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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI INTURI RAMA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER आदेश आदेश आदेश PER INTURI RAMA RAO, AM: The appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) – 8, Mumbai dated 23.04.2018 for the Assessment Year 2010-11.
The assessee raised the following grounds of appeal :
“1. The learned Dy. Commissioner of Income Tax, Circle (OSD), 3(2), Mumbai has erred in disallowing the claim for provision for warranty for the year amounting to Rs.45,45,897/- and the learned Commissioner of Income Tax (Appeals) – 8, Mumbai erred in confirming the same. (Total Tax Effect Rs. Nil in view of loss).
2. The learned Dy. Commissioner of Income Tax, Circle (OSD), 3(2), Mumbai has erred in making disallowance of Rs.45,45,897/- under the pretext of provision for warranty claim being a contingent liability and the learned Commissioner of Income Tax (Appeals) – 8, Mumbai has erred in confirming the same. (Total Tax Effect Rs. Nil in view of loss.)
3. The Assessment Order under section 143(3) r.w.s. 92CA dated 28.12.2016 passed by the Assessing Officer needs to be cancelled and set aside. (Total Tax Effect Rs. Nil in view of loss.)”
The brief facts of the case are as under :
The appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of manufacturing / assembling standard duty cranes, light lifting cranes and certain heavy duty cranes with span / weight of steel structure. The return of income for the assessment year 2010-11 was filed on 30.09.2010 disclosing loss of Rs.3,12,63,836/- and the same was revised on 22.03.2012 at a total loss of Rs.3,18,65,066/-. Against the said return of income, the assessment was completed by the Assessing Officer (AO) i.e., Dy. Commissioner of Income Tax (OSD), Circle-3(2), Mumbai vide order dated 12.03.2014 passed under Sec.143(3) r.w.s. 92CA of the Income Tax Act, 1961 at a loss of Rs.2,56,81,169/-. While doing so, the AO made disallowance of expenses incurred on internet web and other IT Cost at Rs.16,38,000/- and provisions for warranty claims at Rs.45,45,897/-.
Being aggrieved by the above disallowances, an appeal was preferred by the Commissioner of Income Tax (Appeals) - 8, Mumbai, who vide impugned order dated 23.04.2018 had deleted the addition made on account of the internet expenditure and IT Cost. However, confirmed the addition on account of provisions for warranty claims.
Being aggrieved with the order of ld.CIT(A), the appellant is before us in the present appeal.
When the appeal is called on, none appeared on behalf of the assessee.
On the other hand, learned Sr.DR had placed reliance on the order of lower authorities.
We have heard the learned senior Departmental Representative and perused the material on record. The only issue in the present appeal related to the allowability of provision of warranty expenditure. On perusal of the assessment order, it is clear that the AO had clearly disallowed the provision for warranty expenditure holding it to be contingent. On appeal before the Commissioner of Income Tax (Appeals), the ld.CIT(A) had rightly taken note of the legal position governing the allowability of provision for warranty expenditure as laid down by the Hon’ble Supreme Court in the case of CIT Vs. Rotork Controls India Ltd., reported in 314 ITR 62 (SC). However, the ld.CIT(A) while applying the parameters laid down by the Hon’ble Supreme Court in the said decision, had not considered the most relevant data and information i.e., terms and conditions laid down in the warranty policy for the company, what is the percentage of actual claims made for warranty claims in terms of the sales etc. Therefore, in the above circumstances, we are of the considered opinion that the matter should be remitted back to the file of ld.CIT(A) for denovo consideration with a direction to decide the issue on hand keeping in view with the terms and conditions of the warranty policy as well as historical data as laid down by the Hon’ble Supreme Court’s decision in the case of Rotork Controls India Ltd. (supra). Accordingly, the matter is remanded back to the file of ld.CIT(A).
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 28th day of May, 2021.