A provision is a liability which can be measured only by using a substantial degree of estimation

The assessee’s contention is that the provision made towards the non performance guarantee is more in the nature of warranty. Thus, the company assured quality and performance and on any shortfall agreed for damages making provision based on the performance capacity of the machineries supplied. Based on the materials available, on the assured capacity of the machinery and the quality of the product, the assessee had worked out the provision. Consequently, we do not find any ground to support the reasoning of the Commissioner of Income Tax (Appeals) which persuaded the Tribunal to reject ...