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TMI Blog2011 (4) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... al burners one year warranty is allowed. That the entire sale proceeds is taken as the income of the assessee, therefore, the assessee made provision for expenditure likely to be incurred in fulfilling the warranty in the subsequent year. That the provision is made at the rate of 1.5% of the sales. Considering the facts of the case, such provision for the expenditure to be incurred by the assessee in fulfilling the warranty of one year is quite fair and reasonable, the same should be allowed. He alternatively submitted that during the year under consideration the assessee made provision of ₹ 10,58,327/- and at the same time written back the provision of ₹ 9,19,458/- made in the last year. Thus, the net amount claimed against the warranty provision in the year under consideration was only ₹ 1,38,869/-. Therefore, if the assessee s claim is not accepted on merit, then the disallowance can be only ₹ 1,38,869/- and not ₹ 10,58,327/- disallowed by the AO. 4. The learned DR, on the other hand, stated that the assessee is only a trader not the manufacture of industrial burner. The warranty of any product is provided by the manufacturer and not trader. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s services. The assessee has also not brought on record any details or evidences in connection with the warranties provided and expenses borne by it for the warranties either during the year or in past years Since the assessee is incurring various expenses in connection with sales services under the various overheads, no separate deduction for the provisions can be allowed On this ground also, the provisions made for warranty is not admissible The claim of the assessee is therefore, rejected. The disallowance of ₹ 10,58,327/- is made to the total income. 6. At the time of hearing before us, the learned counsel for the assessee was unable to controvert the factually findings recorded by the AO. The learned DR has rightly stated that when a warranty is provided by the manufacturer for any product it is the liability of the manufacturer to fulfill such warranty. During the course of hearing before us, we had specifically asked the assessee s counsel whether there is any agreement between the assessee and the manufacturer which makes the assessee liable for fulfilling the warranty. The assessee denied the existence of such written agreement between the assessee and the manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,19,458.00 Dr. Closing Balance 1,38,869.01 10,58,327.01 10,58,327.01 Warranties on Sales Ledger Account 1- April -2005 to 31-Mar-2006 Date Particulars Vch Type Vch No. Debit Credit 1-4-2005 Dr. Warranties on Sales Payable Journal 23 10,58,327.01 31-3-20056Cr Warranties on Sales Payable Journal 2028 15,81,922.00 10,58,327.01 10,58,327.01 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used for the purpose of the assessee s business. In view of the above facts, in our opinion, the CIT(A) rightly sustained part addition. We therefore uphold the order of the CIT(A) on this issue and reject Ground No.2 of the assessee as well as the Revenue s appeal. 9. Ground No.3 of the assessee s appeal is against disallowance of ₹ 2,00,000/- on account of traveling expenses. We have heard both the parties and perused the material placed before us. We find that the disallowance is made by the AO on lumpsum basis without pointing out any specific item of disallowable nature. The assessee has furnished complete details of the traveling expenditure before us and has also stated that such details were furnished before the AO. We find that the assessee is deriving income from trading in industrial burner and spare parts and it is having eleven branches in various cities. The turnover of the assessee is more than seven crores. Considering these facts, incurring of traveling expenditure is inevitable. In view of the above, we do not find any justification in sustaining the disallowance of ₹ 2,00,000/- out of traveling expenses on ad hoc basis. The same is deleted. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced before us. We find that the issue under consideration is covered in favour of the assessee by the decision of the Hon ble Apex Court in the case T.R.F. Ltd. Vs. CIT, 323 ITR 397 (SC) wherein Their Lordship held as under: After the amendment of section 36(1)(vii) of the Income Tax Act, 1961 with effect from April 1, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable; it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. In the case under appeal before us, the AO made disallowance on the ground that the assessee was unable to establish that the debt in question had become bad in the previous year relevant to the assessment year under consideration. In the case of TRF Ltd., (supra) the Hon ble Apex court held that after 1-4-89 in order to claim deduction in relation to bad debt it is not necessary for the assessee to establish that the debt has in fact become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. In the case of the assessee, it is not disputed that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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