MAG INDIA INDUSTRIAL AUTOMATION SYSTEMS PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), BANGALORE

7. The levy of interest under section 234B and 234C is not warranted on the facts and circumstances of the case.

9. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed, and justice rendered.

2. Subsequently, at the time of hearing, they filed an application to admit revised grounds in both the appeals and we extract the revised grounds raised

in as follows: “The Grounds mentioned hereinafter are without prejudice to one another.

1. That the learned Commissioner of Income Tax (Appeals) ['CIT(A)'] erred on facts and circumstances of the case and in law by upholding the Assessment Order passed by the learned Assessing Officer ('the AO') on the issue pertaining to Provision for Warranty under which the Appellant had claimed allowance for an estimated liability of Rs 1,75,81,254.

2. That the learned CIT(A) erred on facts and circumstances of the case and in law by not appreciating the fact that the amount of Provision for Warranty has been partially adjusted against the warranty claims actually made by the customers and partially reversed by the Appellant in the subsequent & 314/Bang/2024 Mag India Industrial Automation Systems Private Limited, Bangalore Page 3 of 5 years and therefore, the disallowance made by the AO will lead to double taxation for the Appellant.

That the Appellant craves leave to add to and/or to alter, amend, rescind, modify, the grounds herein above or produce further documents before or at the time of the hearing of this appeal.”

4. The brief facts of the case are that the ld. AO has disallowed the provision towards warranty liability provision for the reason that there is no scientific method for arriving the warranty expenses but mechanically the provision was made at a percentage basis and not based on the past experience. In this regard, the ld. AO relied on the judgement of Hon’ble Supreme Court in the case of Rotork Controls India (P) Ltd. Vs. CIT reported in (2009) 314 ITR 62 (SC). 4.1 The assessee filed an appeal before the ld. CIT(A), Bangalore and contended that the provision for the warranty expenses were made after consultation with Industry experts, advice from group companies and after considering the various factors. The ld. CIT(A) had not accepted the argument of the assessee and dismissed the appeal. Aggrieved, the assessee is now challenging the ld. CIT(A)’s order before this Tribunal. 4.2 The ld. A.R. at the time of hearing had submitted that except the revised ground No.2 they have not pressed the other grounds. The ld. A.R. further submitted that the provision made for warranty has been partially adjusted during the year and partially reversed by the assessee in the subsequent years and therefore, the disallowance made by the ld. AO will lead to double taxation and prayed to consider this fact and grant sufficient relief on the partial reversal of the warranty provision made in the subsequent years. The ld AR also filed paper books enclosing the financial statements of the company, statement of warranty provision and statement of warranty & 314/Bang/2024 Mag India Industrial Automation Systems Private Limited, Bangalore Page 4 of 5 expenditure to show that the assessee’s contention is correct and therefore sought for an indulgence from this court. 5. The ld. D.R. relied on the orders of the lower authorities and prayed to dismiss the appeal on the ground that the revised ground No.2 was raised for the first time before this Tribunal. 6. We have heard the rival submissions and perused the materials available on record. First, we will consider the objection raised by the ld. DR about the maintainability of the revised grounds filed by the assessee for the first time. We have gone through the revised grounds and found that the same are only an alternative ground and no fresh dispute has been raised by the assessee and therefore we rejected the objections raised by the ld. DR and accepted the revised grounds of appeal filed by the assessee. 6.1 Now the only issue to be decided in this appeal is whether the disallowance of the provision for warranty expenses is correct when the assessee had reversed the unutilized provision of the warranty expenses in the later years. In this connection we have gone through the paper books filed by the assessee and noticed that the provision for warranty has been partially adjusted against the warranty claim made by the customers during the year and the balance provision was reversed in the subsequent years. Therefore, the unutilized portion was offered to tax subsequently. This fact was not brought to the notice of any of the authorities. Even before this Tribunal the assessee has taken the plea only as a revised ground and therefore there is no opportunity to the lower authorities to consider the claim. Hence this aspect should be verified by the ld. AO by looking into the financial statements and other documents filed by the assessee and if the AO is able to find out that the submission of the assessee is correct then the relief should be granted in respect of the provisional amounts which were reversed in the later years, otherwise it would amounts to double taxation. We also made it clear that while doing this exercise, if necessary, the ld. AO is directed to reopen or rectify & 314/Bang/2024 Mag India Industrial Automation Systems Private Limited, Bangalore Page 5 of 5 the later years assessment orders and grant the relief to avoid the double taxation. 6.2 We, therefore, inclined to set aside the orders of the ld. AO as well as ld. CIT(A) in respect of both the years and restore the matters to the file of ld. AO to decide the issue afresh in accordance with law and after giving an opportunity of hearing to the assessee.