ACIT 10(2), MUMBAI V. GODREJ APPLIACES LTD, MUMBAI

ITA 2803/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8331 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R BAIWAR
• Assessee Lawyers: ZAR EER MEHTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SHRI V. DURGA RAO , JM I.T.A.NO. 2803/MUM/2010 ASSESSMENT YEAR : 2006-07 ASST. COMMISSIONER OF INCOME- TAX-10(2), ROOM NO. 432, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.RD., MUMBAI 400 020. VS. M/S. GODREJ APPLIANCES LTD., PLANT NO. 11, PHIROOJSHANAGAR, VIKHROLI (W), MUMBAI 400 079. PAN: AAACG 0555 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.R. BAIWAR RESPONDENT BY : S/SHRI AKRAM KHAN AND ZAREER MEHTA O R D E R PER P.M. JAGTAP, AM : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-21, MU MBAI, DATED 21.01.2010, AND IN THE SOLITARY GROUND RAISED THERE IN, THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN DELE TING THE DISALLOWANCE OF RS.65,81,649/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF PROVISION FOR FREE SERVICES UNDER PRODUCT-WARRANTIES. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF S CISSORS, KNIVES AND LOCKS, SECURITY EQUIPMENT AND STORAGE SOLUTIONS. TH E RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 20. 10.2006 DECLARING LOSS OF RS. 72,17,099/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, ITS CLAIM FOR DEDUCTION ON ACCOUNT OF THE PROVISION OF RS. 65,81, 649/- MADE FOR FREE SERVICES UNDER PRODUCT WARRANTIES WAS SOUGHT TO BE SUPPORTED BY THE ASSESSEE COMPANY BY MAKING ELABORATE SUBMISSIONS EX PLAINING THEREIN RATIONAL AND BASIS OF MAKING THE SAID PROVISION. AC CORDING TO THE ASSESSING OFFICER, THE SAID PROVISION MADE BY THE ASSESSEE, H OWEVER, WAS IN THE ITA NO. 2803/M/2010 M/S.GODREJ APPLIANCES LTD. 2 NATURE OF CONTINGENT LIABILITY AND HE, THEREFORE, D ISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF PROVISION MADE FOR FREE SERVICES UNDER PRODUCT WARRANTIES. ON APPEAL, THE LEARNED CI T(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSU E FOLLOWING THE ORDERS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EAR LIER YEARS, WHERE A SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE . HE ALSO NOTED THAT THE APPEAL FILED BY THE DEPARTMENT AGAINST ONE OF SUCH ORDERS OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2002-2003 WAS DISMISSED BY THE HONBLE BOMBAY HIGH COURT. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THA T A SIMILAR ISSUE WAS INVOLVED IN THE ASSESSEES OWN CASE FOR THE EARLIE R YEARS AND THE SAME HAS BEEN DECIDED BY THE TRIBUNAL CONSISTENTLY IN FAVOUR OF THE ASSESSEE. IN ONE OF SUCH DECISIONS RENDERED BY THE TRIBUNAL VIDE ITS ORDER DATED 5 TH JULY, 2005 PASSED IN ITA NO. 334/MUM/02, TRIBUNAL TOOK NO TE OF THE DECISION OF ITS COORDINATE BENCH AT BANGALORE PASSED IN THE CA SE OF WIPRO GE MEDICAL SYSTEMS LTD. (81 TTJ 455), WHEREIN IT WAS HELD WHIL E DECIDING A SIMILAR ISSUE THAT THE WARRANTY LIABILITIES ARE IN-BUILT I N SALE PRICE SINCE ALL SALES ARE WITH WARRANTY LIABILITIES. IT WAS ALSO HELD THAT TH E LIABILITY TOWARDS WARRANTY IS CERTAIN AND THE SAME ACCRUES ON THE DATE OF SALE ITSELF. IT WAS ALSO HELD THAT THE ASCERTAINMENT OF SUCH LIABILITY CAN BE DON E WITH REASONABLE CERTAINTY ON THE BASIS OF EXPERIENCE. FOLLOWING THI S DECISION OF BANGALORE BENCH OF THE I.T.A.T IN WIPRO GE MEDICAL SYSTEMS LT D. (SUPRA), THE TRIBUNAL HELD IN THE CASE OF THE ASSESSEE FOR THE A SSESSMENT YEAR 1994-95 VIDE ITS ORDER DATED 5.7.2005 (SUPRA) THAT THE LEAR NED CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF ITA NO. 2803/M/2010 M/S.GODREJ APPLIANCES LTD. 3 ASSESSEES CLAIM FOR PROVISION FOR FREE SERVICES U NDER PRODUCT WARRANTIES. THE SAID DECISION RENDERED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 1994- 95 HAS BEEN SUBSEQUENTLY FOLLOWED BY THE TRIBUNAL A ND ONE OF SUCH ORDERS PASSED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2002- 03 HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT BY DISMISSING THE APP EAL OF THE DEPARTMENT VIDE ITS ORDER DATED 29 TH JULY 2009 PASSED IN INCOME TAX APPEAL (L) NO.899 OF 2009. AS THE ISSUE INVOLVED I N THE YEAR UNDER CONSIDERATION AS WELL AS ALL THE MATERIAL FACTS REL EVANT THERETO ARE ADMITTEDLY SIMILAR TO THAT OF THE EARLIER YEARS, WE RESPECTFULLY FOLLOW THE ORDERS OF THE TRIBUNAL FOR THE EARLIER YEARS AND U PHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF MARCH, 2011. SD. SD. (V.DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 9 TH MARCH, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE ACIT-10(2), MUMBAI 3. THE CIT, M.C. X, MUMBAI 4. THE CIT(A)-21, MUMBAI 5. THE DR G BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI