Eberspeacher Suetrak Bus climate Control Systems Private Limited Vs ACIT (ITAT Delhi)
Held that based on materiality concept, the amount of provision made, can’t be termed as unascertained liability, as the % for which provision is being made had been derived based on technical study, past experience of the company and the industrial standards.
Facts-
The appellant had debited expenses in P&L account, under the head “Provision for Warranty” amounting to Rs. 1,39,21,294/-. During the assessment proceedings, AO observed that the assessee has incurred expenses amounting to Rs. 95,33,176/- only on account of meeting the warranty obligations. The balance amount of Rs. 43,88,118/- which was debited in the P&L account purely on provisional basis has been treated as an unascertained liability. AO disallowed the same.
CIT(A) disallowed the same. According, being aggrieved appellant filed an appeal before ITAT.
Conclusion-
Held that based on materiality concept, the amount of provision made, can’t be termed as unascertained liability, as the % for which provision is being made had been derived based on technical study, past experience of the company and the industrial standards.
It is also pertinent to invite the attention to the fact that assessee has claimed the similar expenditure with the same accounting policy in following assessment years and the same have been accepted in the regular scrutiny assessments.
FULL TEXT OF THE ORDER OF ITAT DELHI
The Revenue filed letter of adjournment signed by the ITO of the Bench which has been rejected owing to the grounds taken up by the assessee.
The present appeal has been filed by the assessee against the order of the ld. CIT(A)-34, New Delhi, dated 28.03.2018, relating to AY 2013-14.
Provisions for warrantee charges.
2. At the outset it was argued that no addition has been made on this account in the orders passed u/s 143(3) for the Assessment Years 2016-17, 2017-18 and 2018-19. The assessee company had been assessed to Income Tax Act u/s 143(3) for the Asstt Year 2013-14, wherein addition of Rs.43,88,118/- had been made to the Returned Income on account of “provisions for Warrantee Charges”. The details of the warrantee charges, the additions, utilization/reversal over the period of eight years are as under:-
