The Calcutta High Court confirmed the relief granted on account of unascertained liability, “Provision Warranty” which is Contingent in nature, thereby granting relief to Landis Gyr, the respondent.
The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961 which is directed against the order passed by the Income Tax Appellate Tribunal, (ITAT) Kolkata Bench (the Tribunal) in ITA No.524/Kol/2017 for the assessment year 2012-13.
The issue for consideration was whether on the facts and circumstances of the case and on law Learned Income Tax Appellate Tribunal was justified in granting relief of Rupees one lakh sixteen thousand to the assessee on account of an unascertained liability, “Provision for Warranty” which is Contingent in nature?
Soumen Bhattacharjee, Standing Counsel assisted for the appellant/revenue and Asim Choudhury advocate appeared for the respondent/assessee.
In the appeal the Department before the Tribunal objected to the allowability of provision for warranty on the ground that in the agreement the clause only mentioned about guarantee and there is no clause for warranty in the terms and conditions.
During the appellate proceedings the Tribunal has examined the relevant clause in the terms and conditions and found that the warranty clause is in-built in the guarantee clause itself as the assessee, in the event of any defective supply within a period of 5-1/2 years has to replace the meters and in the event of the meters not getting replaced, the assessee has to pay twice the cost of meters.
Therefore, the Tribunal on facts concluded that the assessee had agreed for both warranty (i.e., replacement of defective meters) as well as the guarantee (paying twice the cost of meters if meters are not replaced). Thus, the Tribunal was convinced on facts that the clause in the terms and conditions has an in-built warranty clause.
The High Court Bench of Acting Chief Justice TS Sivagnanam and Justice Hiranmay Bhattacharyya observed that “We are of the view that no substantial question of law arises on the said issue as the Tribunal has decided in favour of the assessee by returning ‘finding of fact’.”
The Court concluded by noting that the substantial question of law being entirely factual and the Tribunal having decided in favour of the assessee by returning a finding on fact, we are of the view that no such substantial questions of law arise for consideration.
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