Alkraft Thermo Technologies Ltd., CHENNAI V. ACIT, CHENNAI

ITA 499/CHNY/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8073 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 06-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 499/MDS/2014 / ASSESSMENT YEAR : 2008-09 M/S. ALKRAFT THERMO TECHNOLOGIES LTD., 35-A & B/1, AMBATTUR INDUSTRIAL ESTATE, CHENNAI 600 058. PAN AAACA9304G APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(3), CHENNAI 34. RESPONDENT) / APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 06.01.2016 '# ! / DATE OF PRONOUNCEMENT: 29.01.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 26 .12.2013 - - ITA 499/14 2 FOR THE ASSESSMENT YEAR 2008-09. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS THAT THE CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE O F ` 45,42,350/- BEING REDUCTION OF THE PROVISION FOR WA RRANTY REQUIREMENTS TO 1.5% AS AGAINST 2.5% OF THE SALE PR OVIDED BY THE ASSESSEE. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED PROVISIONS FOR WARRANTY AT ` 1,13,55,876/-, WHICH WORKED OUT TO 2.5% OF THE SALE MADE DURING THE FINANCIAL YEAR 200 7-08 OF ` 45,42,35,033/-. THE ASSESSING OFFICER RESTRICTED T HE SAME TO 1.5% AND MADE AN ADDITION OF ` 45,42,350/-. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(APPEALS). 4. THE CIT(APPEALS) CONFIRMED THE SAME OBSERVING TH AT THE ASSESSEE HAS NOT SUBSTANTIATED ITS CONTENTION WITH ANY LOGIC AND REASONING. SINCE THE A.O. COMPARED THE STATISTICS IN THIS REGARD FOR THE PAST AND FUTURE ASSESSMENT YEARS, ARRIVED A T 1.5% OF THE TOTAL TURNOVER, THE CIT(APPEALS) REJECTED THE GROUN D TAKEN BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEF ORE US. - - ITA 499/14 3 5. THE LD. AR SUBMITTED THAT IT IS TO BE ALLOWED IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF ROTORK CO NTROLS INDIA PVT. LTD. V. CIT (314 ITR 62), WHEREIN IT WAS HELD THAT A PROVISION IS A LIABILITY WHICH CAN BE MEASURED ONLY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION, WHICH IS BASED ON PAST EXPERI ENCE. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE CIT(APPEALS). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE CONTENTION OF THE LD. AR IS THAT T HE PROVISION FOR WARRANTY IS MADE AT 2.5% OF THE SALE BASED ON THE P AST EXPERIENCE. HOWEVER, THE LD. AR WAS NOT ABLE TO SH OW WHAT IS THE ACTUAL CLAIM MADE BY THE ASSESSEE IN EARLIER AS SESSMENT YEARS AND THE CLAIM ALLOWED BY THE DEPARTMENT. THE ONLY PLEA OF THE LD. AR IS THAT PROVISION IS BASED ON 2.5% OF THE SALE AND IN OUR OPINION, IT CANNOT BE THE BASIS FOR ALLOWING TH E EXPENDITURE. ONLY WHEN THE ASSESSEE QUANTIFIED PROVISION FOR WAR RANTY, WHICH WAS BASED ON AVERAGE OF PREVIOUS YEARS WARRANTY SE TTLEMENTS AND ALLOWED PROVISION FOR WARRANTY CLAIMS, IT COULD BE SAID THAT IT - - ITA 499/14 4 IS BASED ON A SCIENTIFIC BASIS. IN OUR OPINION, TH E CLAIM CANNOT BE ALLOWED ON THE BASIS OF THE ARGUMENT PUT FORTH B Y THE LD. AR. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH OF JAN., 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 29 TH JAN., 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.