The Dy. Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad V. GMM Pfaoulder Ltd., Ahmedabad

ITA 2014/AHD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9458 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 02-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Keywords: Business income; Revenue expenditure; Set aside
• Section: 143(3)

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2014/AHD/2016 ( ASSESSMENT YEAR : 2005-06) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), AHMEDABAD / VS. GMM PFAULDER LTD. 3 RD FLOOR, B-JADHAV CHAMBERS, ASHRAM ROAD, AHMEDABAD ./ ./ PAN/GIR NO. : AABCG0563A ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJESH MEENA, SR.D.R. / RESPONDENT BY : SHRI BANDISH SOPARKAR & SHRI PARIN SHAH, A.R. DATE OF HEARING 27/06/2019 !'# / DATE OF PRONOUNCEMENT 28/06/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT), DATED 0 3.05.2016 ARISING IN THE ASSESSMENT ORDER DATED 28.01.2015 PASSED BY THE ASSESSING ITA NO. 2014/AHD/16 [DCIT VS. GMM PFAULDER LTD.] A.Y. 2005-06 - 2 - OFFICER (AO) UNDER S. 143(3) R.W.S. 254 OF THE INCO ME TAX ACT, 1961 (THE ACT) CONCERNING AY 2005-06. 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS TOWARD S DELETION OF DISALLOWANCE OF RS.68,61,000/- TOWARDS PROVISION FO R WARRANTY EXPENSES CLAIMED AS REVENUE EXPENDITURE BY THE ASSE SSEE. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED DR FOR THE REVENUE SUBMITTED THAT THE GRIEVANCE OF THE REVENUE CONCERNS DISALLOWANCE OF PROVISION FOR WARRANTY EXPENSES. I T WAS SUBMITTED ON BEHALF OF THE REVENUE THAT WARRANTY EXPENSES ARE NO T ALLOWABLE BEING PROVISIONAL IN NATURE IN THE ABSENCE OF ANY SCIENTI FIC BASIS FOR DEBITING AN AMOUNT OF RS.68,61,000/- IN THE BOOKS OF ACCOUNT ON THIS SCORE. IT WAS SUBMITTED THAT MERE PROVISION OF SUCH EXPENSES WITHOUT SHOWING CRYSTALLIZATION OF LIABILITY CANNOT BE RECKONED AS AN ELIGIBLE EXPENDITURE UNDER S.37(1) OF THE ACT. 4. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED THA T THE COMPANY HAS PROVIDED WARRANTY TO ITS CUSTOMERS IN ACCORDANC E WITH WARRANTY CLAUSE MENTIONED IN THE SALES ORDER AND THUS WARRAN TY IS INTEGRAL PART OF SALE PRICE. IT WAS NEXT SUBMITTED THAT PROVISIO N FOR WARRANTY HAS BEEN MADE ON A SCIENTIFIC BASIS FOR WHICH THE CALCU LATIONS WERE PROVIDED AS REPRODUCED BY THE CIT(A) IN PARA 4.4 OF ITS ORDER. SIMILAR WARRANTY HAS BEEN CONSISTENTLY PROVIDED YEAR AFTER YEAR BASED ON PAST EXPERIENCES. IN ELABORATION, IT WAS SUBMITTED THAT THE PROVISION FOR WARRANTY IS NOT TOWARDS POSSIBLE CLAIM MADE BY THE CUSTOMERS ALONE BUT ALSO INCLUDE MAINTENANCE SERVICES TO BE PROVIDE D DURING WARRANTY PERIOD. IN ORDER TO PROVIDE WARRANTY SERVICES, THE COMPANY IS REQUIRED TO INCUR MATERIAL, SALARY, TRAVELLING AND OTHER EXP ENSES WHICH REQUIRE OUTFLOW OF RESOURCES TO SETTLE THE OBLIGATION. IT WAS THEREAFTER SUBMITTED THAT THE ISSUE IS NO LONGER RES INTEGRA AND PROVISION FOR ITA NO. 2014/AHD/16 [DCIT VS. GMM PFAULDER LTD.] A.Y. 2005-06 - 3 - WARRANTY HAS BEEN DULY ACCEPTED AS REVENUE EXPENDIT URE BY THE HONBLE GUJARAT HIGH COURT IN CASE OF PR.CIT VS. HITACHI HOME & LIFE SOLUTION (I) LTD. TAX APPEAL NO. 1236 OF 2018 JUDGM ENT DATED 09.10.2018 . THE PROVISION FOR WARRANTY EXPENSES HAS BEEN HEL D TO BE ALLOWABLE EXPENDITURE BY THE HONBLE SUPREME COURT IN ROTORK CONTROLS INDIA PVT. LTD. VS. CIT [2009] 314 ITR 62 [SC] AS REFERRED TO AND RELIED UPON BY THE CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND TH AT THE CIT(A) HAS EXAMINED THE ISSUE THREADBARE AND ALSO TOOK NOT E OF THE BASIS OF CALCULATION OF WARRANTY PROVISIONS. THE RELEVANT O PERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER: 4.3. DECISION: 1 HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. IT IS WORTH HERE TO MENTION THAT THE ASSESSMENT ORDER HAS BEEN PASSED B Y THE AO IN PURSUANCE TO THE DIRECTIONS OF THE HON'BLE ITAT 'A' BENCH, AH MEDABAD IN ITA NO. 2923/2008 FOR THE YEAR UNDER CONSIDERATION, WHEREBY THE ISSUE UNDER CONSIDERATION HAS BEEN DIRECTED TO BE DECIDED AFRES H IN LIGHT OF THE DIRECTIONS ISSUED IN ITA NO. 12/AHD/2008 FOR A. Y. 2004-05 IN APPELLANT'S OWN CASE. FOR READY REFERENCE, THE DIRECTIONS GIVEN BY THE HON'BLE ITAT FOR THE YEAR UNDER CONSIDERATION IS REPRODUCED AS U NDER:- '15.1. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF T HE AUTHORITIES BELOW. WE FIND THAT THE HON'BLE TRIBUNAL IN ITA NO. 12/AHD/2008 FOR A. Y. 2004-05 (REVENUE'S APPEAL IN ASSESSEE'S O WN CASE) VIDE ORDER DATED 11/12/2011 HAS RESTORED THE MATTER BACK TO THE FILE OF AO BY OBSERVING AS UNDER:- '76. GROUND NO. 2 RELATES TO DELETION OF A SUN OF RS.6,43,000/- IS PROVISIONS FOR WARRANTY EXPENSES. THE ASSESSEE DEBITED A SUM OF RS.25,70,000/- IN THE P & L ACCOUNT. THE AO DISALLOWED WARRANTY EXPENSES FOR TH REE MONTHS ON PROPORTIONATE BASIS AN PERTAINING TO THE SUBSEQUENT YEAR. THE LD. CTT(A) ALLOWED THE ENTIRE CLAIM FOLLOWING THE DECISION OF ITAT, BANGALORE IN THE CA SE OF WIPRO GE MEDICAL SYSTEM LID. VS. DCIT 81 TTJ 455. .. 79. WE HAVE HEARD THE PARTIES. THE ASSESSEE HAS TO SUBMIT PRESENT VALUE OF WARRANTY EXPENSES. IT HAS TO BE PR OPERLY ASCERTAINED AND DISCOUNTED ON ACCRUAL BASIS. A PROP ER ITA NO. 2014/AHD/16 [DCIT VS. GMM PFAULDER LTD.] A.Y. 2005-06 - 4 - CALCULATION OF THIS ISSUE WILL HE SUBMITTED TO THE AO WHO WILL EXAMINE THE SAME AND ALLOW THE CLAIM AS PER DECISIO N OF HON. SUPREME COURT IN ROTORK CONTROLS INDIA (P) LTD . (SUPRA) AX ABOVE, THIS GROUND OF REVENUE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ' 15.2. SINCE THE FACTS ARE IDENTICAL IN THIS CASE AL SO AND THE REVENUE HAS NOT POINTED OUT ANY CHANGE IN THE FACTS AND CIR CUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, WE AC CORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THIS ISSUE BACK TO THE FILE AO FOR FRESH ADJUDICATION. THUS, THIS GROUND O F REVENUE'S APPEAL IS ALLOWED BUT FOR STATISTICAL PURPOSES.' 4.4. ON GOING THROUGH THE FACTS OF THE CASE, IT IS SEEN THAT, THESE EXPENSES WERE PERTAINING TO THE ESTIMATED LIABILITY ON ACCOU NT OF COST THAT MAY BE INCURRED ON PRODUCT SOLD UNDER WARRANTY. THE COST T O BE INCURRED PROVIDING FREE SERVICE UNDER WARRANTY WAS DETERMINE D BASED ON PAST EXPERIENCE AND ARE PROVIDED FOR IN THE YEAR OF SALE . THE COMPANY WAS FOLLOWING THIS SYSTEM CONSISTENTLY. EVERY YEAR, AT THE END OF THE YEAR, HOW MUCH PROVISION WAS REQUIRED WAS CALCULATED AND IT W AS COMPARED WITH PROVISIONS OF WARRANTY IN BOOKS OF ACCOUNTS ANY SHO RT / EXCESS PROVISION AS DEBITED AND CREDITED TO P & L ACCOUNT. AS PER AP PELLANT, THE CLAIM OF PROVISION FOR WARRANTY EXPENSES WAS DEBITED ONLY TO THE TUNE OF RS.21,74,000/- RATHER THAN THE TOTAL DISALLOWANCE M ADE BY THE AO AT RS.68,61,000/-. THUS, THE AO HAS MADE THE EXCESS DI SALLOWANCE OF RS.46.87,000/- WHICH WAS IN FACT THE PROVISION IN T HE BOOKS OF ACCOUNT AS ON 31/03/2004. THE AMOUNT OF THE PROVISION AS ON 31 /03/2005 WAS AT RS.68,61,000/- WITH THE PROVISION MADE IN THE YEAR UNDER CONSIDERATION AT RS.21,74,000/-. THE APPELLANT FURTHER SUBMITTED THA T THE PROVISION HAS BEEN MADE ON THE BASIS OF THE FORMULA PROVIDED AS P ER THE SCIENTIFIC METHOD TO ESTIMATE THE WARRANTY EXPENSES OF WHICH D ETAILED WORKING SUBMITTED IS AS UNDER:- PRODUCT WARRANTY CALCULATION FOR THE FINANCIAL YEAR 2004-05 YEAR NET SALES (RS. 000) FREE REPLACEMENT BASIC VALUE EXCISE DUTY 16% COST OF SERVICE FREE REPLACEMENT TOTAL 2000-01 434,678 3,232 517 3,749 2001-02 410,590 2,846 455 3,301 2002-03 521,797 2,873 460 3,333 2003-04 590,521 12,709 2,033 1,908 16,650 2004-05 806,533 3,964 634 1,908 6,506 PROVISION FOR WARRANTY EXP. 2004-05 RS. 000 NET SALE FOR THE CURRENT YEAR 1 2 MONTHS 806,53 3 CONSTANT FACTOR 0.50 HISTORICAL RELATION OF WARRANTY EXP. & NET SALES 1.70 WARRANTY EXP PROVISION REQUIRED FOR THE YEAR 2004-0 5 ITA NO. 2014/AHD/16 [DCIT VS. GMM PFAULDER LTD.] A.Y. 2005-06 - 5 - HISTORICAL RELATION RS. 000 TOTAL WARRANTY EXP. 04-05 AS ABOVE 6,506 NET SALES OF 03-04 590,521 1.10% TOTAL WARRANTY EXP. 03-04 AS ABOVE 16,650 NET SALES OF 02-03 521,797 3.19% TOTAL WARRANTY EXP 02-03 AS ABOVE 3,333 NET SALES OF 01-02 410,590 0.81% AVERAGE WARRANTY EXP. LAST 3 YEARS 1.70% RS. '000 PROV. REQUIRED AS ON 31/03/2005 6,861 AMOUNT OF PROV. IN BOOKS AS ON 31.03.2004 4,687 PROVISION REQUIRED / (WRITTEN BACK) FOR THE YEAR EN D 31/03/05 2,174 4.5. THE APPELLANT ALSO SUBMITTED THAT AGAINST THE ORIGINAL ASSESSMENT COMPLETED, THE DISALLOWANCE MADE BY THE AO, ON APPE AL THE LD.CIT(A)- VIII, AHMEDABAD IN ITS ORDER DATED 05/05/2008 VI DE PARA NO. 7.2 HAS DELETED THE DISALLOWANCE WITH THE FOLLOWING OBSERVA TIONS:- 'I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AR. CONSIDERING THE FACTS OF THE CASE, IT IS FOUND THAT THE PROVISI ON HAS BEEN MADE BY THE APPELLANT ON SCIENTIFIC BASIS AND IT IS AN A SCERTAINED LIABILITY. SIMILAR DISALLOWANCE HAS NOT BEEN MADE B Y THE AO IN EARLIER YEARS UP TO A. Y. 2003-04, THEREFORE, RELYI NG ON THE DECISION OF 1TAT. BANGALORE IN THE CASE OF WIPRO GE MEDICAL SYSTEMS LIMITED VS. DCIT CITED SUPRA AND OTHER DECISIONS RE LIED UPON BY THE A. R., THE DISALLOWANCE MADE BY THE AO OF RS.21.74 LAKHS IS DELETED. AS REGARDS THE REVERSAL OF PROVISION OF RS .46.87,000/- THE SAME IS TAXABLE U/S. 41(1) AS THE SAME HAS BEEN ALL OWED AS EXPENDITURE IN EARLIER YEAR. HOWEVER AS THE APPELLA NT HAS ALREADY OFFERED THE SAME AS INCOME NO FURTHER ADDITION OR D ISALLOWANCE IS REQUIRED. HENCE THE ADDITION OF RS.46.87.000/- IS N O MORE REQUIRED AND SO THE SAME IS DELETED. THUS THE TOTAL ADDITION ON ACCOUNT OF PROVISION FOR WARRANTY OF RS.68.61 LAKHS IS DELETED .' 4.6. THEREAFTER, AGAINST THE ORDER OF CIT(A) ON THE APPEAL OF REVENUE, THE HON'BLE ITAT, AHMEDABAD HAS DIRECTED THE AO LA EXAM INE THE CALCULATION OF WARRANTY EXPENSES IN VIEW OF THE JUDGMENT OF HON 'BLE SUPREME COURT IN ROTORK CONTROLS INDIA PVT. LTD. HOWEVER, THE DISALL OWANCE WAS ONCE AGAIN MADE BY THE AO STATING THAT NO SCIENTIFIC OR OTHER BASIS FOR PROVISION HAS BEEN ADOPTED. THUS THE EXPENDITURE WAS IN THE NATUR E OF CONTINGENT LIABILITY. THE APPELLANT SUBMITTED THAT THE WORKING OF THE PROVISION HAS BEEN MADE APPLYING 0.5% CONSTANT FACTORS TO THE SAL ES MADE IN THE CURRENT YEAR AND BASED ON THE EXPENSE INCURRED IN RESPECT O F SALES MADE, THE APPELLANT HAS WORKED OUT THE AVERAGE OF THE EXPENDI TURE DURING WARRANTY PERIOD IN LAST THREE YEARS WHICH HAVE BEEN REPRODUC ED IN THE PRECEDING ITA NO. 2014/AHD/16 [DCIT VS. GMM PFAULDER LTD.] A.Y. 2005-06 - 6 - PARAS. SIMILAR DISALLOWANCES HAVE NOT BEEN MADE BY THE AO IN EARLIER YEARS EXCEPT A. Y. 2004-05 IN WHICH PART PROVISION OF RS.6,43,000/- OUT OF RS.25,72,000/- WAS DISALLOWED. HOWEVER, SUBSEQUENTL Y, THE LD.CIT(A) - 2, AHMEDABAD HAS DELETED THE ENTIRE DISALLOWANCE ON TH IS ISSUE VIDE APPELLATE ORDER NO.CIT(A)-2/ACIT/CIR.4/252/11-12 DA TED 14/05/2015. THE RELEVANT PORTION OF THE DECISION IS REPRODUCED HERE UNDER:- '3.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED WARRANTY EXPENSES OF RS. 6,43,000/- CORR ESPONDING TO THE PROVISIONS MADE FOR LAST THREE MONTH OF THE FIN ANCIAL YEAR AS THE PERIOD OF WARRANTY WOULD FOIL IN SUBSEQUENT FIN ANCIAL YEAR. THE ISSUE WAS SET ASIDE BY THE HONOURABLE ITAT TO THE A O. THE AO HAS AGAIN DISALLOWED THE SAME ON THE GROUND THAT THE WA RRANTY PERIOD IS NOT FALLING DURING THE CURRENT FINANCIAL YEAR. THE APPELLANT HAS SUBMITTED THAT IT HAD MADE WARRAN TY PROVISIONS OF RS.25.72 LAKH WHICH HAS BEEN WORKED OUT ON SCIEN TIFIC BASIS. THE PROVISION IS MADE IN RESPECT OF THE SALES MADE UNDE R THE YEAR OF ASSESSMENT. THE APPELLANT HAS DEBITED ONLY INCREMEN TAL AMOUNT TO THE PROFIT AND LOSS ACCOUNT WHICH SHOW THAT THE EXT ENT OF OPENING BALANCE OF PROVISION OF WARRANTY HAS BEEN REDUCED F ROM THE TOTAL PROVISION OF WARRANTY REQUIRED OS ON THE LAST DAY O F THE FINANCIAL YEAR. THEREFORE, IT HAS BEEN SUBMITTED BY THE APPEL LANT THAT THERE IS NO SEPARATE ENTRY OF THE PROVISION WRITTEN BACK, TH E APPELLANT HAS PROVIDED FOR THE WARRANTY BY APPLYING .5% CONSTANT FACTOR LO THE SALES MADE IN THE CURRENT YEAR AND BASED ON THE EXP ENSES INCURRED IN RESPECT OF THE SALES MADE. THE APPELLANT HAD INC URRED .76% EXPENSES IN RESPECT OF F.Y. 2000- 2001, .81% IN RES PECT OF YEAR 2002 - 03 AND IN RELATION TO ITS SALES OF 2003 - 04 , IF WAS 3.19%. THE APPELLANT HAS, THEREFORE, TAKEN THE LOWEST PERC ENTAGE OF EXPENDITURE OF ALL THE THREE YEARS AND PROVIDED FOR THE WARRANTY EXPENDITURE OF RS. 25.72 LAKH. REGARDING THE FULL Y EAR WARRANTY PROVISION, IT HAS BEEN SUBMITTED THAT THE WARRANTY PERIOD IS 18 MONTHS FROM THE DATE OF DISPATCH OR 12 MONTH FROM T HE DATE OF COMMISSIONING OF THE WORKING OF GLASS LINED VESSELS AND SINCE, THE ENTIRE SALE PRICE IS CREDITED TO SALES ACCOUNT, THE EXPENDITURE TO BE INCURRED DURING THE ENTIRE WARRANTY SHOULD BE ALLOW ED AS DEDUCTION ON THE PRINCIPLE OF PRUDENCE AND THE MATCHING CONCE PT AS PER ACCOUNTING STANDARD 29 OF THE ICAI. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE C ASE, IT IS NOTED THAT THE APPELLANT HAS MADE THE PROVISIONS ON THE S CIENTIFIC BASIS. IT HAS PROVIDED FOR THE EXPENDITURE BY ADOPTING PERCEN TAGE OF .76% WHICH WAS THE LOWEST IN LAST THREE YEARS. IT HAS ON LY MADE THE INCREMENTAL PROVISION DURING THE YEAR AND THE BALAN CE LYING IN THE PROVISION TO WARRANTY ACCOUNT HAS BEEN ADJUSTED AGA INST THE PROVISION OF CURRENT YEAR'S WARRANTY. REGARDING, TH E ADDITION OF THE AO THAT THE WARRANTY FOR LAST THREE MONTHS OF THE Y EAR WOULD BE APPLICABLE IN THE NEXT YEAR, IT IS NOTED THAT THE S ALE FOR LAST THREE MONTHS HAVE BEEN SHOWN IN THE PROFIT AND LOSS ACCOU NT BY THE APPELLANT AND ALL THE EXPENSES RELATED TO THOSE SAL ES WILL HAVE TO BE PROVIDED IN THE CURRENT YEAR ITSELF. THIS PRACTICE HAS BEEN ADOPTED ITA NO. 2014/AHD/16 [DCIT VS. GMM PFAULDER LTD.] A.Y. 2005-06 - 7 - BY THE APPELLANT IN EARLIER YEARS AND IT IS NOTED T HAT NO DISALLOWANCE ON ACCOUNT OF WARRANTY PROVISION HAS B EEN MADE IN OTHER YEARS. THE PROVISION IS ALSO IN ACCORDANCE WI TH THE ACCOUNTING STANDARDS PRESCRIBED BY THE ICAI. THE CL AIM OF THE APPELLANT THAT ON THE BASIS OF MATCHING PRINCIPLE O F PROVIDING THE EXPENDITURE CORRESPONDING TO THE INCOME THE PROVISI ONS ARE TO BE ALLOWED IN THE CURRENT YEAR ITSELF IS ACCEPTABLE. IN VIEW OF THE ABOVE DISCUSSION, THE DISALLOWANCE M ADE BY THE AO IS DIRECTED TO BE DELETED AS THE PROVISIONS MADE BY TH E APPELLANT ARE IN ORDER AND HAVE BEEN MADE BY FOLLOWING A SCIENTIF IC AND SYSTEMATIC METHOD AS HELD BY THE HONOURABLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PRIVATE LIMITED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. ' 4.7. IT HAS ALSO BEEN NOTICED THAT IN APPELLANT'S O WN CASE IN A. Y. 2006-07 TO 2008-09, THE LD.CIT(A) HAS ALLOWED THE APPEAL OF THE APPELLANT OR THIS ISSUE. ON THE CONTRARY IN A. Y. 2009-10, THE EXCESS PROVISION FOR WARRANTY WAS CREDITED IN THE P & L ACCOUNT BY THE APPELLANT WHICH HAS BEEN ACCEPTED BY THE AO. FURTHER, IN A. Y. 2010-11, THE LD.CIT(A) HAS ALLOWED THE APPEAL ON THIS ISSUE AND THE DISALLOWANCE MADE WAS DELETED. AS PER APPELLANT THE SAID DECISION HAS BEEN ACCEPTED BY TH E DEPARTMENT AND NO SECOND APPEAL BEFORE THE HON'BLE ITAT, AHMEDABAD HA S BEEN PREFERRED. 4.8. ON GOING THROUGH THE DETAILS AND SUBMISSIONS, IT HAS BEEN NOTICED THAT THE APPELLANT HAS TAKEN THE AVERAGE WARRANTY E XPENSES OF LAST THREE YEARS WHICH WAS 1.70% OF THE TOTAL SALES AND EVEN T AKING THE CONSTANT FIGURE AT 0.5%, THE TOTAL PROVISION WAS ARRIVED AT RS.68,61,000/- OUT OF WHICH RS.46,87,000/- WAS THE PROVISION MADE TILL TH E IMMEDIATELY PRECEDING YEAR. THUS, IN THE YEAR UNDER CONSIDERATI ON, THE PROVISION OF THE INCREMENTAL VALUE OF RS.21,74,000/- WAS MADE. THUS, THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF RS.46,87,000/- WAS UNWARRANTED AS NO SUCH PROVISION HAS BEEN DEBITED IN THE P & L ACCOUN T OF THE YEAR UNDER CONSIDERATION. FURTHER, THE PROVISION FOR WARRANTY DEBITED IN THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION AT RS.21,7 4,000/- IS ALLOWED TOR THE REASON THAT THE SAME IS BASED ON THE SCIENTIFIC METHOD ADOPTED BY THE APPELLANT AS PER THE CONSISTENCY FOLLOWED IN THE PR ECEDING YEARS AND ON THE BASIS OF THE IMMEDIATELY PRECEDING THREE YEARS EXPENDITURE INCURRED BY THE APPELLANT. ON THE SAME BASIS, THE LD. CIT(A) IN APPELLANT'S OWN CASE IN A. Y. 2004-05 HAS ALSO GRANTED THE PROVISIO N MADE BY THE APPELLANT. THUS, THE DISALLOWANCE MADE BY THE AO OF RS.68,61,000/- IS NOT FOUND CORRECT AND JUSTIFIED AND IS ACCORDINGLY DELE TED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 6. WE ARE OF CONSIDERED VIEW, THE CIT(A) HAS CORREC TLY APPRECIATED THE FACT IN PERSPECTIVE AND COMPLIED THE POSITION O F LAW PROPERLY AS RENDERED BY THE HONBLE SUPREME COURT IN ROTORK CONTROLS INDIA PVT. LTD. (SUPRA) AND HONBLE GUJARAT HIGH COURT IN HITACHI HOME & LIFE SOLUTION (I) LTD.(SUPRA), WITHOUT REPEATING THE CONTENT OF THE ORDER OF ITA NO. 2014/AHD/16 [DCIT VS. GMM PFAULDER LTD.] A.Y. 2005-06 - 8 - THE CIT(A) REPRODUCED HEREINABOVE, WE SEE NO REASON TO TAKE A DIFFERENT VIEW IN THE MATTER. WE THUS DECLINE TO I NTERFERE WITH THE ORDER OF THE CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 28/06/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 28/06/20 19