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Case Law Details

Case Name : Acer India Pvt. Ltd. Vs. DCIT (ITAT Bangalore)
Appeal Number : ITA No. 784/Bang/2010
Date of Judgement/Order : 25/02/2011
Related Assessment Year : 2005- 06
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Acer India Pvt. Ltd. Vs. DCIT (ITAT Bangalore) – Provision for warranty stood crystallised as soon as the sale was made which a customer would like to be fulfilled within the warranty period and is at the cost of an assessee ‘Goodwill Therefore, the residual amount purported to have been held by the AO as an excess provision cannot be considered as a contingent provision and not an ascertained liability.
The warranty period continues beyond an year which fact was rightly considered by the ld. CIT(A) confining to the various decisions such as IBM India Ltd. (Supra) reported in 290 ITR (AT) 183 = (2007-TIOL-22- ITAT-Bang). Similar view has been taken by other coordinate Benches of the Tribunal therefore requires no further deliberation. In the light of the above, we hold the view that the decision of the ld. CIT(A) requires no further interference on the issue. The revenue’s appeal stands dismissed.
Interest income earned from deposits made for opening letter of credit with the banks for the purpose of availing credit facilities to carry on the business must be treated as income from business, since it has direct nexus with the business activity carried on by the industrial undertaking of the assessee firm.

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