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TMI Blog2019 (3) TMI 2047X X X X Extracts X X X X X X X X Extracts X X X X ..... n claimed under the head warranty expenses and the assessee had been claiming this consistently on the same basis as a contractual liability. We note that the provision was made as per Note 27(D) to the balance sheet. The assessee company had written back sum under the head Excess Provision Written back and shown as Other income for the impugned assessment year. Coming to the judgment in the case of Bharat Earthmovers [ 2000 (8) TMI 4 - SUPREME COURT ] allowability of a liability has to be judged as 1. a business liability has to definitely arise in the accounting year. 2. there should be certainly about the incurring of the liability. 3. it should also be capable of being estimated with reasonable certainty though t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2017 passed by the Assessing Officer u/s. 143(3) of the Income-Tax Act, 1961 (in short, the Act). 2. Assessee s appeal in ITA No. 176/Ran/2015 for the A.Y 2006-07, Revenue s appeal in ITA No. 125/Ran/2017 for the A.Y 2012-13 and C. O No. 19/Ran/2018 arising out of ITA No. 125/Ran/2017 for the A.Y 2012-13, relating to same assesse and common/identical issues are involved. Therefore, these Have been clubbed and heard together and a consolidated order is being passed for the sake of convenience. ITA No. 125/Ran/2017 for the A.Y 2012-13 ( by the revenue) 3. The Revenue s appeal in ITA No. 125/Ran/2017 for the A.Y 2012-13 is taken as a lead case. Grounds raised by the revenue in ITA No. 125/Ran/2017 for the A.Y 2012-13 are as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an expenditure during the year under consideration. This is one type of an expenditure which is not allowed as per the provisions of Income Tax Act, hence, the same is correctly disallowed and added back to the total income of the assessee. 4. The brief facts qua the issue are that in these two appeals and cross objection of the assessee, a common issue is disputed, which relates to disallowance of warranty expenses booked by the assessee under the head provisions for warranty expenses . 5. We heard both the parties and perused the material on record. We note that the assessee is a Govt. of India undertaking engaged in manufacturing of heavy machines, equipment etc and registered under the provisions of Indian Companies Act, 1956. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale on the basis of past factor of actual expenses incurred by it towards warranty liability. This provision of After Sale Service is then reversed back by the company on the expiration of the Guarantee/Warranty Period and the amount of such expiration is then offered for taxation as income. Therefore, we note when it is well settled that a business liability had definitely arisen in the accounting year and incurring of the liability was certain. The liability so accrued was estimated scientifically. For that we rely on the following Judgments:- 1. Haden International Group India (P) Ltd Vs. ACIT, Cir-3, Than (2008) 20 SOT 305(Mum)-ITAT Mumbai Bench H . 2. Siemens Public Communication Networks Ltd Vs. CIT, Bangalore-III, Bangal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of 12 months from the accepted date of commissioning measured over each 12 month period. A performance guarantee valid for 15 months from the date of commissioning for 10% value of equipment ( along with accessories) including taxes and duties etc to the FOR destination price of the materials on order must be submitted within 20 days of the placement of the order. No payment will be done without submission of Performance Gurantee. 9. We note that the claim of excess liability and written back of the assessee company are as follows:- S.No. Narration Amount 1 Provision made in earlier years withdrawn during the year Rs. 2,11,05, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... men [1963] 73 ITR 53 (SC) and Calcutta Co. Ltd v. CIT [1959] 37 ITR 1 (SC), it must be held that the provision made by the assesse-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, would be allowable as deduction out of the gross receipts for the accounting year dealing which the provision was made for the liability. The liability was not a contingent liability. The High Court was not right in taking a view to the contrary. 12. It is evidently clear from the judgment that the allowability of a liability has to be judged ..... X X X X Extracts X X X X X X X X Extracts X X X X
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