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TMI Blog2022 (10) TMI 1059X X X X Extracts X X X X X X X X Extracts X X X X ..... ly dealing with the reasons assigned therein; and the impugned order remains perverse? 2. Whether the Income Tax Appellate Tribunal, while reversing the order of the Commissioner of Income Tax (Appeals), has proceeded on irrelevant considerations while ignoring the relevant aspects of the matter, including the fact that on introduction of new range of products, past data may not be available? 2. We have heard Dr. R.B. Krishna, learned Advocate for the assessee and Shri. E.I. Sanmathi, learned Standing Counsel for the Revenue. 3. Brief facts of the case are, assessee is a Public Limited Company engaged in the business of sale of pressure cookers and cookware. For A.Y. (Assessment Year) 2011-12 (ITA No.736/2018), the assessee filed its re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue, the ITAT (Income Tax Appellate Tribunal), C-Bench, vide common order dated 03.08.2018 set-aside the order passed by the CIT(A) and remanded the issue with regard to disallowance of provision for warranty expenses to the AO for fresh consideration. 7. Dr. Krishna, for the assessee submitted that in addition to manufacture and sale of pressure cookers and cookware, assessee also markets kitchen home appliances, which carry a warranty for repair and replacements. Assessee has also exported 'Customer designed pressure cookers' to UK. Assessee has also introduced new kitchen home appliances every year. In 2009-10, 26 new products were launched. In 2010-11, 39 new products were launched and in 2011-12, 52 new products wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced reliance on Rotork Controls India Pvt. Ltd., Vs. Commissioner of Income- Tax, Chennai (2009)314 ITR 62 (SC) - paras - 27,28,29,30. 11. Shri. Sanmathi for the Revenue argued opposing the appeal and submitted that the CIT(A) has erred in allowing the appeal by considering the facts in assessment years 2013-14 to 2015-16. In substance, he submitted that the provision made for items other than pressure cookers and cookware, is not based on the warranty claims of previous years, Hence, the conditions prescribed in Rotork Controls, are not fulfilled. Therefore, the ITAT has rightly allowed the appeal and remitted the matter to the Assessing Officer. With these submissions, he prayed for dismissal of these appeals. 12. We have carefully cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, is erroneous as it rules out the accrual concept. 29. The second option is also inappropriate since it does not reflect the expected warranty costs in respect of revenue already recognised (accrued). In other words, it is not based on matching concept. Under the matching concept, if revenue is recognised the cost incurred to earn that revenue including warranty costs has to be fully provided for. When valve actuators are sold and the warranty costs are an integral part of that sale price then the appellant has to provide for such warranty costs in its account for the relevant year, otherwise the matching concept fails. In such a case the second option is also inappropriate. 30. Under the circumstances, the third option is most ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perience, assessee has made provision of 1% of the sales value towards warranty and replacement expenses. As against provision of Rs.2.81 Crores for the year 2011-12, the warranty expenses incurred during the financial year 2012-13 and 2013-14 is Rs.2.86 Crores, which is more than the provision made. 18. The ITAT has noted in para 20 of its order that the CIT(A) had considered warranty expenses for A.Y. 2013-14 and 2014-15, whereas, he ought to have considered the past event while considering the provision made by the assessee. A careful perusal of CIT(A)'s order shows that CIT(A) in para 6.9 has considered the warranty claims for financial years 2011-12 and 2012-13 (A.Y. 2012-13 and 2013-14). Therefore, the finding recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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