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TMI Blog2008 (3) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2001-2002. 2. The Revenue had raised five issues for our consideration. In respect of two of those issues, it was stated by learned counsel for the Revenue on 23 rd May, 2007 that the matter is covered either by a judgment of this Court or by a judgment of the Supreme Court. As such, those two issues were not pressed. With regard to the remaining three issues, we heard learned counsel for the parties and in our opinion no substantial question of law arises in respect of these three issues also. 3. The first issue is whether the Income Tax Appellate Tribunal (the Tribunal) was correct in law in permitting the Assessee to lead additional evidence in accordance with Rule 46A of the Income Tax Rules, 1962 (the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the Tribunal had acted on a wrong principle. Clearly, therefore, no substantial question of law arises for consideration. 8. The second issue relates to a provision of Rs.83,38,507/- for warranties which was allowed by the Tribunal. According to learned counsel for the Revenue, the amount did not represent an accrued liability and, therefore, the Tribunal was not justified in allowing the provision made. 9. In this regard, it is worth noting that the Assessee follows the mercantile system of accounting and it carries on the business of dealing in computers and computer peripherals. The sales of the Assessee run into a huge volume and are spread over a large geographical area. The Assessee provides a warrantee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainty though the actual quantification may not be possible if these requirements are satisfied the liability is not as contingent one. The liability is in presenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. 13. Reference was also made to Commissioner of Inland Revenue v. Mitsubishi Motors, New Zealand, [1996] 222 ITR 697 (PC). Relying upon these two decisions and the facts noted above as well as the fact that the Assessee follows the mercantile system of accounting, the Tribunal held that the provision for warrantee claims was justified and is entitled to a deduction. 14. On the issue of the basis of esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax v. Sony India (P) Ltd., [2007] 160 Taxman 397. The matter now having been conclusively settled by this Court in at least two decisions, no substantial question of law arises for consideration. 18. The third issue relates to deduction in respect of provision made by the Assessee for doubtful debts, customs duty, warrantee, gratuity and loss due to foreign exchange rate fluctuations while computing the book profit for the purposes of Section 115-JB of the Income Tax Act, 1961 (the Act). 19. In so far as the provision for customs duty is concerned, learned counsel for the Revenue rightly did not press that because it appears that the provision was made as a result of a demand notice raised by the customs authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ascertained liabilities. It cannot be said that a bad and doubtful debt is not an ascertained liability. That being so, Explanation (c) to Section 115-JB(2) of the Act ( which is similar to Explanation (c) to Section 115-JA(2) of the Act) would not come into play. 22. In Commissioner of Income Tax v. HCL Comnet Systems and Services Ltd., [2007] 292 ITR 299, it was noted that the expression provision defined in Part III of Schedule VI to the Companies Act, 1956 means any amount written off or retained by way of providing for depreciation renewals or diminution in value of assets or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy. In respect of a bad or doubtful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability being not ascertainable. It is no doubt true that the actual payment of the gratuity is deferred to a later date on the happening of a certain event, namely, death or voluntary retirement of the employee. But, as observed by the Allahabad High Court, these are not uncertain events. Therefore, the provision made by the assessee for the payment of gratuity under the agreement dated February 14, 1956, is in the nature of a revenue expenditure in respect of the assessment years under reference. 27. As already mentioned above, the Tribunal has found as a matter of fact that the provision was made on the basis of actuarial valuation. That being so, and in view of the two decisions referred to hereinabove, no substantial que ..... X X X X Extracts X X X X X X X X Extracts X X X X
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