9911796707
TMI Blog2019 (3) TMI 2047X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assesse, pertaining to assessment year 2012-13, are directed against the separate orders passed by the Commissioner of Income-tax (Appeals), Ranchi in I.T /Appeal Nos. 373/Ran/Co/08-09 & 159/Ran/Co/14-15 dated 30-09-2015 & 20-03-2017 01.02.2016, 04-02-2016, which in turn arise out of separate assessment orders dated 31-12-2008/20-03-2017 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 club ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... careful scrutiny of the materials placed on record, and also from the order of the ld. AO, that the said expenses of Rs. 3,93,07,000/- was not actually incurred, but it is a mere provision in the books of accounts of the assesse. Since the liability has not been ascertained or incurred, the assesse company cannot claim the same as 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 expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated at Clause 6 of the Statement of Accounting Policies of the Company forming part of the balance sheet and Profit and Loss account. The assesse company follows this policy uniformly and consistently every year in the preparation of the balance sheet and Profit and Loss account. The company has worked the percentage on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this consistently on the same basis as a contractual liability. In support of this, the assessee submitted a sample order placed Central Coalfield Limited. Clause 14 of the order states:- "Performance Guarantee (PBG)- You shall guarantee that the availability of the equipment shall not be less than 85% for a period 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 Guran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not certain. Applying the principles laid down in Metal Box Co. of India Ltd v. Their Workmen [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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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