9911796707
TMI Blog2023 (4) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] this court has answered the question of law in assessee s favour. In the said appeal, Revenue had challenged the Tribunal s order for A.Y. 2003-04 which had held that the warranty estimated at 2.14% was arrived based on assessee s past experience in the Indian International market and the post sales support rendered based on the technical evaluation. In Rotork Case [ 2009 (5) TMI 16 - SUPREME COURT] it is held that a provision is a liability, which can be measured only by using a substantial degree of estimation and it is recognized when an enterprise has a present obligation as a result of past event - it is probable and an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sst. year 2013-2014 and asst. year 2014-2015? 2. ITA No. 294/2018 by the Revenue, directed against the order dated September 22, 2017 in IT(TP)A No. 242/Bang/2016 passed by the ITAT has been admitted to consider the following questions of law: 1. Whether, on the facts and circumstances of the case and in law, the Tribunal is right in allowing the provisions for warranty even though the disallowance had been relying on the decision of Apex court in the case of Rotark Controls India Pvt. Ltd? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in allowing the provision for warranty even thought the assessee had not made the provision on a scientific basis as laid down by the Apex Court in the case of Rotark Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Assessee, praying to allow the appeals, submitted that: the Tribunal erred in not following the orders passed by its co-ordinate Benches in the appellant s own case for the A.Y. 2003-2004, 2005-2006, 2007-2008, for deduction of provision for warranty; the Tribunal erred in not taking into consideration the order passed by this Court in assessee s own case for A.Y. 2003-04 in ITA No. 204/2008, holding that the provision for warranty created by the assessee was reasonable and it was treated as an allowable deduction; assessee s global policy lays down the practice of re-assessment in the creation of provision for warranty; the Tribunal has erred in observing that assessee does not have a system of reversal of provision of warranty wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the said appeal, Revenue had challenged the Tribunal s order ITA No. 930/Bang/06 for A.Y. 2003-04 which had held that the warranty estimated at 2.14% was arrived based on assessee s past experience in the Indian International market and the post sales support rendered based on the technical evaluation. 10. In Rotork Case, it is held that a provision is a liability, which can be measured only by using a substantial degree of estimation and it is recognized when: a) an enterprise has a present obligation as a result of past event; b) it is probable and an outflow of resources will be required to settle the obligation; and c) A reliable estimate can be made of the amount of obligation. 11. It was argued by Shri. Percy Pardiwala that Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.85 2016-17 3,49,52,62,741 5,13,35,88,995 3,63,16,42,487 4,99,72,09,249 98,49,30,90,748 5.21 5.7 2017-18 4,99,72,09,249 3,80,34,80,000 4,37,52,10,000 4,42,54,79,249 1,14,03,23,80,000 3.34 4.44 Total 1874,32,16,553/- 1434,15,83,857 38886,41,85,286 Total provision for AYs 2007-08 to 2016-17 = Rs.1493,97,36,553/- Total utilization for AYs 2008-09 to 2017-18 = Rs. 1426,07,56,990/- (95.5% of total provision for AYs 2007-08 to 2016-17) ** percentage of actual expenses over sales is the comparison of the utilization in the subsequent year towards the sales in the previous year Adverting to the above statement, he urged that assessee had utilized about 95.5% of the total provision made between A.Y. 2007-08 and 2016-17. 14. Shri. Pardiwala has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the estimate made by assessee is reliable and robust. 16. In view of the above, the orders passed by the AO and confirmed by CIT(A) and the Tribunal are unsustainable in law and these appeals by the assessee merit consideration. 17. So far as the connected appeal [ITA No. 294/2018] by Revenue is concerned, we may record that it is not in dispute that assessee has utilized 95.5% of the total provision for A.Y. 2007-08 to 2016-17. The percentage of utilization depends upon the warranty claims made during the corresponding year. The tabular column submitted by assessee shows that the warranty claim is varied between 2.16% to 9.89%. But what is relevant is the utilization of the provision and as noticed by us, the utilization is 95.5%. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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