facts established show that defects existed in some of the items manufactured and sold then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under section 37. The order of the Tribunal stands set aside and the matter is remanded to the Assessing Officer to pass appropriate orders in the light of the decision of the Supreme Court cited supra. - Decided in favour of assessee for statistical purposes. - T.C.(A).No.379 of 2008 - - - Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said warranty clause is based on contractual obligation and is provided in the respective sales contract. 2.2. The assessee debited a sum of ₹ 1,53,01,497/- being the amount of unexpired warranties and claimed deduction. However, the Assessing Officer disallowed the claim of the unexpired warranties on the ground that the liability is unascertained and, therefore, the same cannot be considered as proper deduction. He further held that under the mercantile system of accounting, which the appellant follows, a deduction in respect of a contract liability for warranty can be allowed only if the liability has accrued in the relevant accounting period. 2.3. Assailing the said order, the assessee appealed to the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trend indicates that a large number of sophisticated goods were being manufactured in the past and in the past if the facts established show that defects existed in some of the items manufactured and sold then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under section 37 of the 1961 Act. In the said decision, the Supreme Court also laid down certain conditions, which read as under: 11. What is a provision? This is the question which needs to be answered. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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