The ACIT, Anand Circle, Anand V. Ringspann Elecon (India) Ltd., Anand

ITA 2967/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73065 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 24-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2010
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: A L THAKKAR A R

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD . .. . . . . . , , , , ! '# ! '# ! '# ! '#, , , , $ $ $ $ BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO. 2967/AHD/2010 A.Y. 2007-08 ACIT, ANAND CIRCLE, AHMEDABAD. VS RINGSPANN ELECON (INDIA)LTD., ANAND- SOJITRA ROAD VALLABHVIDYANAGAR, ANAND. PAN: AABCR1022K (APPELLANT) (RESPONDENT) ITA NO. 2986/AHD/2010 A.Y. 2007-08 RINGSPANN ELECON (INDIA)LTD., ANAND- SOJITRA ROAD VALLABHVIDYANAGAR, ANAND. PAN: AABCR1022K VS ACIT, ANAND CIRCLE, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SH. O.P. BATHEJA, SR.D.R. ASSESSEE(S) BY : SH. A.L. THAKKAR, AR !% & #'/ // / DATE OF HEARING : 24/02/2014 )*+ & #' / DATE OF PRONOUNCEMENT: 26 /02/2014 , , , ,/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS FILED BY THE REVENUE AND A SSESSEE AGAINST THE ORDER OF LD. CIT(A)-IV, BARODA DATED 31 .08.2010. 2. IN THE REVENUES APPEAL, REVENUE HAS TAKEN THE F OLLOWING GROUNDS OF APPEAL: ITA NOS. 2697 & 2986 OF 2010 RINGSPANN ELECON (INDIA)LTD VS ACIT, ANAND CIRCLE, AHD FOR A.Y. 2007-08 - 2 - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS 11,15,9 04/- BEING DISALLOWANCE OF WARRANTY PROVISION MADE AT THE END OF THE YEAR AND NO EXPENSE TOWARDS ANY WARRANTY PAYMENT/CHARGES WERE I NCURRED OUT OF IT AND THEREFORE IT WAS IN THE NATURE OF CONTINGENT LI ABILITY. 3. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL: THE LEARNED DY. COMMISSIONER OF INCOME TAX, ANAND C IRCLE ERRED IN LAW AND ON FACTS IN MAKING DISALLOWANCE OF WARRA NTY PROVISION RS 28,74,150/- FOR WARRANTY CLAIMS OF PRODUCTS SOLD DURING THE YEAR. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE MADE PROVISION FOR WARRANTY EXPENSES A T RS 28,74,150/- BY DEBITING THE SAME TO HIS PROFIT AND LOSS ACCOUNT . THE ASSESSING OFFICER DISALLOWED THE ENTIRE DEDUCTION OF RS 28,74 ,150/- CLAIMED BY THE ASSESSEE. 5. ON APPEAL, THE LD. CIT(A) ALLOWED DEDUCTION OF R S 11,15,904/- BEING 1% OF THE RELEVANT SALES OF RS 11,15,19,444/- MADE DURING THE YEAR AND DISALLOWED THE BALANCE AMOUNT OF RS 17,58, 246/-. 6. BEING AGGRIEVED BY THIS ORDER, BOTH THE PARTIES ARE IN APPEAL BEFORE US. 7. THE REVENUE DISPUTED THE ALLOWANCE OF CLAIM FOR WARRANTY PROVISION OF RS 11,15,904/- AND THE ASSESSEE DISPUT ED THE DISALLOWANCE OF WARRANTY CLAIM OF RS 17,58,246/-. 8. THE LD. DR CONTENDED THAT IN VIEW OF THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS VS. CI T (2009) 314 ITR 64 (SC), PROVISION FOR WARRANTY EXPENSES CAN BE ALLOWE D ON SOME SCIENTIFIC ITA NOS. 2697 & 2986 OF 2010 RINGSPANN ELECON (INDIA)LTD VS ACIT, ANAND CIRCLE, AHD FOR A.Y. 2007-08 - 3 - BASIS ONLY, AND AS 1% OF THE SALE IS NOT A SCIENTIF IC BASIS, THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION OF RS 11,15,904/-. 9. ON THE OTHER HAND, THE CONTENTION OF THE AR OF T HE ASSESSEE IS THAT APART FROM 1% OF THE SALE, FURTHER PROVISION F OR RS 17,58,246/- WAS MADE ON THE BASIS OF CLAIM OF NEYVELI LIGNITE CORPO RATION WHICH WAS RECEIVED DURING THE YEAR BY THE ASSESSEE AND THEREF ORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS 17,58,246/-. 10. WE FIND THAT THE ASSESSEE IS ENGAGED IN MANUFAC TURING OF ENGINEERING GOODS. FURTHER, IT IS ALSO NOT IN DISP UTE THAT THE ASSESSEE PROVIDES WARRANTY OF ONE YEAR TO ITS CUSTOMERS AND ASSESSEE HAS TO INCUR EXPENSES FOR WARRANTY IN THE SUBSEQUENT PERIO D IN RESPECT OF SALES MADE DURING A PERIOD. IN VIEW OF THE ABOVE UNDISPU TED FACTS, KEEPING IN VIEW THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS (SUPRA), THE DEDUCTION IS TO BE ALL OWED TO THE ASSESSEE IN RESPECT OF FUTURE WARRANTY EXPENSES IN RESPECT O F SALES RECOGNIZED IN A GIVEN PERIOD. 11. FURTHER, THIS WARRANTY EXPENSE IS TO BE ESTIMAT ED ON SOME SCIENTIFIC BASIS WHICH INCLUDES THE PAST EXPERIENCE IN THE CASE OF THE ASSESSEE. THUS, WE FIND THAT THE ALLOWANCE OF DEDU CTION AT THE RATE OF 1% OF SALES ALLOWED BY THE LD. CIT(A) ON THE BASIS OF ACTUAL PAST EXPERIENCE OF THE ASSESSEE CANNOT BE SAID TO BE BAS ED ON NO SCIENTIFIC BASIS. THEREFORE, WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LD. DR. 12. FURTHER, WE FIND THAT NO MATERIAL WAS BROUGHT B EFORE US BY THE LD. AR TO SHOW THAT ANY ACTUAL LIABILITY WAS INCURRED B Y THE ASSESSEE OF RS 17,58,246/- IN RESPECT OF ANY SALE MADE TO NEYVELI LIGNITE CORPORATION. NO DETAILS OF THE SALES MADE TO NEYVELI LIGNITE COR PORATION DURING THE ITA NOS. 2697 & 2986 OF 2010 RINGSPANN ELECON (INDIA)LTD VS ACIT, ANAND CIRCLE, AHD FOR A.Y. 2007-08 - 4 - YEAR OR EVIDENCE OF ANY EXPENSES INCURRED BY THE AS SESSEE IN RESPECT OF SUCH SALES DURING THE YEAR WAS PRODUCED BEFORE US. IN ABSENCE OF THE SAME, WE DO NOT FIND ANY GOOD REASON TO INTERFERE W ITH THE ORDER OF THE LD. CIT(A). 13. WE, THEREFORE, CONFIRM THE ORDER OF THE LD. CIT (A) AND DISMISS THE APPEAL OF THE REVENUE AS WELL AS THAT OF THE ASSESS EE. ORDER PRONOUNCED IN THE COURT ON WEDNESDAY, THE 26 TH FEBRUARY, 2014 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 26 /02/2014 GHANSHYAM MAURYA, SR. P.S. TRUE COPY , & -#. /.+# , & -#. /.+# , & -#. /.+# , & -#. /.+#/ COPY OF THE ORDER FORWARDED TO : 1. 01 / THE APPELLANT 2. -201 / THE RESPONDENT. 3. # !3 / CONCERNED CIT 4. !3() / THE CIT(A)-III, AHMEDABAD 5. .'6 -# , , / DR, ITAT, AHMEDABAD 6. 678 9% / GUARD FILE. ,! ,! ,! ,! / BY ORDER, : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD