ANIRUDDHA BOSE,J. - (1.) Revenue has come up with this appeal for admission against the concurrent findings of the Commissioner of Income Tax Appeals and the Income Tax Appellate Tribunal on the question of allow-ability of provisions for warranty expenses. Both these appellate authorities have decided the issue in favour of the assessee.
(2.) The assessee is engaged in the business of manufacture and marketing of control gears, motor controls centres, control panels and enclosures etc. For the two assessment years, 2006-07 and 2007-08, it had made provisions for warranty expenses of Rs. 1,50,43,597/- and Rs. 1,60,88,554/- It appears that this provision was made for anticipated expenditure of the assessee for subsequent years on discharging their warranty in respect of materials supplied to its customers. The assessing officer had disallowed claim for deduction of this expenditure mainly on the ground that no actual expense was incurred for the two financial years, that is, 2002-03 and 2003-04 in replacement of goods under warranty. In the assessment order of 2006-07, the assessing officer found that actual expenses incurred was about 5% of what had been debited in the books. Similar reasoning was given in the assessment order of 2006-07 while disallowing the same expenses.
(3.) Both the Commissioner and Tribunal however found that the accounting norms adopted by the assessee was proper as the provision of the warranty expenses was being made on the basis of past experience and had been computed in a systematic and scientific manner.;