INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Provision for warranty - Disallowance on the allegation of insurance of no actual expenses - Assessee pleading that in subsequent years substantial amount had been incurred on account of repairing and servicing of pumps

Assessee-company engaged in manufacture of motors and job work claimed deduction of provision for warranty made by it. AO noticed that during the year against provisions of warranty of no actual expenses was incurred or paid. In view of this AO considered the nature of the warranty as contingent liability. Assessee submitted that in subsequent years substantial amount had been incurred on account of repairing and servicing of pumps.Held: Assessee's submission that in subsequent years substantial amount had been incurred on account of repairing and servicing of pumps, required factual verifciation, accordingly, matter was remanded back to AO with direction to examine assessee's claim of provision of warranty expenses as per scientific process followed by it and also to examine as to whether actual expenses had been incurred year to year on the servicing and repairing of the pumps.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2008-09 & 2012-13

INCOME TAX ACT, 1961

Section 36(1)(vii)

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