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Showing contexts for: Rotork controls in Ttk Prestige Ltd vs The Deputy Commissioner Of Income-Tax on 14 October, 2022Matching Fragments
10. Shri. Krishna has placed reliance on Rotork Controls India Pvt. Ltd., Vs. Commissioner of Income- Tax, Chennai5.
11. Shri. Sanmathi for the Revenue argued opposing the appeal and submitted that the CIT(A) has erred in allowing the appeal by considering the facts in assessment years 2013-14 to 2015-16. In substance, he submitted that the provision made for items other than pressure cookers and cookware, is not based on the warranty claims of previous years, Hence, the conditions prescribed in Rotork Controls, (2009)314 ITR 62 (SC) - paras - 27,28,29,30 are not fulfilled. Therefore, the ITAT has rightly allowed the appeal and remitted the matter to the Assessing Officer. With these submissions, he prayed for dismissal of these appeals.
12. We have carefully considered rival contentions and perused the records.
13. In Rotork Controls, it is held that a provision is a liability, which can be measured only by using a substantial degree of estimation and it is recognized when:
(a) an enterprise has a present obligation as result of past event;
(b) it is probable and an outflow of resources will be required to settle the obligation; and
(c) a reliable estimate can be made of the amount of obligation.
19. In para 27 of Rotork Controls, extracted hereinabove, it is held that when warranty costs are integral part of the sale price, then assessee has to provide for such warranty costs in its account for the relevant year, otherwise the matching concept fails.
20. The CIT(A) has passed a detailed order by recording the factual aspect of the case and considering the authorities on the point, where as, the ITAT has considered expenses incurred in incorrect A.Ys. Further, in our view, the ITAT has misconstrued the law laid down in Rotork.