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TMI Blog2020 (12) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the Commissioner of Income Tax (Appeals)-4, Chennai, in ITA No.179/17-18/CIT(A)-4/AY: 2010-11 dated 12.09.2019 for the AY 2010-11. 2. M/s.Amco Batteries Ltd., the assessee, is engaged in the business of manufacturing trading of batteries. While making the assessment for the AY 2010-11, the Assessing Officer (in short AO ) disallowed the provision of warranty mainly for the reason that there was a vast variation in ratio between the actual expenses the provision created. On appeal, the Ld.CIT(A) upheld the assessment. On assessee s appeal, this Tribunal remitted the issue back to the AO to examine the issue afresh. In the revision order, the AO held, inter alia, that in the absence of any new material brought to his notice, no deviation in the disallowance made in the Assessment Order is required, which was confirmed by the Ld.CIT(A) and accordingly, sustained the quantum of disallowance made in the original Assessment Order. Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (A). The Ld.CIT(A) after examining the assessee s submission, material and after considering the fact that the ITAT allowed the assessee s similar claim in the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue, the Ld.CIT(A) held that the ratio between the actual and the provision was less than 70:100 during the period relevant to the AYs 2005-06 2007-08, therefore, he (the Ld.CIT(A)) considered such provision is ascertainable and hence deleted the additions made by the AO in those assessment years. However, since this ratio is 59:10 for the AY 2008-09, which does not meet the para meter fixed by him i.e. 70:100 in the earlier years, supra, and hence, the Ld.CIT(A) did not consider the estimation of provision made for the assessment year 2008-09 as a scientific reasonable one and accordingly, upheld the addition made by the AO. Aggrieved, the assessee filed an appeal before the Hon ble ITAT and the Hon ble ITAT allowed assessee s appeal holding that the arbitrary ratio of 70:100 assumed by the Ld.CIT(A) is without justification unwarranted in ITA No.1116/Bang/2011 dated 03.07.2012 for the AY 2008- 09. Against this order, the Revenue filed an appeal before the Hon ble High Court of Karnataka, which upheld the order of the Hon ble ITAT in ITA No.400 of 2012 dated 25.08.2020. The Ld.AR inviting our attention to the Paper Book, submitted that though the assessee pleaded that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he held that the assessee s estimation of provision is not scientific reasonable. Aggrieved, the assessee filed an appeal before the Hon ble Tribunal, which allowed the appeal. Aggrieved against that order, the Revenue filed an appeal before the Hon ble High Court of Karnataka. The relevant portion of the judgment in ITA No.400 of 2012 dated 25.08.2020 related to the AY 2008-09, is extracted as under: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx The appeal was admitted by a bench of this Court vide order dated 12.01.2013 on the following substantial question of law: (i) Whether the Tribunal was correct in holding that the provision for warranty of ₹ 3,98,18,294/- is allowable as deduction when the assessee has not made provision on a scientific basis as enunciated by the Apex Court in Rotork Controls India Pvt. Ltd., vs. CIT, 314 ITR 62? (ii) Whether the Tribunal was correct in holding that the assessee is entitled for deduction when excess provision towards warranty made in the previous years is not offered to tax by reversing the entries as laid down by the Apex Court in Rotork Controls India Pvt. Ltd. Vs. CIT, 314 ITR 62? 2. Facts leading to filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Thus I have concluded that if the ratio between actual expenditure and provisions is 70:100 then the provision be considered ascertainable and therefore deductible. On this premises I have allowed deletion of additions in appellants own case in Assessment years 2005-06 and 2007-08. But each case is different on facts. The assessee also admits that sales of the company has grown by leaps and bounds. This year the ratio between actual expenditure and warranty provision is 59:100 and therefore do not meet the parameter fixed by me i.e., 70:100 on the basis of which the additions of Assessment years 2005-06 and 2007-08 had been deleted. In view of the above I do not consider the estimation of provision in this year is scientific and reasonable. However, the allowance of actual expenditure reduced by the A.O. and disallowance of the balance is found justified. The addition is upheld. The related grounds of appeal are dismissed. 6. Thus, from close scrutiny of paragraph 9, it is evident that the principles laid down by the Supreme Court in Rotork Controls India (P) Ltd. Supra had been taken into account by the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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