COMMISSIONER OF INCOME-TAX Vs. DENSO KIRLOSKAR

JUDGEMENT

(1.) This appeal by the Revenue under section 260-A of the Income-tax Act, 1961 [for short 'the Act'] posing the following two substantial questions of law for answer reading as under:

(2.) The stand of the assessee was that the provision for warranty was made on the basis of estimating the same at 1.5% of the sales turnover of the year. From the amount of warranty provision made, the assessee would wait for two years against possible claims, meet the same if there are any and if there are none, balance amount will be taken as profit of the third year as warranty claim can arise only up to a period of two years from the date of sale.

(3.) The Assessing Officer had disallowed this amount of Rs. 74,56,682/- being of the opinion that it does not represent any expenditure incurred by the assessee. The Appellate Commissioner affirmed this view in the appeal of the assessee and in the further appeal of the assessee, the Tribunal reversed this finding and opined that the provision of this nature should be allowed as a revenue expenditure incurred during the financial year relevant for the assessment year.