Provision for warranty - disallowance

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Manjunatha.T.

Manjunatha.T. (Querist)
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26 September 2008 Please clarify, should provision for warranty be disallowed while computing income from business or profession ? If yes, under which Section ?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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26 September 2008 If the provision for warranty has been made on a substantiated claim it can not be disallowed.

Manjunatha.T.

Manjunatha.T. (Querist)
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26 September 2008 Dear Sir, What is substantiated claim

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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26 September 2008 There must be a claim from your customer on the basis of your warranty policy.

Manjunatha.T.

Manjunatha.T. (Querist)
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26 September 2008 If at the time of selling provision warranty is made based on the policy & if there is no claim during the period of warranty, the same will be reversed. In this case, will the provision made be allowed as deduction ?

Manjunatha.T.

Manjunatha.T. (Querist)
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S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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26 September 2008 One can not make provision merely on the basis of warranty policy, for, in such a case all the sales made will have to be provided for within the period of warranty! The provision can be made on the basis of claims received within the purview of warranty policy or debited on the basis of actual settlement (for the purposes of IT assessment).

Manjunatha.T.

Manjunatha.T. (Querist)
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26 September 2008 Thank you very much Sir.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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26 September 2008 You are welcome!

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