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1 - 7 of 7 (0.27 seconds)Section 37 in The Income Tax Act, 1961 [Entire Act]
Section 37 in The Companies Act, 1956 [Entire Act]
M/S. Rotork Controla India (P) Ltd vs Commnr. Of Income Tax, Chennai on 12 May, 2009
7. We have carefully considered all the relevant facts of the case.
The assessee has made a detailed submission which goes to show that
working of the impugned provision is being made consistently over
several years on certain percentage of sale turnover. Considering the
nature of business of the assessee manufacturing certain medical
implements, providing for warranty is nothing unusual in any manner.
The authorities below have not tried to examine the whole issue in a
correct perspective but have merely gone on the prejudiced view that
any item classified as provisions is contingent in nature. Nothing has
been brought on record to demonstrate that the provision figures
worked out by the assessee are whimsical and ad hoc and have nothing
to do with the business structure of the assessee but a ploy to reduce its
tax liability. We may examine the case of the assessee in the light of ratio
decidendi laid down in the landmark judgment in the case of Rotork
Controla India (P) Ltd vs Commnr. Of Income Tax(supra) in
which the Hon'ble Supreme Court gave the judgment in favor of the
assessee and allowed deduction of the provision of warranty provided
that the provision has been developed through a scientific methodology
Page |9
ITA No. 2621/Mum/2025
A.Y. 2021-22
Agappe Diagnostics Limited, Mumbai
and is not arbitrarily made for. The Hon'ble Supreme Court explained
as to what a provision on the following lines is:
Dy.C.I.T., Bangalore vs Lenovo India Pvt. Ltd.,, Bangalore on 31 March, 2017
5.5 The assessee has also place reliance on certain judicial
decisions in this regard i.e. Rotork Controls India Private Limited Vs
Commissioner of Income Tax Chennai (supra),Principal Commissioner
of Income Tax, Bangalore Vs Lenovo India (P) Ltd (433 ITR 177,
Karnataka HC, 2021),Principal Commissioner of Income Tax Vs Nokia
India (P) Ltd (98 taxmann.com 415, Delhi HC, 2018),Champ Energy
Ventures (P) Ltd Vs Income Tax Officer Ward-1(2), Pune (102
taxmann.com 374-2019), Grundfos Pumpas India Ltd. Vs Deputy
Commissioner of Income Tax, Company Circle II(2) Chennai (98
taxmann.com 396).
Engineering Analysis Centre Of ... vs The Commissioner Of Income Tax on 2 March, 2021
Ltd. v. CIT (supra), the warranty provision was not based on the
said historical/empirical data or not. The hon'ble Court has recognised
the right to deduction of warranty provision holding that the provision is
not against a contingent liability, if the present value is ascertained
properly and discounted on accrual basis. It is deductible under section
37 of the Act. The provision will depend upon the nature of business,
nature of sales, nature of product manufactured and sold and the
scientific method of accounting adopted by the assessee, besides the
historical trend in the quantum of articles produced and sold. The Court
also held that the fact that it would involve a substantial degree of
estimation should make no difference to the character of the provision.
Principal Commissioner Of Income Tax -6 vs M/S Nokia Siemens Network India P. Ltd on 5 December, 2022
5.5 The assessee has also place reliance on certain judicial
decisions in this regard i.e. Rotork Controls India Private Limited Vs
Commissioner of Income Tax Chennai (supra),Principal Commissioner
of Income Tax, Bangalore Vs Lenovo India (P) Ltd (433 ITR 177,
Karnataka HC, 2021),Principal Commissioner of Income Tax Vs Nokia
India (P) Ltd (98 taxmann.com 415, Delhi HC, 2018),Champ Energy
Ventures (P) Ltd Vs Income Tax Officer Ward-1(2), Pune (102
taxmann.com 374-2019), Grundfos Pumpas India Ltd. Vs Deputy
Commissioner of Income Tax, Company Circle II(2) Chennai (98
taxmann.com 396).
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