MAHINDRA SONA LTD, MUMBAI V. ACIT CIR 2(2), MUMBAI

ITA 3997/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49449 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA SR
• Assessee Lawyers: D S MAINKAR
• Keywords: Business expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S. SYAL, ACCOUNTNAT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO.3997/MUM/2010 ASSESSMENT YEAR: 2006-2007 MAHINDRA SONA LTD., GATEWAY BUILDING, APOLLO BUNDER, MUMBAI 400 001. PAN: AAACM3524A VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(2), R.NO.545, AYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D. S. MAINKAR RESPONDENT BY : SHRI. P.C. MAURYA, SR. A.R O R D E R PER V. DURGA RAO, J.M: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 4 TH MARCH, 2010 PASSED BY THE LD. CIT (A)-5 FOR THE AS SESSMENT YEAR 2006-2007. 2. THE ISSUE INVOLVED IN THIS APPEAL IS WHETHER PRO VISION FOR WARRANTY IS ALLOWABLE U/S 37(1) OF THE I.T ACT OR NOT. IN THIS REGARD THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAD MADE A PROVISION FOR WARRANTY PERIOD APPLIES AMOUNTING TO RS. 16,19,000/-. THE ASSESSING OFFICER HAS OBSERVED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE MERELY A PROVISION AND NOT AN ASCERTAINED LIABILITY AND THEREFORE HE DISALLOWED R S. 16,19,000/- AS BUSINESS EXPENDITURE U/S 37(1) OF THE INCOME TAX AC T AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON BEIN G AGGRIEVED, ASSESSEE ITA NO.3997/MUM/2010 A.Y 2006-2007: 2 CARRIED MATTER IN APPEAL BEFORE THE LD. CIT (A). T HE LD. CIT (A) BY FOLLOWING THE A.Y. 2005-2006 UPHELD THE ORDER OF THE ASSESSIN G OFFICER. 3. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR T HE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE CARRIED MATTER IN APPEA L BEFORE THE TRIBUNAL FOR A.Y. 2005-2006 WHEREIN THE TRIBUNAL ALLOWED THE WAR RANTY CLAIM OF THE ASSESSEE U/S 37 OF THE I.T. ACT. ON THE OTHER HAND THE LEARNED D.R FAIRLY CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE. THE TRIBUNAL FOR A.Y. 2005-06 IN THE ASSESSEES OWN CASE CONSIDE RED THE ISSUE AND UPHELD AS UNDER: WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIV AL CONTENTIONS CAREFULLY. THE ASSESSEE WHO IS A MANUF ACTURER OF AUTOMOTIVE COMPONENTS HAD BEEN ISSUING WARRANTY AT THE SALE OF THE PRODUCT FOR REMOVAL OF DEFECTS OVER A PARTIC ULAR PERIOD OF TIME. THE ASSESSEE HAD MADE PROVISIONS FOR WARRANT Y EXPENDITURE IN THE YEAR OF SALE ON THE BASIS OF PAS T EXPERIENCE ETC. THE ISSUE IS WHETHER SUCH PROVISION FOR WARRAN TEE CAN BE ALLOWED AS DEDUCTION. WE FIND THAT THE SAME ISSUE HAD BEEN CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROL INDIA (P) LTD. VS. CIT (314 ITR 62) IN WHIC H THE HONBLE SUPREME COURT OBSERVED THAT WARRANTY WAS AN INTEGRA L PART OF THE SALE PRICE AS THE WARRANTY STOOD ATTACHED TO TH E SALE PRICE OF THE PRODUCT. IT WAS ALSO OBSERVED THAT WARRANTY PROVISIONS HAVE TO BE RECOGNISED BECAUSE AN ASSESSEE HAD A PRE SENT OBLIGATION AS A RESULT OF PAST EVENTS RESULTING IN AN OUTFLOW OF RESOURCES AND A RELIABLE ESTIMATE COULD BE MADE OF THE AMOUNT OF OBLIGATION. THEREFORE THE ASSESSEE HAD INCURRED THE LIABILITY WHICH WAS AN ALLOWABLE DEDUCTION UNDER SECTION 37 O F THE I.T. ACT. RESPECTFULLY FOLLOWING THE SAID JUDGMENT WE S ET ASIDE THE ORDER OF THE LD. CIT (A) AND ALLOW THE CLAIM OF THE ASSESSEE. 4. WE RESPECTFULLY FOLLOWING THE DECISION OF THE H ONBLE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-2006 THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. ITA NO.3997/MUM/2010 A.Y 2006-2007: 3 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2011. SD/- SD/- (R.S. SYAL) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 15 TH JULY, 2011. OKK* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-5, MUMBAI 4. COMMISSIONER OF INCOME TAX, CONCERNED 5. DEPARTMENTAL REPRESENTATIVE, BENCH B, MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI