M/s Apple India Private Limited, Bangalore V. DCIT, Bangalore

CO 25/BANG/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6810 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.353/B ANG/2011 (ASST. YEAR - 2006-07) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-11(1), BANGALORE. . APPELLANT VS. M/S APPLE INDIA PVT. LTD., NO.24, 19 TH FLOOR, CONCORDE, TOWER C, VITTAL MALYA ROAD, U.B CITY, BANGALORE-560 093. . RESPONDENT PAN NO.AABCA1906 H. CO NO.25/BANG/2011 (BY ASSESSEE) REVENUE BY : SHRI SUSAN THOMAS JOSE ASSESSEE BY : SHRI SANJAY MEHTA DATE OF HEARING : 30-01-2012 DATE OF PRONOUNCEMENT : 30-01-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) I AT ITA NO.353/B/11 2 CO NO.25/B/11 BANGALORE DATED 13.1.2011. THE APPEAL ARISES OUT O F THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING THE ADDITION AMOUNTING TO RS.78, 92,976/- MADE ON ACCOUNT OF DISALLOWANCE OF PROVISION OF WARRANTY DE BITED TO PROFIT AND LOSS ACCOUNT. THE MAIN GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) HAS NOT CONSIDERED THAT THE EXTENT OF PROVISION MAD E DURING THE RELEVANT PREVIOUS YEAR ENDED ON 31.3.2006 WAS HIGHE R THAN THE PRECEDING ASSESSMENT YEARS AND WITHOUT CONSIDERING THE SAME, THE CIT(A) HAS HELD THAT THE PROVISION FOR WARRANTY HAS BEEN CREATED IN A SCIENTIFIC MANNER BASED ON PAST EXPERIENCE. 3. THE LEARNED DR SMT. SUSAN THOMAS JOSE, WHILE PLA CING RELIANCE UPON THE ORDER OF THE AO, HAS SUBMITTED TH AT THE ISSUE OF PROVISION OF WARRANTY HAS BEEN CONSIDERED BY THE HO NBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS (I) PVT. LTD R EPORTED VS. CIT IN 314 ITR 62 WHEREIN IT HAS BEEN HELD THAT THE PRINCI PLE OF ESTIMATION OF THE CONTINGENT LIABILITY IS NOT THE NORMAL RULE A ND IT WOULD DEPEND ON THE NATURE OF THE BUSINESS, THE NATURE OF SALES, TH E NATURE OF PRODUCT MANUFACTURED AND SOLD AND THE SCIENTIFIC METHOD OF ACCOUNTING ITA NO.353/B/11 3 CO NO.25/B/11 ADOPTED BY THE ASSESSEE AND ALSO UPON THE HISTORICA L TREND AND UPON THE NUMBER OF ARTICLES PRODUCED AND THAT IT WAS ALS O HELD THAT A PROVISION IS A LIABILITY WHICH CAN BE MEASURED ONLY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION AND IT IS RECOGNI ZED WHEN A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF PAST EVENT; B) IT IS PROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE REQUIRED TO SETTLE THE OBLIGATION AND C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF TH E OBLIGATION AND IF THESE CONDITIONS ARE NOT MET, NO PROVISION CAN BE RECOGNIZED. 4. ACCORDING TO THE LEARNED DR, THE CIT(A) HAS NOT CONSIDERED WHETHER THE PROVISION OF WARRANTY MEETS THE ABOVE C ONDITIONS AND HAS SUMMARILY ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT IT IS FOLLOWING A SCIENTIFIC METHOD OF ESTIMATION AND, THEREFORE, T HE ORDER NEEDS TO BE RECALLED AND THAT THE AUTHORITIES ARE REQUIRED TO RE-CONSIDER THE ISSUE IN ACCORDANCE WITH LAW LAID DOWN BY THE HONBLE SUP REME COURT IN THE CASE OF ROTORK CONTROLS (I) PVT. LTD CITED (SUP RA). ITA NO.353/B/11 4 CO NO.25/B/11 5. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER PL ACED RELIANCE UPON THE ORDER OF THE CIT(A) AND ALSO DECISION OF T HE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 AND 2005-06, WHEREIN THE PROVISION HAS BEEN ALLOWED. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THIS ISSUE HAS REACHED FI NALITY BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS (I) PVT. LTD (CITED SUPRA) AND THAT THE AO NEEDS TO RECONSID ER THE CASE OF THE ASSESSEE IN THE LIGHT OF THE OBSERVATIONS OF THE HO NBLE SUPREME COURT AND THE CONDITIONS LAID DOWN THERE-UNDER. 7. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE TO THE FILE OF THE AO FOR RECONSIDERATION IN ACCORD ANCE WITH LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RO TORK CONTROLS (I) PVT. LTD CITED (SUPRA). NEEDLESS TO MENTION TH AT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 8. COMING TO THE CROSS-OBJECTION OF THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS FILED THE CROSS-OBJECTION AGAINST THE FINDINGS OF THE ASSESSING OFFICER. THUS, IT CAN BE SEEN THAT IT IS ONLY IN SUPPORT OF THE ITA NO.353/B/11 5 CO NO.25/B/11 CIT(A)S ORDER, WHEREIN THE ASSESSEE HAS GOT RELIEF . AS WE HAVE ALREADY SET ASIDE THE ORDER OF THE CIT(A) TO THE FI LE OF THE AO, THIS CROSS OBJECTION HAS BECOME INFRUCTUOUS AND NEEDS NO ADJUDICATION. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JAN, 2012. SD/- SD/- (N.K SAINI) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 30/01/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.