INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Provision made for warranty expenses - Assessee pleaded that provision made for warranty expenses was on the basis of historical trend and past experience -

Assessee-company engaged in trading of Uninterrupted Power Supply (UPS) systems and accessories claimed deduction of provision made for warranty expenses. AO disallowed deduction on the ground that assessee had not provided basis for arriving provision created for warranty expenseds and details regarding computation of expenditure were not explained. Assessee pleaded that it had to provide after sale service to customers on each and every uninterrupted power supply sold in India for which assessee was to incur warranty expenses. Further, provision made for warranty expenses was on the basis of historical trend and past experience, and further said provision was made on scientific basis. Held: If provision made for warranty was on the basis of historical trend and past experience and further, there was scientific basis for making provision, then same was to be allowed as deduction. Issue was remanded to AO for verification.

Relied:Rotork Controls India (P) Ltd. v. CIT (2009) 314 ITR 62 (SC) : 2009 TaxPub(DT) 1730 (SC).

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 36(1)(va)

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