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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 ..... assessment year 2008-09 observing that the assessee had made provision to the extent of ₹ 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 ₹ 32.74 crores but ₹ 31.07 crores was written back and the deduction by way of provision of warranty was claimed only at ₹ 1.67 crores. AO had also disallowed sum of ₹ 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’ble Supreme Court in Rotork Controls India P. Ltd. Vs. CIT (supra) , the assessee havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of Contingent Liability. 1.3 The learned CIT(A), Pune erred in not following ratio of following decisions: i) Rotork Controls India P. Ltd. CIT (2009) 314 ITR 62 (SC) ii) CIT V Ericssion Communications P. Ltd. (2009) 318 ITR 340 (Delhi) 4. First, we shall take up the issue in assessment year 2008-09. The assessee for the year under consideration was engaged in the business of manufacturing and sale of aseptic packaging material, aseptic processing and filling equipments. The assessee was leading supplier of liquid food packaging material and packaging systems, wherein it was manufacturing special packaging for storing liquid foods like juices, beverages and milk over a long period of time without the use of preserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ending from 31.03.2005 to 31.03.2013, which is reproduced under para 3.1 at page 4 of the appellate order. The CIT(A) sought additional information from the assessee to adjudicate the issue and based on test laid down by the Hon ble Supreme Court in Rotork Controls India P. Ltd. Vs. CIT (2009) 314 ITR 62 (SC), it was held that the machines sold by the assessee were heavy duty machines in the range of ₹ 4-6 crores each and were utilized by limited clientele. He further observed that where number of equipments sold each year was limited, the same did not necessita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing 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 further pointed out that inadvertently, the assessee had made provision of warranty for ₹ 32.74 crores during the year. However, ₹ 31.07 crores was written back and only provision of ₹ 1.67 crores was made. 8. The learned Departmental Representative for the Revenue placing reliance on the order in assessment year 2003-04, wherein he said that it is not ascertained liability and hence, not allowable. The said appeal is also listed for hearing. 9. We have heard the rival contentions and perused the record. The issue arising in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of undertaking given by the assessee by way of warranty on the equipment sold by it to the prospective purchasers, the assessee was maintaining a systematic method, wherein the provision was made on account of warranty. In case any part of the warranty was utilized, then the same was so debited or / and the balance on expiry of period of warranty was written back. This method was regularly and systematically followed by the assessee. The CIT(A) has referred to the factual aspects of the case and pointed out that the machinery sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1.67 crores. The Assessing Officer had also disallowed sum of ₹ 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 ble Supreme Court in Rotork Controls India P. Ltd. Vs. CIT (supra) , the assessee having fulfilled the conditions laid down by the Apex Court, we find merit in the claim of assessee and accordingly, we direct the Assessing Officer to allow the deduction on account of provision for warranty made at ₹ 1.67 crores. The grounds of appeal raised by the assessee are thus, allowed. 10. The issue raised in assessment year 2003-04 is identical to the issue in assessment year 2008-09 and following the same parity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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