Principal Commissioner Of Income Tax 2 v. Hitachi Homes And Solutions (I) Ltd. ==========================================================

C/TAXAP/1238/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1238 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2VersusHITACHI HOMES AND SOLUTIONS (I) LTD.========================================================== Appearance:MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 09/10/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1.Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 18.04.2018 raising following question for our consideration: “Whether the Appellate Tribunal has erred in law and on facts by deleting the addition made by the Assessing Officer and confirmed by the CIT(A) of Rs.52,47,094/- by disallowing the expenses claimed by the assessee for provision of five year warranty?” 2.The sole issue raised by the Revenue is of a disallowance of a sum of Rs.52.47 lakhs made by the Assessing Officer which was confirmed by the Commissioner of Income Tax (Appeals) but deleted by the Tribunal. This issue arises this-wise. Respondent-assessee is engaged inter-alia in the business of manufacturing and selling of Air C/TAXAP/1238/2018 ORDER Conditioners and Air Conditioning System. On such supplies, the assessee provided five years warranty to the customer. For the assessment year 2001-02, the assessee had claimed such expenditure to the tune of Rs.52.47 lakhs on estimation basis. When questioned, the assessee pointed out that the assessee provided five year warranty. The estimate was based on number of compressors on such machines which failed every year in last five years. It appears that the assessee also produce data before the Revenue authorities of the failure ratio of assessment made in the assessment year 2008-09. 3.The Assessing Officer did not accept such explanation. Assessing Officer and Commissioner of Income Tax (Appeals) were of the opinion that letters produced were for the assessment year 2008-09 which would not be useful for the year under consideration. Assessee's contention that in the past, no such objection was raised was also not accepted. 4.In further appeal, the Tribunal by the impugned judgment, deleted the addition on the short ground of consistency. It was noticed that the assessee had been following the same pattern since years. No where in the past the Revenue had objected to such claim. 5.Quite apart from the Tribunal's observations on the issue of consistency which seem to be commencing, independently also we do not think that the disallowance was justified on merits. The assessee who was engaged in the business of manufacturing and selling air conditioned units would provide five year warranty to the customer. The expenditure was estimated on the basis of data of past five years of failure of the compressors which obviously in all air conditioned units would be the main concern. The principle of allowing expenditure on the basis of estimation which is derived through some scientific exercise, which in statistical terms used as actuary is well established. 6.In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J)