The Tax Publishers2020 TaxPub(DT) 2319 (Del-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Although, AO held that no details regarding scientific method of computation of provision for warranty was filed by assessee, however, it was found that the assessee, in fact, furnished a computation of the provision for warranty along with its reply, therefore, the AO was not justified in disallowing the assessee's claim for provision for warranty.

Business expenditure - Allowability - Provision for warranty -

Assessee-company was engaged in business of manufacturing and trading of toys of heavy vehicles. AO disallowed the assessee's claim for provision for warranty holding that the assessee could not prove the actual incurrence of liability under the warranty class on the basis of fixing a percentage on turnover and in the absence of any such details prepared on scientific method for making such a provision, the provision was not allowable. Held: Although, AO held that no details regarding scientific method of computation of provision for warranty was filed by assessee, however, it was found that the assessee in fact, furnished a computation of the provision for warranty along with its reply. Further, in assessee's own case for earlier assessment year, similar disallowance was deleted by CIT(A). Accordingly, the disallowance made on account of provision for warranty was deleted.

REFERRED : Rotork Controls India (P) Ltd. v. CIT (2009) 314 ITR 62 (SC) : 2009 TaxPub(DT) 1730 (SC) and Asstt. CIT Circle-6 New Delhi v. Continental India Ltd. (Formerly known as Modi Tyres Company (P) Ltd. [ITA No.207/Del./2016, dt. 19-3-2019].

FAVOUR : In assessee's favour.

A.Y. : 2011-12


INCOME TAX ACT, 1961

Section 37(1)

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