9911796707
TMI Blog2015 (11) TMI 1762X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2007-08 is outline below: Particulars 80IB Unit Non-80IB Unit Total Op. Balance as on April, 1, 2006 100,307,498 39,108,300 182,372,553 Add:Provision created during the year 44,089,408 32,267,614 76,357,022 Less:Payments made during the year 55,730,304 41,840,524 97,630,828 Closing Balance as on March 31,2007 88,606,602 29,535,390 161,098,747 We wish to submit that the provision for warranty expenses created during the year amounting to Rs. 76,357,022/- represents the amounts set aside for meeting warranty obligation of Acer and the same has been computed based on a scientific and technical estimate of costs to be incurred in meeting these obligations over the period of warranty. Subsequently, actual warranty expenditure incurred during the year amounting to Rs. 97,630,828/- has been adjusted against the balance available in the provision for warranty expense account. In this regard, your goodself has proposed to disallow the provision for warranty created during the year. Further, your goodself has acknowledged that the actual warranty expenditure incurred during the year is higher than the corresponding provisions created during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as the payouts for warranty are in excess of the provision created during the year, disallowance of the amount of provision would not arise considering that the disallowance would be for the net warranty provision (after reducing the actual warranty expenses incurred during the year). 3. The CIT(A) held that for the assessment 2008-09 the assessee adopted scientific method for warranty provision, after going through the submissions of the assessee. The CIT(A) observed that the method adopted by the assessee in computing provisions of warranty on a year to year basis and the same is consistent and the assessee has elaborately explained the provision in the Financial Statements mentioned in his submissions. The CIT(A) pointed out that the method adopted by the assessee with regard to the warranty provisions remains the same for all these years. Therefore, the AO was not correct in concluding that the method followed is different from the earlier year. Further, the issue is squarely covered by the orders of the ITAT for AY: 2004-05 and 2005-06 as mentioned by the assessee. Therefore, the CIT(A) directed the AO to follow the decision of the Hon'ble Tribunal in the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition amounting to Rs. 10,85,61,747/- made on account of disallowance of provision of warranty debited to P & L account, without prejudice to the facts and circumstances under which the disallowance was made by the AO. 3. The ld. CIT(A( has erred in allowing relief to the assessee relying on the judicial decision cited y the assessee, holding that the provision for warranty has been created in a scientific manner based on past experience, without appreciating that the extent of provision made during the relevant previous year ended on 31-033-2008 was higher than the provision made in the preceding assessment years. 4. The ld. CIT(A) erred in allowing he relief, relying on the decision of the ITAT in assessee's own case for earlier years, which has not reached its finality and appeals u/s 260A of the IT Act, 1961 have been filed before the Hon'ble High Court against such orders. 5. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed in so far as the above mentioned issue is concerned and that of the AO be restored. 6. The assessee craves leave to add, to alter, to amend o to delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken by other co-ordinate Benches of the Tribunal therefore requires no further deliberation. In the light of the above, we hold the view that the decision of the ld.CIT(A) requires no further interference on the issue. The revenue's appeal stands dismissed." 10. Again in the order dated 25-2-2011 in ITA No.784/Bang/2010 , it has been observed as under: "11.2 The assessee creates provision for warranty based on the estimation of expenditure likely to be incurred on the past sales made on yearly basis at then prevailing market prices for spares and labour. For the relevant previous year, the assessee estimated the warranty liability at Rs. 12,76,77,530/- and created a provision only for Rs. 12,16,75,204/- in the books of account by charging a provision of Rs. 8,24,29,136/- to the debit in the P&L account and claimed it as ITA 22(Bang)/2011 Page 5 of 7 deduction. The assessee company had created the provision based on the estimation of warranty liability, which is based on failure rates of the past year data/experience and industry trends and not on adhoc basis. The assessee has not changed the method of computing the warranty provision and it has been followed consisten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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