Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs M/S. Goodyear India Ltd., Haryana on 6 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'C ' NEW DLEHI
BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
I.T.A. No.6187/Del/2014
Assessment Year: 2005-06
Asstt. Commissioner of Income-tax vs M/s Goodyear India Ltd.
Circle -12(1), New Delhi. Ballabhgarh, Faridabad,
Haryana.
(PAN:AAACG3511H)
(Appellant) (Respondent)
Appellant by: Shri S.R. Senapati, Sr. DR
Respondent by: S/Shri Neeraj Jain & Gaurav Jain
Date of hearing: 27.03.2018
Date of Pronouncement: 06.04.2018
ORDER
PER K. NARASIMHA CHARY, JM
Aggrieved by the order dated 3.9.2014 in Appeal No.287/08-09 passed by the learned Commissioner of Income-tax(A)-XXIX, New Delhi, {for short "ld.CIT(A)"), revenue preferred this appeal.
2. The assessee M/s Goodyear India Limited, is engaged in the business of manufacture and sale of automotive tyres, tubes and flaps and other industrial rubber products. For the Asstt. Year 2005-06, they have filed their return of income on 31.3.2005 declaring 'Nil' income after setting off the brought forward 2 business loss/depreciation of RS.10,40,10,743/-. In so far this appeal is concerned, what is relevant is that the AO found that the assessee made a provision for warranty claims amounting to Rs.1,20,00,000/- and holding it to be a contingent liability, he disallowed the same. In appeal, learned CIT(A) placed reliance on the decision reported in the case of Rotork Controls India Ltd. vs CIT, 223 CTR 425 (SC) and holding that the obligation of the assessee under warranty is the result of a past event and the outflow of resources are probable to settle the obligation and a reliable estimate was made to meet such an obligation. On this premise, learned CIT(A) directed the AO to delete this addition.
3. Challenging such finding, revenue preferred this appeal stating that the learned CIT(A) committed an error. It is argued by the learned DR that there is no scientific basis for the assessee to make such a provision.
4. Per contra, it is the argument of the learned AR that keeping in view the probable outflow of resources that are required to meet the obligation in the current year, on a realistic estimate the assessee made the provision and it was rightly allowed by the learned CIT(A). Further, in assessee's own case the Tribunal had taken a consistent view in favour of the asssessee on this aspect right from the year 2006-07 to 2011-12, while placing reliance on the decisions of the Hon'ble Apex court in the case of Rotork Control India Ltd. vs CIT, 223 CTR 425 (SC) and of the Hon'ble jurisdictional High Court in CIT vs Whirlpool of India 242 CTR 245.
5. We have gone through the record in the light of the submissions on either side. At the outset, it is brought to our notice that is similar question had arisen for consideration in assessee's own case in respect of the assessment years 2006- 07 in ITA No. 4360/del/2010, in respect of assessment years 2007-08 to 2009-10 in ITA No. 5650/del/2011 and batch and in respect of assessment years 2010-11 and 2011-12 in ITA No. 1516/del/2015 and such appeals are disposed of by orders dated 14/12/2012, 29/04/2016 and 22/01/2018 respectively, holding this issue in favour of the assessee.
6. We have gone through the orders of the coordinate benches of this tribunal referred by the learned counsel for the assessee. In all these matters the 3 coordinate benches dealt with this issue at length and ultimately placing reliance on the decision of the Hon'ble apex court in Rotork controls India Ltd versus CIT 214 idea 62 and the decision of the Hon'ble jurisdictional High Court in the case of CIT versus Whirlpool of India 242 CTR 245 and held that the liability of the assessee for provision for warranty for replacement on account of manufacturing defects, arises at the time of sale and is to be allowed as deduction in that year on the basis of rationale/scientific estimate, notwithstanding that the exact amount of liability is ascertained at a later date. It was further found that the action of the assessee in creating provision for warranty in this set of circumstances is also in consonance with the above decision.
7. In the impugned order also Ld. CITA placed reliance on the decision of the Hon'ble apex court in Rotork controls India Ltd (supra) and found that there was an obligation on the part of the assessee which had arisen from the sales and for meeting such an obligation it was necessary to create the provision and the decision of the Hon'ble apex court in Rotork Controls India limited (supra) is applicable to the facts of the case. This finding of the learned CIT(A) is fitting in the view consistently taken by the Tribunal in assessee's own case quite for a longtime.
8. Having regard to the consistent view taken in respect of the creation of provision permitting the warranty obligation by the assessee, by the Tribunal we find it difficult to hold that the impugned order is in any way illegal or irregular or that the same should be interfered with. With this view of the matter we uphold the finding of the Ld. CITA and find the appeal is devoid of merits. Appeal therefore fails and is, accordingly, dismissed.
9. In the result, the appeal of the revenue is dismissed.
Order pronounced in the Open Court on 6th April, 2018.
Sd/- sd/-
(PRASHANT MAHARISHI) (K. NARASIMHA CHARY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: April, 2018/'VJ'
4
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A) By order
5. DR, ITAT
Asstt. Registrar, ITAT