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TMI Blog2006 (7) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court judgment Reports in 264 ITR 1 referred by the assessee where it has been held that the law declared by the Supreme Court would only apply to future cases or in other words, there shall be no prospective overruling unless it is so indicated in the particular decision. 2. That the Ld. CIT, Delhi-IV, has wrongly held that the provisions of Warranty Claim expenses at ₹ 16,56,404 is a contingent liability for adjustment in Book Profit as per the provisions of sub-clause (c) of Explanation to section 115JA(2) of the Income-tax Act and accordingly directed the Assessing Officer to recalculate the income, while determining book profits for the purpose of section 115JA of the Income-tax Act. 3. That the order is bad in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k the amount of ₹ 16,56,404 to the book profit of the assessee and directed the Assessing Officer to re-calculate the income and to pass consequential orders. 5. Aggrieved by the aforesaid order, the assessee is in appeal before us. 6. It was argued by Ld. Authorized Representative of the assessee that the assessee-company had done job work during the year of manufacturing of engines and had calculated the warranty provision at the rate of 4 per cent of the total revenue. The assessee had shown the total warranty expenses in the profit and loss account at ₹ 21,12,260 and the provision for warranty as per the balance sheet has been made at ₹ 16,56,404. The assessee has also placed on record the year wise provision made fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability. 8. We have considered the rival submission and also the material available on record. We have also seen the orders cited at the bar during the course of argument. Having examined the material, we are of the considered view that the issue with regard to provision for warranty is no more resintegra. The Supreme Court in the case of Bharat Earth Movers v. CIT [2000] 245 ITR 428 considered the general principles regarding allowance of business expenditure and the difference between accrued and contingent liability. It was held that if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (supra) has held that every loss of revenue as a consequence of order of the Assessing Officer cannot be treated as prejudicial in the interest of revenue, e.g., when a Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Income-tax Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of revenue unless the view taken by the Income-tax Officer is unsustainable in law.
11. The assessee's appeal, therefore, succeed on both the grounds. The order dated 29-3-2004 of Ld. CIT, Delhi is set aside.
12. In the result, the assessee's appeal in allowed. X X X X Extracts X X X X X X X X Extracts X X X X
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