The Commissioner Of Income Tax,Chennai v. M/S.amco Batteries Ltd.,803, Addison Building,Anna Salai,Chennai - 600 002

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 15.03.2021 The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Ms.Justice R.N.MANJULA Tax Case Appeal No.188 of 2021 The Commissioner of Income Tax,Chennai....Appellant Vs M/s.Amco Batteries Ltd.,803, Addison Building,Anna Salai,Chennai - 600 002....Respondent APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 22.12.2020 made in ITA.No.3155/Chny/2019 on thefile of the Income Tax Appellate Tribunal, Madras 'B' Bench,Chennai for the assessment year 2010-11 & against the order dt12/09/19 made in ITA.No.179/17-18/CIT(A)-4/AY 2010-11 & againstthe order dt-30/3/13 made in GIR/PAN AX-7131 on thefile of the Deputy(CIT)Company Circle-1(1) Chennai for theassessment year 2010-11 This appeal filed by the Revenue under Section 260A of theIncome Tax Act, 1961 ('the Act' for brevity) is directed againstthe order dated 22.12.2020 made in ITA.No.3155/Chny/2019 on thefile of the Income Tax Appellate Tribunal, Madras 'B' Bench,Chennai ('the Tribunal' for brevity) for assessment year 2010-11. 2. The Revenue has raised the following substantialquestions of law for consideration: https://hcservices.ecourts.gov.in/hcservices/ "1. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in allowing provisions for warranty,without appreciating the fact that the claimmade by the assessee was only aftercomparing the previous year records whichwas not done on a scientific basis? 2. Is not the reasoning and finding ofthe Tribunal bad by allowing provisions forwarranty which was exorbitantly high whencomparedwithhistoricaltrendofexpenditure incurred towards warranty in thepast and Assessee had not rationallyexplained the steep increase based on cogentevidence for supporting its claim? 3. Whether the Tribunal ought to haveapplied the decision of the Apex Court inthe case of Rotork Control Ltd Vs CITwherein it was clearly held that expenditurewas allowable provided the provisionscreated was to be scientifically establishedwhich is not the case on hand as no detailsnor evidences were produced by the Assesseeto substantiate its claim?" 3. We have heard heard Mrs.R.Hemalatha, learned SeniorStandingCounselfortheappellant-RevenueandMr.R.Vijayaraghavan, learned counsel for the respondent-assessee. 4. The short question involved in this appeal is whether theprovision made by the assessee has been done in a scientificmanner and whether it has followed the conditions stipulated bythe Hon'ble Supreme Court in the case of Rotork Controls IndiaPvt. Ltd. Vs. CIT [314 ITR 62]. 5. It is the submission of the learned Senior StandingCounsel appearing for the appellant that the Hon'ble DivisionBench of this Court in the case of Renowned Auto Products Mfrs.Ltd. Vs. ITO [(2013) 40 taxmann.com 13] had held that provisionwas made on an ad-hoc basis without adopting any scientificmethod contrary to the law laid down in the Hon'ble SupremeCourt in the case of Rotork Controls India Pvt. Ltd., anddismissed the appeal of the assessee. The learned counselfurther relied on the decision of this Court in the case of CITVs. Forbes Campbell Finance Ltd., wherein the Division Bench hadallowed the Revenue's Appeal. It is further submitted that inthe instant case also, there is no scientific basis adopted bythe assessee with regard to the provision made for the warrantyclaim. 6. Per contra, the learned counsel for the respondent-assessee would submit that the Tribunal had taken note of thedecision of the High Court of Karnataka at Bangalore inITA.No.400 of 2021 (CIT Vs. Amco Batteries Ltd.), dated25.08.2020, wherein the ratio adopted by the assessee was testedfor its correctness and whether it was on scientific basis andit was held that the assessee's provision was scientific and intune with the directions issued by the Hon'ble Supreme Court inRotork Controls India Pvt. Ltd. and the Tribunal in the impugnedorder has taken note of the decision of the High Court ofKarnataka and also held that the assessee has been consistentlyfollowing the same method and it is found to be scientific andas per the conditions laid down in Rotork Controls India Pvt.Ltd. 7. In reply, the learned Senior Standing Counsel for theappellant would contend that the decision of this Court in thecase of Renowned Auto Products (supra) would bind this Court andthe decision of the High Court of Karnataka will not be abinding precedent of this Court. 8. As a general proposition, the learned Senior StandingCounsel is right. However, the thin but marked difference isthat the decision of the High Court of Karnataka is in theassessee's own case in respect of the correctness of theprovision made by the assessee for warranty. 9. These transactions are identical and the assessee hasbeen consistently following the said method for severalassessment years, which has been noted by the High Court ofKarnataka as well as by the Tribunal in the impugned order. 10. Therefore, we are of the considered view that theTribunal and the CIT(A) rightly held that the assessee hadfollowed the scientific method and complied with the directionsissued by the Hon'ble Supreme Court in Rotork Controls IndiaPvt. Ltd. 11. For the above reasons, we find no good grounds tointerfere with the order passed by the Tribunal. Accordingly,the tax case appeal stands dismissed. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar hvk https://hcservices.ecourts.gov.in/hcservices/ To 1. The Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai Madras 'B' Bench, Chennai 2. The Commissioner of Income Tax, Chennai. Chennai. 3. The Deputy Commissioner of Income Tax, Company Circle-1(1), Chennai. Company Circle-1(1), Chennai. +1cc to Mr.T.Ravikumar, Advocate, S.R.No.16586 +1cc to Mr.Subbaraya Aiyar, Advocate, S.R.No.16598 TCA.No.188 of 2021 RSV(CO)KM(19/04/2021)