Estimated expenditure towards warranty is allowable

Supreme Court in the case of  Rotork Controls vs. CIT (Supreme Court) held that  Estimated expenditure towards warranty is allowable u/s 37 (1). The assessee sold valve actuators. At the time of sale, the assessee provided standard warranty that if the product was defective within the stated period, the product would be rectified or replaced free of charge. For AY 1991-92, the assessee made a provision for warranty at Rs.10,18,800 at the rate of 1.5% of the turnover. As the actual expenditure was only Rs. 5,18,554, the excess provision of Rs.5,00,246 was reversed and only the net provision w...