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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals)-6, Chennai in dated 02.03.2015.
:-2-: I.T.A. N0. 1924/Mds/2015
The assessee debited Rs. 53,23,000/- in its P&L A/CIT(A), by way of provisions for warranty. In the assessment made for assessment year 2001-02, the AO observed that the provisions for warranty created were not based on any scientific reasons and it is only an unascertained liability. Relying on the decisions of the Jurisdictional High Court in the case of CIT vs Rotark Controls India Ltd., 293 ITR 311 (Mad), the AO disallowed this claim. Aggrieved, the assessee filed an appeal. Relying on the Supreme Court decision in Rotark Controls India Ltd, vs CIT, 314 ITR 62 (SC), the CIT(A) allowed the appeal.
Aggrieved, the revenue filed this appeal pleading that the Apex Court held that only provisions for warranty arrived on a scientific basis is allowable and not any lump sum provision (Uncertain liability). The CIT(A) ought to have appreciated that the provisions is not made scientifically. In order to apply the decision of the Hon’ble Supreme Court, the assessee should have satisfied the important aspects observed by the Hon’ble Supreme Court viz.,
(i) Provisioning which relates to present obligation (ii) It arises out of obligating events (iii) It involves outflow of resources and lastly
(iv) It involves reliable estimation of obligation and the CIT(A) erred in giving a sweeping relief to the assessee etc.,
The AR brought to our notice, the decision of the Jurisdictional High Court in its case in TCA No. 1339/2007 dated 13.07.2015, wherein, the Hon’ble High Court set aside the order of this Tribunal and remitted the matter to the AO to :-3-: I.T.A. N0. 1924/Mds/2015 pass appropriate orders in the light of the decision of Supreme Court in Rotork India (P) Ltd., referred supra.
We heard the rival contentions. Following the Hon’ble High Court’s decision, supra, this matter is remitted back to the AO to pass appropriate orders in the light of the decision of the Supreme Court in Rotork Control India Pvt. Ltd. To that extent, the appeal is allowed in favour of the revenue.
In the result, the revenue’s appeal is treated as allowed for statistical purpose.
Order pronounced on Wednesday, the 26th day of July, 2017 at Chennai.