INCOME TAX ACT, 1961

Section 115JB

MAT - Book profits under section 115JB - Disallowance of provision for warranty while computing book profits under section 115JB -

Assessee was engaged in business of manufacturing of Mahindra range of vehicles, agricultural tractors, implements, industrial engines, automotive pressings, industrial process control instruments, etc. AO had observed that assessee had made provision for warranty and in its tax audit report stated that the said provision was not contingent liability and constitute deductible expenditure since, the same represent the accounting estimate arrived at scientific empirical basis. Assessee submitted before AO that this provision was made on a scientific basis based on past history of assessee. AO did not agree to the contention of assessee and proceeded to disallow the sum both under normal provisions as well as under computation of book profits under section 115JB. Held: As far as disallowance made under normal provisions of the Act was concerned, ITAT had set aside the order to AO. There was absolutely no finding recorded by CIT(A) in his appellate order as to whether the provision was made on a scientific basis based on past history of assessee. Since the same issue was set aside to AO under normal provisions of the Act, it was fit and appropriate in the interest of justice and fair play to remand this ground also to AO as the decision in this case would be depending on the outcome of the decision taken by AO under normal provisions of the Act. Accordingly, matter was remanded back to AO for de novo adjudication in accordance with law.

Relied:M/s. Mahindra & Mahindra Ltd v. DCIT 2019 TaxPub(DT) 8129 (Mum-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2003-04

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