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TMI Blog2016 (12) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... rent assessment years on identical issues were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issues in ITA No.786/PN/2014 to adjudicate the issue. 3. The assessee in ITA No.786/PN/2014 has raised the following grounds of appeal:- 1.1 On the facts of the case and in law, the learned CIT(A) erred in confirming disallowance of the incremental provision for warranty of Rs. 1,67,12,826/- 1.2 The learned CIT(A) Pune erred in not appreciating that the provision for warranty was properly ascertained and was not in the nature of Contingent Liability. 1.3 The learned CIT(A), Pune erred in not following ratio of following decisions: i) Rotork ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Disputes Resolution Panel (in short 'the DRP') and in view thereof, he added back sum of Rs. 1,67,12,826/- to the income of assessee. 5. Before the CIT(A), the assessee pointed out that the provision for warranty was not contingent liability but was properly ascertained and measured by using substantial degree of estimation based on past experience worldwide and in India in particular. It was further claimed that that accounting was in compliance of Accounting Standard 4 'Contingencies and Events occurring after the balance sheet date' and has been claimed as revenue expenditure. The assessee also prepared statement showing year-wise provision of warranty including the utilization amount and reversal made every year for the year endi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve for the assessee at the outset pointed out that scientific method was followed by the assessee in making provision on account of warranty, wherein 2% of sale value was taken and warranty was over a period of 18 months from the date of supply of machinery or 12 months from the date of commissioning, whichever is earlier. He stressed that heavy packing machineries were manufactured and sold by the assessee for which, it entered into agreement for supply of machinery. As part of the said agreement, there was warranty clause and the assessee was following systematic method of provision and write back and utilization of amount. The Assessing Officer had disallowed the claim of assessee since there was no utilization during the year. He furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to the purchaser any part of equipment which contains a defect or actual refund to the purchaser the portion of price attributable to the defective part. The replacement or repair price were also subject to some warranty for the remainder of original warranty period or six months from the date of repair or installation of replacement part, whichever is shorter. It was agreed that the purchaser had to bear the cost and risk of transport of defective part to the seller, who in turn, had to repair or replace the same on the same terms as the equipment was supplied. As per clause 7.4, the seller i.e. the assessee had no liability for any defect in the equipment because of ordinary wear and tear, misuse or abuse and other conditions. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. It may be clarified herein that the CIT(A) had rejected the claim of assessee in assessment year 2008-09 observing that the assessee had made provision to the extent of Rs. 32.74 crores, whereas none of the provisions made in the earlier years were much utilized. The learned Authorized Representative for the assessee in this regard has clarified that inadvertently, the same was created at Rs. 32.74 crores but Rs. 31.07 crores was written back and the deduction by way of provision of warranty was claimed only at Rs. 1.67 crores. The Assessing Officer had also disallowed sum of Rs. 1.67 crores only. In view thereof, we find no merit in the observations of CIT(A) in denying the claim of assessee. Applying the ratio laid down by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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