For Income Tax Act, Provisions for Warranty Expenses should be Reliable For Income Tax Act, Provisions for Warranty Expenses should be Reliable

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The Tax Publishers For Income Tax Act, Provisions for Warranty Expenses should be Reliable Akhilesh Kumar Sah In Apple India Pvt. Ltd. v. DCIT [ITA Nos. 422 & 423/Bang/2018 (A.Ys. 2013-14 & 2014-15), decided on 3-8-2018] the assessee-company made provision for warranty expenses. the assessing officer inferred that provision created based on ad hoc basis and no scientific method was adopted nor based on the historical trends. Therefore, assessing officer held that such ad hoc provision should not be allowed as a deduction. Following the decision in Rotork Controls India (P.) Ltd. v. CIT 2009 TaxPub(DT) 1730 (SC) : (2009) 314 ITR 62 (SC) it was held that in order that provision for warranty expenses be allowable same must be created on some scientific basis. 1. AppleIndia case In Apple India Pvt. Ltd. v. DCIT 2018 TaxPub(DT) 5271 (Bang 'A'-Trib) : (2018) 172 ITD 553 (Bang 'A'-Trib) : (2018) 196 TTJ (Bang 'A'-Trib) 1139, appeals were filed by the assessee directed against different orders of the Commissioner of Income-tax (Appeals)-1 [CIT(A)], Bengaluru, dated 30-10-2017 for the assessment years 2013-14 and 2014-15. Since identical issue in respect of allowability of the provision for warranty expenditure was involved in both the appeals, the common order was passed. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

For Income Tax Act, Provisions for Warranty Expenses should be Reliable

Akhilesh Kumar Sah

In Apple India Pvt. Ltd. v. DCIT [ITA Nos. 422 & 423/Bang/2018 (A.Ys. 2013-14 & 2014-15), decided on 3-8-2018] the assessee-company made provision for warranty expenses. the assessing officer inferred that provision created based on ad hoc basis and no scientific method was adopted nor based on the historical trends. Therefore, assessing officer held that such ad hoc provision should not be allowed as a deduction. Following the decision in Rotork Controls India (P.) Ltd. v. CIT 2009 TaxPub(DT) 1730 (SC) : (2009) 314 ITR 62 (SC) it was held that in order that provision for warranty expenses be allowable same must be created on some scientific basis.

1. AppleIndia case

In Apple India Pvt. Ltd. v. DCIT 2018 TaxPub(DT) 5271 (Bang 'A'-Trib) : (2018) 172 ITD 553 (Bang 'A'-Trib) : (2018) 196 TTJ (Bang 'A'-Trib) 1139, appeals were filed by the assessee directed against different orders of the Commissioner of Income-tax (Appeals)-1 [CIT(A)], Bengaluru, dated 30-10-2017 for the assessment years 2013-14 and 2014-15. Since identical issue in respect of allowability of the provision for warranty expenditure was involved in both the appeals, the common order was passed.