THE COMMISSIONER OF INCOME TAX V. M/S.MOTOR INDUSTRIES CO LTD.,

ITA/762/2007

AI Insights

The case involves an appeal by the Commissioner of Income-Tax and the Deputy Commissioner of Income-Tax against M/s. Motor Industries Co. Ltd. concerning the allowances of deductions for warranty expenses and contributions to a benevolent fund for the assessment year 1999-2000. The Tribunal had previously granted these exemptions, which the Revenue challenged in the High Court. The main legal questions revolved around the deductibility of provisions made for warranty expenses and the contributions to the benevolent fund under the Income Tax Act, 1961. The High Court, referencing past judgments and the procedures followed by the assessee, upheld the Tribunal's decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728998 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 18-07-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. M/s. Motor Industries Co. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T
• Assessee Lawyers: K V ARAVIND
• Keywords: Allowable deduction; Deductions; Warranty expenses; Benevolent fund; Contingency; Compulsion
• Section: 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 18TH DAY OF JULY, 2014 PRESENT: THE HON'BLE Mr.JUSTICE N.KUMAR AND THE HON'BLE Mr.JUSTICE B.MANOHAR INCOME TAX APPEAL NO.762 OF 2007 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE C.R BUILDING QUEENS ROAD BANGALORE 2. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-12(1) C.R BUILDING QUEENS ROAD BANGALORE ...APPELLANTS (BY SRI.K.V.ARAVIND, ADV.) AND: M/S. MOTOR INDUSTRIES CO. LTD., HOSUR ROAD ADUGODI BANGALORE-30 ...RESPONDENT (BY SRI.T. SURYANARAYANA, ADV., FOR M/S. KING & PARTRIDGE, ADV.) THIS APPEAL IS FILED UNDER SECTION 260-A, OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 04.05.2007 PASSED IN ITA NO.3718/BANG/2004 FOR THE ASSESSMENT 2 YEAR 1999-2000, PRAYING THAT FOR THE REASONS STATED THEREIN THIS HON’BLE COURT MAY BE PLEASED TO: i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY ITAT BANGALORE, IN ITA NO.3718/BANG/2004 DATED 04.05.2007 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER & CONFIRM THE ORDER PASSED BY THE DY., COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-12(1), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR HEARING, THIS DAY, N.KUMAR, J., DELIVERED THE FOLLOWING: J U D G M E N T The Revenue has preferred this appeal against the order passed by the Tribunal granting exemptions regarding warranty expenses and deductions in respect of the contributions made to benevolent fund. 2. The Revenue has raised the following two substantial questions of law that raised for consideration: i) Whether the Appellate Authorities were correct in holding that the provision for warranty expenses is an allowable deduction even though the same would arise only on happening of the contingency ie., when a claim is made against a warranty by the customers? 3 ii) Whether the Appellate Authorities were correct in holding that assessee is entitled to claim deduction in respect of contributions made to benevolent fund despite the fact that the assessee did not demonstrate the compulsion to undergo this expense as per the provisions of the Act? 3. In the assessee’s case itself in the past, it has been held that the assessee takes into consideration past historical cost, cost escalation length of warranty with regard to equipments and spares, increase in volumes over last period etc., and then warranty provisions is made. Once the assessee follows the said procedure, his warranting provision is allowable, which is in conformity with the judgment of the Apex Court in ITA No.744/2007 and 1131/2006 dated 13.06.2014 and therefore, we do not see any substance in the said contention and therefore, the said substantial question of law is answered in favour of the assessee and against the Revenue and infact, this Court in the earlier orders has held it in favour of the assessee. 4 4. Insofar as the second substantial question of law is concerned, it is also covered by the judgment of this Court in the case of Commissioner of Income Tax Vs. M/s. Motor Industries Co. Ltd., in ITA No.3/2002 disposed of on 02.11.2007. Accordingly, we hold the said substantial question of law also in favour of the assessee and against the Revenue. In that view of the matter, we do not see any merit in the appeal. Accordingly, the appeal is dismissed. Sd/- JUDGE Sd/- JUDGE GH "