Holding

A warranty provision that meets the criteria of a present obligation, probable outflow, and reliable estimate is a provision deductible under Section 37 of the Income Tax Act, 1961.

Summary

Rotork Controls India (P) Ltd., a manufacturer of valve actuators, provided a standard warranty on its products and made a provision of 1.5% of turnover for anticipated warranty claims. The assessee claimed a deduction for the net provision under Section 37 of the Income Tax Act, 1961, which was disallowed by the Assessing Officer on the ground that the liability was merely contingent. The Tribunal allowed the deduction, but the Madras High Court reversed, holding that no present obligation existed at the date of sale. The Supreme Court held that the warranty provision satisfied the three criteria of a provision – a present obligating event, probable outflow of resources, and a reliable estimate – and therefore was deductible under Section 37. The Court set aside the High Court judgment, allowed the appeals of the assessee, and dismissed the Department’s appeals.

Issues considered

Whether a provision for warranty expenses, being a contingent liability, qualifies as a deductible expense under Section 37 of the Income Tax Act, 1961.
Whether the High Court erred in not applying the rule of consistency and the established principles on provisions.
Whether the warranty obligation constitutes a present liability arising from past events.

Legislation cited

Income Tax Act, 1961s. 10(2)(xv), s. 28, s. 30-36, s. 37, s. 40A(7)

Subjects

warranty provisioncontingent liabilitySection 37 deductionincome taxprovision accountingmatching conceptrule of consistencylarge volume manufacturingestimation of liability

Judgment

[2009] 8 S.C.R. 1152

A MIS. ROTORK CONTROLS INDIA (P) LTD.
v.
COMMISSIONER OF INCOME TAX, CHENNAI
(Civil Appeal Nos. 3506 - 3510 of 2009)
MAY 12, 2009
B
[S.H. KAPADIA AND AFTAB ALAM, JJ.)

Income Tax Act, 1961: s.37 - Provision for warranty -
Estimation of contingent liability - Manufacture and sale of
G large number of sophisticated product for long - Every year
some of the items found to be defective - Sale becoming
virtually impossible without warranty - Provision for warranty
made based on historical trend - Entitlement to deduction -
Held: Entitled - Such obligation arising from past events to
D be recognized as provisions.

Words and phrases: 'provision: 'liability', 'obligating event'
- Meaning of, in the context of Income Tax Act, 1961.
Appellant-assessee was manufacturing and selling
E Value Actuator. At the time of sale, the assessee .
company provided a standard warranty whereby in the
event the product sold becomes defective within a
specified period, the company would undertake to rectify
or replace the defective part free of charge. For the
F assessment year 1991-92, the assessee made a provision
for warranty @ 1.5% of the turnover. This provision was
made on account of warranty claims likely to arise on the
sales effected by the assessee and to cover up that
expenditure. The assessee made reversal of excess
G provision.

The assessee claimed deduction in respect of net
provision which was disallowed by the A.O. on the
ground that the liability was merely a contingent' liability
H 1152
'ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1153
OF INCOME TAX, CHENNAI
;

not allowable as a deduction under Section 37 of Income A
Tax Act, 1961. The decision was upheld by appellate
authority. On appeal, Tribunal held that right from the
assessment year 1983-84 the CIT (A) as well as the
Tribunal allowed the warranty claim on the ground that
Valve Actuators were sophisticated equipments; that in B
the course of its manufacture and sale a reasonable
warranty was given to the purchasers; that every item
of sale was covered by the warranty scheme; that no
purchaser was ready and willing to buy Valve Actuators
without warranty and consequently every item sold had C
a corresponding obligation under the warranty clause(s)
attached to such sales. Applying the Rule of
•· Consistency, the Tribunal held that the assessee on the
facts and circumstances of the case was entitled to
deduction under Section 37 of the 1961 Act in respect D
of provision for warranty.
The High Court held that the assessee was not
entitled to deduction in respect of the provision made for
warranty claims. Hence these appeals.
E
Allowing the appeals of assessee and dismissing
the appeals of Department, the Court
HELD: 1. A provision is a liability which can be
measured only by using a substantial degree of F
estimation. A provision is recognized when: (a) an
enterprise has a present obligation as a result of a past
event; (b) it is probable that an outflow of resources will
be required to settle the obligation; and (c) a reliable
estimate can be made of the amount of the obligation. If G
these conditions are not met, no provision can be
recognized. [Para 1O] [1167-B-D]
2. Liability is defined as a present obligation arising
from past events, the settlement of which is expected to
H
1154 SUPREME COURT REPORTS [2009] 8 S.C.R.

A result in an outflow from the enterprise of resources
embodying economic benefits. A past event that leads to
a present obligation is called as an obligating event. The
obligating event is an event that creates an obligation
which results in an outflow of resources. It is only those
B obligations arising from past events existing
independently of the future conduct of the business of
the enterprise that is recognized as provision. For a
liability to qualify for recognition there must be not only
present obligation but also the probability of an outflow
c of resources to settle that obligation. Where there are a
number of obligations, (e.g. product warranties or similar
contracts) the probability that an outflow will be required
in settlement, is determined by considering the said
obligations as a whole. In the case of a manufacture and
0 sale of one single item the provision for warranty could
·-
constitute a contingent liability not entitled to deduction
under Section 37 of the said Act. However, when there
is manufacture and sale of an army of items running into
thousands of units of sophisticated goods, the past
E event of defects being detected in some of such items
leads to a present obligation which results in an
enterprise having no alternative to settling that obligation.
In the present case, the appellant was manufacturing and
selling Valve Actuators. They were in the business from
F assessment years 1983-84 onwards. Valve Actuators are
sophisticated goods. Over the years appellant were
manufacturing Valve Actuators in large numbers. The
statistical date indicates that every year some of these
manufactured Actuators are found to be defective. The
G statistical date over the years also indicated that being
sophisticated item no customer is prepared to buy Value
Actuator without a warranty. Therefore, warranty became
integral part of the sale price of the Valve Actuator. In
other words, warranty stood attached to the sale price of
the product. These past events are known as obligating
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1155
OF INCOME TAX, CHENNAI

events. Therefore, warranty provisions. These past A
...,, • events are known as obligating events. Therefore,
warranty provision needs to be recognized because the
appellant is an enterprise having a present obligation as
a result of past events resulting in an outflow of
resources. Lastly, a reliable estimate can be made of the B
amount of the obligation. In short, all three conditions for
recognition of a provision are satisfied in this case. [Para
11 and 12) [1167 -D-H; 1168-A-F]

3. For determining an appropriate historical trend, it
is important that the company has a proper accounting
c
system for capturing relationship between the nature of

- the sales, the warranty provisions made and the actual
expenses incurred against it subsequently. Thus, the
decision on the warranty provision should be based on
', past eicperience of the company. A detailed asse~sment D
of the warranty provisioning policy is required particularly
if the experience suggests that warranty provisions are
generally reversed if they remained unutilized at the end
of the period prescribed in the warranty. Therefore, the
company should scrutinize the historical trend of E
warranty provisions made and the actual expenses
.. incurred against it. On this basis a sensible estimate
should be made. The warranty provision for the products
~ should be based on the estimate at year end of future
warranty expenses. Such estimates need reassessment F
.._ every year. As one reaches close to the end of the
warranty period, the probability that the warranty
expenses will be incurred is considerably reduced and
that sho!Jld be reflected in the estimation amount.
Whether this should be done through a pro rate reversal G
or otherwise would require assessment of historical
~

' trend. If warranty provisions are based on experience and
historical trend and if the working is robust then the
question of reversal in the subsequent two years, may not
H
1156 SUPREME COURT REPORTS (2009] 8 S.C.R.

A arise in a significant way. On the facts and circumstances
of this case, provision for warranty is rightly made by the '
<;
appellant-enterprise because it incurred a present
obligation as a result of past events. There is also an
outflow of resources. A reliable estimate of the obligation
B was also possible. Therefore, the appellant incurred a
liability, on the facts and circumstances of this case,
during the relevant assessment year which was entitled
to deduction under Section 37 of the 1961 Act. Therefore,
all the three conditions for recognizing a liability for the
c purposes of provisioning stands satisfied in this case. It
is important to note that there are four important aspects
of provisioning. They are - provisioning which relates to
present obligation, it arises out of obligating events, it
involves outflow of resources and lastly it involves
D reliable estimation of obligation. Keeping in mind all the
four aspects, this Court is of the view that the High Court
should not to have interfered with the decision of the
Tribunal. [Para 13) [1169-0-H; 1170-A-E]

4. The principle of estimation of the contingent
E liability is not the normal rule. It would depend on the
nature of business, the nature of sales, the nature of the
product manufactured and sold and the scientific method
~

of accounting being adopted by the assessee. It will also
..,,
depend upon the historical trend. It would also depend
F upon the number of articles produced. If it is a case of
single item being produced then the principle of
estimation of contingent liability on pro rata basis may not
apply. [Para 14] [1172-A-C]

G Indian Molasses Co. (Private) Ltd. v. Commissioner of
Income-tax, West Bengal - (1959) 37 ITR 66 (SC),
Distinguished.

Commissioner of Income-tax, Madras v. Indian Metal
' -
and Metallurgical Corporation (1964) 51 ITR 240; Shree
H
--<..

.. •

ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1157
OF INCOME TM<, CHENNAI

'1
Sajjan Mills Ltd. v. Commissioner of Income-tax, M.P., and A
Anr.(1985) 156 ITR 585 (SC); Commissioner of Inland
Revenue v. Mitsubishi Motors New Zealand Ltd. (1996) 222
ITR 697 (PC); Bharat Earth Movers v. Commissioner of
Income-tax (2000) 245 ITR 428 (SC); Mata/ Box Company
of India Ltd. v. Their Workmen (1969) 73 ITR 53 (SC); Madras B
Industrial Investment Corporation Ltd. v. Commissioner of
Income-tax (1997) 225 ITR 802 (SC), referred to .
•
Case Law Reference:

1959 37 ITR 66 (SC) distinguished Para 5 c
1964 51 ITR 240 referred to Para 5

1985 156 ITR 585 (SC) referred to Para 5
,
1996 222 ITR 697 (PC) referred to Para 6 D
2000 245 ITR 428 (SC) referred to Para 6
,1969 73 ITR 53 (SC) referred to Para 6

1997 225 ITR 802 (SC) referred to Para 14
E
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3506-10 of 2009.
_,,.
From the Judgment & Order dated 05.02.2007 of the High
Court of Judicature at Madras in T.C(A) Nos. 163 of 2003, 1
of 2004, 94 & 95 of 2004 and 565 of 2004.
F

With

C.A. 3511 of 2009, 3512 of 2009, 3513 of 2009, 3514 of 2009,
3515 of 2009, 3516 of 2009, .3517 of 2009, 3518 of 2009, G
3519 of 2009, 3520 of 2009, 3521 of 2009, 3522 of 2009,
, 3523 of 2009, 3524 of 2009.
S. Ganesh, V. Shekhar, K. Radhakrishnan, Vikas Singh
(NP), N. Venkatraman (NP), Pritesh Kapur, Radha
H

.r
1158 SUPREME COURT REPORTS [2009] 8 S.C.R.

A Rangaswamy, Navin Prakash, Vismai Rao, Arijit Prasad, C.V.
Subba Rao, Shweta Garg, Ashish Gopal Garg, A. Deb Kumar,
M. Khairaty, Y. Lokesh, B.V. Bairam Das, Kaanan Kapur, H.
Raghavendra Rao, Muthu Venkatraman, S. Nanda Kumar,
Achin Goel, R. Aravind, V.N. Raghupathy for the Appearing
B Parties.
The Judgment of the Court was delivered by

S. H. KAPADIA, J. 1. Delay condoned.

c 2. Leave granted.
FACTS IN THE LEAD MATIER
Civil Amieal Nos. of 2009 - Arising out of S.L.P.(C}
Nos.14178-14182 of 2007 - M/s. Rotork Controls India (P}
D Ltd. v. Commissioner of Income Tax1 Chennai.
3. In these civil appeals filed by the assessee we are
concerned with the assessment years 1991-92, 1992-93, 1993-
94 and 1994-95. For the sake of convenience we hereby refer
to the facts concerning assessment year 1991-92.
E
4. Appellant-company sells Valve Actuators. Bulk of the
sales is to BHEL. At the time of sale appellant (assessee)
provides a Standard Warranty whereby in the event of any
Beacon Rotork Actuator or part thereof becoming defective
F within 12 months from the date of commissioning or 18 months
from the date of despatch whichever is earlier, the company
undertakes to rectify or replace the defective part free of
charge. This warranty is given under certain conditions
stipulated in the warranty clause. For the assessment year
G 1991-92, the assessee made a provision for warranty at
Rs.10, 18,800/- at the rate of 1.5% of the turnover. This
provision was made by the assessee on account of warranty •
claims likely to arise on the sales effected by the appellant and
to cover up that expenditure. It may be noted that since the
H provision made was for Rs.10, 18,800/- which exceeded the

~ '
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1159
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]

actual expenditure, the appellant reversed Rs.5,00,246 as A
'1
Reversal of Excess Provision. Consequently, the assessee
claimed deduction in respect of the net provision of
Rs.5,18,554/-which was disallowed by the A.O. on the ground
that the liability was merely a contingent liability not allowable
as a deduction under Section 37 of the Income-tax Act, 1961 B
("the 1961 Act", for short). This decision was upheld by CIT (A).
The matter was carried in appeal to the Tribunal by the
• appellant. It was held by the Tribunal that right from the
assessment year 1983-84 the CIT (A) as well as the Tribunal
had allowed the warranty claim(s) on the ground that Valve c
Actuators are sophisticated equipments; that in the course of

-
'
manufacture and sale of Valve Actuators a reasonable warranty
was given to the purchasers; that every item of sale was
covered by the warranty scheme; that no purchaser was ready
, and willing to buy Valve Actuators without warranty and D
consequently every item sold had a corresponding obligation
under the warranty clause(s) attached to such sales. This has
been the view of the Department and the Tribunal right from
assessment year 1983-84. In fact the Department allowed
deduction on the above facts constituting normal trading E
practice. For example, during the assessment year 1983-84 the
total sales during the year was Rs.1,45,36,599/- and in that year
... the appellant had earmarked 1% of the total sales towards the
warranty claims which it would have to meet. This amount
provided for was held to be reasonable having regard to the F
anticipated liability which was discharged in the subsequent
year. From that year onwards it has been consistently held that
looking to the nature of the business and the nature of the
product manufactured and sold it was necessary for warranty
clause to be attached to the sales effected by the appellant and
G
that the warranty obligations constituted an integral part of the
" sales effected during the' year. All throughout this period
between assessment year 1983-84 and assessment year
1991-92, the Tribunal took the view that the provision made by
the appellant was realistic. Applying the Rule of Consistency,
H
1160 SUPREME COURT REPORTS [2009] 8 S.C.R.

A the Tribunal held that the assessee on the facts and
circumstances of the case was entitled to deduction under
Section 3·7 of the 1961 Act in respect of provision for warranty
amounting to Rs.5, 18,554. At this stage one point needs to be
emphasized. During the assessment year 1983-84 to
B assessment year 1991-92 there was one instance when the
Tribunal disallowed the warranty claim that was in the
assessment year 1985-86. The reason was in that year the
assessee had not adjusted the excess out of the provision to
the expense of the immediate following year and as a result
c the Closing Balance of the Provision Account was found to be
swelling up from year to year. In other words, during that year
reversal was not effected. That is not the position during the
assessment years 1991-92, 1992-93, 1993-94 and 1994-95.
Accordingly, for the assessment year 1991-92, the appellant
o herein succeeded before the Tribunal. Aggrieved by the
decision of the Tribunal, the Department carried the matter in
appeal to the Madras High Court vide Tax Case Appeal No.163
of 2003 etc. Those appeals were for all the assessment years
1991-92, 1992-93, 1993-94 and 1994-95. By common
E judgment dated 5.2.07, the High Court held that the assessee
was not entitled to deduction in respect of the provision made
for warranty claims. It was held that no obligation was ever cast
on the date of the sale and consequently there was no accrued
liability. According to the impugned judgment, the liability had
F not crystalised on the date of the sale and, therefore, appellant
was not entitled to deduction in respect of the provision made
for warranty charges payable under the terms of sale. According
to the impugned judgment, warranty provision was made
against the li~bility which had not crystalised against the
G appellant a11li consequently it was a provision made for an
unascertained .'ability and, therefore, the appellant was not
entitled to claim deduction under Section 37 of the 1961 Act.
The case of the DepartfT'lent was accepted by the High Court,
hence these civil appea. are filed by the assessee.
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1161
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]

~
CONTENTIONS A
_,
5. On behalf of the Department Mr. V. Shekhar, learned
. senior counsel, submitted that provision for warranty is towards
unforeseen liability, which is not certain nor it could be foreseen
with precision in the relevant year, hence, claim of warranty as
B
well as liability in respect thereof was contingent. Being
contingent, deduction as expense(s) was :iot available.
According to learned counsel, Section 37 of the 1961 Act does
' not refer to "making of provision" it only refers to "deduction
permissible on account of actual expenditure incurred". In other
words, according to learned counsel, Section 37 does not refer
c
to anticipated claims. According to learned counsel, in this case
the liability is contingent. The goods sold may be defective or
they may not be defective and, therefore, warranty provision was
made only to earn goodwill and stay in business. According to
• learned counsel, warranty is only an assurance about the quality D
of the product sold. The obligation to satisfy the claim in the
warranty clause would depend upon factors, namely, whether
the product was used in the manner required or whether the
buyer was responsible for causing defect. In the alternative,
learned counsel submitted that whether the liability for which E
provision is made was based on any scientific study is required
.... to be examined before allowing deduction under Section 37 of
the 1961 Act. Lastly, learned counsel urged that the amount
which is provided for or kept apart cannot be held to be
expenditure, actually incurred and consequently deduction is not F
admissible. Learned counsel submitted that in each case one
has to find out whether there is an element of certainty that the
liability would occur. In each case one has to ascertain whether
there is any scientific data or material produced by the
assessee about the liability incurred in the past and in the G
,, absence of such a data assessee was not entitled to deduction
for warranty provision in its books of accounts. According to
learned counsel, merely because the assessee is maintaining
its account on mercantile basis, it cannot claim that the provision
made towards warranty is an accrued liability. According to H
1162 SUPREME COURT REPORTS [2009] 8 S.C.R.

A learned counsel, accounting treatment will not decide whether
the warranty claim is actual liability, accrued liability or
~
._
contingent liability. Since in the relevant year there was no claim
for replacement of the defective pieces, the assessee could not
have claimed deduction by merely making an entry in its books
B of accounts or by making a mere provision in its books of
accounts. In this connection, learned counsel placed reliance
on the judgment of the Madras High Court in the case of
Commissioner of Income-tax, Madras v. Indian Metal and
Metallurgical Corporation - (1964) 51 ITR 240. Learned
c counsel also placed reliance on the judgments of the Supreme
Court in the case of Indian Molasses Co. (Private) Ltd. v.
Commissioner of Income-tax, West Bengal - (1959) 37 ITR
66 (SC) and Shree Sajjan Mills Ltd. v. Commissioner of
Income-tax, M.P., and Anr. - (1985) 156 ITR 585 (SC).
D 6. Mr. S. Ganesh, learned senior counsel, appearing on •
.behalf of the assessee, submitted that in this case the High
Court had erred in not following the Rule of Consistency. In this
connection, it was urged that right from assessment year 1983-
84 upto assessment year 1991-92, the Tribunal had come to
E the conclusion that Valve Actuators were sophisticated items;
that, the appellant has been following scientific method of
accounting which included the concept of "reversal"; that ...
looking to the nature of business and the nature of the product
the appellant was entitled under the Commercial Accounting
F Principles to create provisions for warranty and accordingly the
appellant was entitled to deduction under Section 37 of the
1961 Act. According to learned counsel, for the assessment
years in question, the Tribunal has accordingly followed its
earlier view which has prevailed right from assessment year
G 1983-84 and it has, therefore, directed deletion of the
disallowance of Rs.5, 18,554/- for the assessment year 1991- ...
92. While explaining the concept of"reversal", learned counsel
pointed out that 1.5% of total sales of Rs.1 crore (amounting
to Rs; 1.50 lakhs) was taken by the appellant as a provision for
H warranty claims in its balance-sheet by debiting its profit and
· ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1163
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]
loss account and by crediting the provision for warranty claims A
in the balance-sheet. This is in the first year. In the second year
Rs.1.50 lakhs which was the provision for first year was brought
forward by way of Opening Balance of the Provision Account
in the Ledger Account. If expenditure incurred in the second
year was not Rs.1.50 lakhs but only Rs.1 lakh then such actual B
expenditure of Rs.1 lakh alone was debited to the Provision
Account which, as stated above, had the Opening Balance of
Rs.1.5 lakhs and accordingly in the second year Rs.50,000/-
was taken to the credit of profit and loss account and offered
for tax. In other words, in the year in which the provision made c
by the appellant exceeded actual expenditure by Rs.50,000/-
the same was offered for tax as income. In other words, there
was reversal to the extent of Rs.50,000/- in the second year.
This is the example of reversal. According to learned counsel,
the concept of "reversal" forms part of scientific method of 0
accounting which is being followed by the assessee from the
assessment year 1983-84 onwards right upto assessment year
1991-92, 1992-93, 1993-94 and 1994-95. While overruling the
judgment of the Tribunal, the High Court has failed to notice this
important aspect of reversal. According to learned counsel, if E
one applies the concept of "reversal" which has been applied
in the present case, there is no escapement of income from
~ assessment and the entire exercise would be revenue neutral.
Learned counsel placed reliance on the judgment of the Privy
Council in the case of Commissioner of Inland Revenue v.
Mitsubishi Motors New Zealand Ltd. - (1996) 222 ITR 697 F
(PC). Learned counsel also placed reliance on the judgments
of the Supreme Court in the case of Bharat Earth Movers v.
Commissioner of Income-tax - (2000) 245 ITR 428 (SC) and
Metal Box Company of India Ltd. v. Their Worl<men - (1969) G
73 ITR 53 (SC).
7. Learned counsel next submitted that assuming for the
sake of argument that the liability for warranty claim is a
contingent liability, the amount claimed by the appellant as
deduction was still allowable if deduction claimed is equal to H
1164 SUPREME COURT REPORTS (2009] 8 S.C.R.

A the war~(!nty expenses actually incurred and the deductibility of
such expenses viewed over a number of years is beyond doubt.
In this connection, learned counsel urged that if having regard
to surrounding circumstances of the appellant's business as a
whole, a certain item of expenditure is bound to incur year after
s year in different degrees then the business liability has definitely
arisen and such liability cannot be considered as contingent
liability.

8. It was next urged that under Section 145 of the 1961
C Act, as it stood prior to 1997, the income of the appellant had
to be determined on the basis of method of accounting followed
by the appellant year to year and that method could be departed
from by the A.O. only if it was in a position to give a finding
that the correct income was incapable of being determined on
the basis of the assessee's impugned method of accounting.
D As stated above, from assessment year 1983-84 the appellant,
according to learned counsel, has been making provision for
Wdrranty claims consistently at the rate of 1.5% of its total sales
turnover and from 1987 appellant has introduced in its accounts
the concept of "reversal" of excess provision which has been
E accepted by the Department right upto assessment years in
question. According to learned counsel, there is no finding in
the order of the A.O. for the assessment years in question
saying that the method of accounting of the appellant was
incapable of income determination. In the circumstances,
F learned counsel submitted that the High Court had erred in
reversing the decision of the Tribunal.
Relevant Provisions of Law:
9. We quote herinbelow relevant provisions of the lncome-
G tax Act, 1961 as it stood at the material time:
"General
37. (1) Any expenditure (not being expenditure of the nature
described in Section 30 to 36 [***] and not being in the
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1165
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]

nature of capital expenditure or personal expenses of the A
.... " assessee), laid out or expended wholly and exclusively for
the purposes of the business or profession shall be
allowed in computing the income chargeable under the
head "Profits and gains of business or profession".
B
Expenses or payments not deductible in certain
circumstances

40A.(7)(a) Subject to the provisions of Clause (b), no
deduction shall be allowed in respect of any provision
(whether called as such or by any other name) made by c
the assessee for the payment of gratuity to his employees
,._ .. on their retirement or on termination of their employment
for any reason

-. (b) Nothing in Clause (a) shall apply in relation to: D
(i) any provision made by the assessee for the purpose
of payment of a sum by way of any contribution towards
an approved gratuity fund, or for the purpose of payment
of any gratuity, that has become payable during the
previous year; E

.. (ii) any provision made by the assessee for the previous
year relevant to any assessment year commencing on or
c after the 1st day of April, 1973, but before the 1st day of
April, 1976, to the extent the amount of such provision F
does not exceed the admissible amount, if the following
conditions are fulfilled, namely:
(1) the provision is made in accordance with an
actuarial valuation of the ascertainable liability of the
assessee for payment of gratuity to his employees G
,... I
on their retirement or on termination of their
employment for any reason;
(2) the assessee creates an approved gratuity fund
for the exclusive benefit of his employees under an H
1166 SUPREME COURT REPORTS [2009) 8 S.C.R.

A irrevocable trust, the application for the approval of
the fund having been made before the 1st day of
January, 1976; and
""
....
(3) a sum equal to at least fifty per cent of the
admissible amount, or where any amount has been
B
utilised out of such provision for the purpose of
payment of any gratuity before the creation of the
approved gratuity fund, a sum equal to at least fifty
per cent of the admissible amount as reduced by
the amount so utilised, is paid by the assessee by
c way of contribution to the approved gratuity fund
before the 1st day of April, 1976, and the balance
of the admissible amount or, as the case may be,
the balance of the admissible amount as reduced
---
by the amount so utilised, is paid by the assessee
D by way of such contribution before the 1st day of
April, 197?:
Explanation 1.-For the purposes of sub-clause (ii) of
clause (b) of this sub-section, "admissible amount" means
E the amount of the provision made by the assessee for the
payment of gratuity to his employees on their retirement
or on termination of their employment for any reason, to
~

the extent such amount does not exceed an amount
calculated at the rate of eight and one-third per cent of the
F salary [as defined in clause (h) of rule 2 of Part A of the
Fourth Schedule] of each employee entitled to the payment
of such gratuity for each year of his service in respect of
which such provision is made.
Explanation 2.-For the removal of doubts, it is hereby
G declared that where any provision made by the assessee
for the payment of gratuity to his employees on their
retirement or on termination of their employment for any
~
-
...
reason has been allowed as a deduction in computing the
income of the assessee for any assessment year, any sum
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1167
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]
paid out of such provision by way of contribution towards A

-" an approved gratuity fund or by way of gratuity to any
employee shall not be allowed as a deduction in computing
the income of the assessee of the previous year in which
the sum is so paid."
B
FINDINGS:

10. What is a provision? This is the question which needs
to be answered. A provision is a liability which can be
measured only by using a substantial degree of estimation. A
provision is recognized when: (a) an enterprise has a present c
obligation as a result of a past event; (b) it is probable that an
.,. '
outflow of resources will be required to settle the obligation; and
(c) a reliable estimate can be made of the amount of the
obligation. If these conditions are not met, no provision can be
,, recognized. D

11. Liability is defined as a present obligation arising from
past events, the settlement of which is expected to result in an
outflow from the enterprise of resources embodying economic
benefits. E
12. A past event that leads to a present-obligation is called
as an obligating event. The obligating event is an event that
creates an obligation which results in an outflow of resources.
It is only those obligations arising from past events existing
independently of the future conduct of the business of the F
enterprise that is recognized as provision. For a liability to
qualify for recognition there must be not only present obligation
but also the probability of an outflow of resources to settle that
obligation. Where there are a number of obligations (e.g.
product warranties or similar contracts) the probability that an G
outflow will be required in settlement, is determined by
considering the said obligations as a whole. In this connection,
it may be noted that in the case of a manufacture and sale of
one .single item the provision for warranty could constitute a
contingent liability not entitled to deduction under Section 37 H
1168 SUPREME COURT REPORTS [2009) 8 S.C.R.

A of the said Act. However, when there is manufacture and sale
of an army of items running into thousands of units of
sophisticated goods, the past event of defects being detected
in some of such items leads to a present obligation which
)o

-
results in an enterprise having no alternative to settling that
B obligation. In the present case, the appellant has been
manufacturing and selling Valve Actuators. They are in the
business from assessment years 1983-84 onwards. Valve
Actuators are sophisticated goods. Over the years appellant
has been manufacturing Valve Actuators in large numbers. The
c statistical data indicates that every year some of these
manufactured Actuators are found to be defective. The
statistical data over the years also indicates that being
,
sophisticated item no customer is prepared to buy Valve
~

Actuator without a warranty. Therefore, warranty became integral )""'

D part of the sale price of the Valve Actuator(s). In other words,
warranty stood attached to the sale price of the product. These
aspects are important. As stated above, obligations arising
from past events have to be recognized as provisions. These
past events are known as obligating events. In the present case,
E therefore, warranty provision needs to be recognized because
the appellant is an enterprise having a present obligation as a
result of past events resulting in an outflow of resources. Lastly,
a reliable estimate can be made of the amount of the obligation. •
In short, ~II three conditions for recognition of a provision are
F satisfied in this case.
13. In this case we are concerned with Product Warranties.
To give an example of Product Warranties, a company dealing
in computers gives warranty for a period of 36 months from the
date of supply. The said company considers following options
G : (a) account for warranty expense in the year in which it is
~
incurred; (b) it makes a provision for warranty only when the
'
...
customer makes a claim; and (c) it provides for warranty at 2%
of turnover of the company based on past experience (historical
trend). The first option is unsustainable since it would
H tantamount to accounting for warranty expenses on cash basis,
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1169
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]
,,. which is prohibited both under the Companies Act as well as A
by the Accounting Standards which require accrurl concept to
be followed. In the present case, the Department is insisting
on the first option which, as stated above, is erroneous as it
rules out the accrual concept. The second option is also
inappropriate since it does not reflect the expected warranty B
costs in respect of revenue already recognized (accrued). In
other words, it is not based on matching concept. Under the
matching concept, if revenue is recognized the cost incurred
to earn that r~venue including warranty costs has to be fully
provided for. When Valve Actuators are sold and the warranty c
costs are an integral part of that sale price then the appellant
has to provide for such warranty costs in its account for the
relevant year, otherwise the matching concept fails. In such a
case the second option is also inappropriate. Under the
circumstances, the third option is most appropriate because it D
fulfills accrual concept as well as the matching concept. For
determining an appropriate historical trend, it is important that
the company has a proper accounting system for capturing
relationship between the nature of the sales, the warranty
provisions made and the actual expenses incurred against it E
subsequently. Thus, the decision on the warranty provision
should be based on past experience of the company. A detailed
assessment of the warranty provisioning policy is required
particularly if the experience suggests that warranty provisions
are generally reversed if they remained unutilized at the end of
F
the period prescribed in the warranty. Therefore, the company
should scrutinize the historical trend of warfanty provisions
made and the actual expenses incurred against it. On this basis
a sensible estimate should be made. The warranty provision
for the products should be based on the estimate at year end
G
of future warranty expenses. Such estimates need
./
reassessment every year. As one reaches close to the end of
the warranty period, the probability that the warranty expenses
will be incurred is considerably reduced and that should be
reflected in the estimation amount. Whether this should be done
H
1170 SUPREME COURT REPORTS [2009] 8 S.C.R.

A through a pro rata reversal or otherwise would require
assessment of historical trend. If warranty provisions are based
,
on experience and historical trend(s) and if the working is robust
then the question of reversal in the subsequent two years, in
the above example, may not arise in a significant way. In our
B view, on the facts and circumstances of this case, provision for
warranty is rightly made by the appellant-enterprise because it
has incurred a present obligation as a result of past events.
There is also an outflow of resources. A reliable estimate of
the obligation was also possible. Therefore, the appellant has
c incurred a liability, on the facts and circumstances of this case,
during the relevant assessment year which was entitled to
deduction under Section 37 of the 1961 Act. Therefore, all the
three conditions for recognizing a liability for the purposes of
provisioning stands satisfied in this case. It is important to note
D that there are four important aspects of provisioning. They are
- provisioning which relates to present obligation, it arises out
of obligating events, it involves outflow of resources and lastly
it involves reliable estimation of obligation. Keeping in mind all
the four aspects, we are of the view that the High Court should
not to have interfered with the decision of the Tribunal in this
E
case.
14. In this case the High Court has principally gone by the
judgment of the Supreme Court in the case of Shree Sajjan
Mills (supra). That was the case of gratuity. For the assessment
F year 1974-75 the assessee-company sought to deduct a sum
of Rs.18,37,72'7/- towards the amount of gratuity payable to its
employees and worked out actuarially. No provision was made
for Rs.18,37,727/-. The claim for deduction was made on the
ground that the liability stood ascertained by actuarial valuation
G and, therefore, was deductible under Section 37 of the 1961
Act. The ITO allowed the deduction only in respect of the '- -.
amounts actually paid by the assessee and the rest was
disallowed on the ground of non-compliance with the provisions
of Section 40A(7) of the 1961 Act. This view of the ITO was
H affirmed by CIT(A). The Tribunal held that for the earlier
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1171
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]

assessment year relating to 1973-74, actuarially ascertained A
.'\. "' liability for gratuity arising under Payment of Gratuity Act, 1972
,.
was an allowable deduction. However, for the assessment year
in question, the Tribunal held that the increased liability claimed
by the assessee for deduction was allowable on general
principles of accounting. This view was taken by the Tribunal B
on the basis that the actuarially determined liability was not
~ provided for in the assessee's books of account. In appeal by
' the Department, the High Court held that the assessee was not
entitled to deduction without complying with the provisions of
Section 40A(7) of the 1961 Act. This view of the High Court c
was affirmed by this Court. It was held that Section 40A(7)
which stood inserted by Finance Act, 1975 w.e.f. 1.4.73 has
been given an overriding effect over Section 28 as well as
Section 37 of the 1961 Act. Consequently, the deduction
allowable on general principles was ruled out as Section 40A(1) D
made it clear that Section 40A had effect notwithstanding
anything contained in Sections 30 to 39 of the 1961 Act. In other
words, as regards deduction in respect of gratuity, the
assessee was required to comply with the provisions of Section
40A(7) after Finance Act, 1975. It is interesting to note that E
prior to 1.4.73 actual payment or provision for payment was
eligible for deduction either under Section 28 or under Section
.J 37 of the 1961 Act. This has been reiterated in Shree Sajjan
'· Mills (supra). The position got altered only after 1.4.73. Before
that date, provision made in the P & L Account for the estimated F
present value of the contingent liability properly ascertained and
discounted on an accrued basis could be deducted either under
Section 28 or Section 37 of the 1961 Act. This has been
explained in Shree Sajjan Mills (supra) at page 599. Section
--'• 40A(7) deals only with the case of gratuity. Even in the case of
G
---1 gratuity but for insertion of Section 40A(7), provision made in
_>•
--<
-' the P & L Account on the basis of present value of the
contingent liability properly ascertained and discounted on an
accrued basis was entitled to deduction either under Section
28 or under Section 37 of the said Act. This aspect, therefore,
H
1172 SUPREME COURT REPORTS [2009] 8 S.C.R.

A indicates that the present value of the contingent liability like
}
the warranty expense, if properly ascertained and discounted
<
on accrued basis, could be an item of deduction under Section
37 of the said Act. This aspect is not noticed in the impugned
judgment. We may add a caveat. As stated above, the principle
B of estimation of the contingent liability is not the normal rule.
As stated above, it would depend on the nature of business,
the nature of sales, the nature of the product manufactured and ~
sold and the scientific method of accounting being adopted by
the assessee. It will also depend upon the historical trend. It
c would also depend upon the number of articles produced. As
stated above, if it is a case of single item being produced then
the principle of estimation of contingent liability on pro rata basis
may not apply. However, in the present case, it is not so. In the
present case, we have the situation of large number of items
D being produced. They are sophisticated goods. They are
supported by the historical trend, namely, defects being
detected in some of the items. The data also indicates that the
warranty cost(s) is embedded in the sale price. The data also
indicates that the warranty is attached to the sale price. In the
E circumstances, we hold that the principle laid down by this
Court in the case of Metal Box Company of India (supra) will
apply. In that case this Court held that contingent liabilities
discounted and valued as out-of-necessity could be taken into •
account as trading expenses if these were capable of being
F valued. It was further held that an estimated liability even under
a gratuity scheme even if it was a contingent liability if properly
-
ascertainable and if its present value stood fairly discounted,
was deductible from the gross profits while preparing the P &
L Account. In view of this decision it became permissible for
,__

...
an assessee to provide, in his P & L Account, for the estimated
G
liability under a gratuity scheme by ascertaining its present
value on accrued basis and claiming it as an ascertained ~

liability to be deducted in the computation of profit and gains
of the previous year either under Section 28 or under Section
37 of the 1961 Act. However, the above principle would not
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1173
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]

apply after insertion of Section 40A(7) w.e.f. 1.4.73. It may be A
stated that the principles of commercial accounting, mentioned
above, formed the basis of the judgment of this Court in the
case of Metal Box Company of India (supra) and those
principles are affirmed by the judgment of the Supreme Court
in Shree Sajjan Mills (supra) upto 1.4.73. In this case we are B
concerned with warranty claims. In respect of warranty claims
_,, during the relevant assessment years in question there is no
provision similar to Section 40A(7) of the 1961 Act. We may
add that the above principle of commercial accounting in Metal
Box Company of India (supra) also find place in the judgment c
of this Court in the case of Madras Industrial Investment
~ Corporation Ltd. v. Commissioner of Income-tax - (1997) 225
ITR 802 (SC), in which the Court has explained the meaning of
the word "expenditure" in Section 37 of the 1961 Act. In other
words, the principle enunciated in Metal Box Company of India D
(supra) which has been reiterated in Shree Sajjan Mills (supra)
(upto 1.4. 73) which deals with making of provision on the basis
of estimated present value of contingent liability holds good
during the assessment years in question qua warranty claims.
15. Before concluding, we may refer to the judgment of this E
Court in the case of Indian Molasses Co. (supra). In that case
• the facts were as follows:

"One John Bruce Richard Harvey was the managing
director of the assessee company in 1948. He had by then F
served the company for 13 years, and was due to retire at
the age of 55 years on September 20, 1955. There was,
it appears, an agreement by which the company was under
an obligation to provide a pension to Harvey after his
retirement. On September 16, 1948, the eompany executed G
,, a trust deed in favour of three trustees to whom the
company paid a sum of Pound 8,208-19-0 (Rs. 1,09,643)
and further undertook to pay annually Rs. 4,364 (Pound
l
~ 326.14 sh.) for six consecutive years, and the trustees
agreed to execute a declaration of trust. The trustees H
1174 SUPREME COURT REPORTS [2009] 8 S.C.R.

A undertook to hold the said sums upon trust to spend the
same in taking out a deferred annuity policy with the
Norwich Union Life Insurance Society in the name of the
trustees but on the life of Harvey under which Pound 720
per annum were payable to Harvey for life from the date
8 of his superannuation. It was also provided in the deed that
notwithstanding the main clause the trustees would, if so
desired by the assessee company, take out instead a
deferred longest life policy, with the said insurance
company in their names, but in favour of Harvey and Mrs.
c Harvey for an annuity of Pound 558-1-0 per annum payable
during their joint lives from the date of Harvey's
superannuation and during the lifetime of the survivor,
provided further that if Harvey died before he attained the
age of 55 years the annuity payable to Mrs. Harvey would
D be Pound 611-12-0 during her life. It was further provided
that should Harvey die before attaining the age of 55 years,
the trustees would stand possessed of the capital value of
the deferred annuity policy, upon trust to purchase therewith
an annuity for Mrs. Harvey with the above insurance
E company or other insurance company of repute. The other
conditions of the deed of trust need not be considered,
because they do not bear upon the controversy.
In furtherance of these presents, the trustees took out
a policy on January 12, 1949. In addition to conditions usual
F in such policies, it provided for the following benefits:
Amount per annum of Pound 563-5-8 p.a. if both Mr.
deferred annuity. and Mrs. Harvey be living on
September 20, 1955.
G Pound 720-0-0 p.a. if Mrs.
Harvey should die before
September 20, 1955, leaving
Harvey surviving her. Pound
645-0-0 p.a. if Harvey should
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1175
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]
die before _September 20, A
1955, leaving Mrs. Harvey
surviving him.

There was a special provision which must be reproduced:

"Provided the contract is in force and unreduced, the B
_, grantees (i.e., the trustees) shall be entitled to surrender
the annuity on the option anniversary (i.e., September 20,
1955), for the capital sum of Pound 10, 169 subject to
written notice of the intention to surrender being received
~~Y the directors of the society within the thirty day c
preceding the option anniversary."
Two other clauses of the Second Schedule of the policy
may also 0e quoted :

-'
"(Ill) If both the nominees shall die whilst the contract D
remains in force and unreduced and before the option
anniversary the said funds and property of the society shall
be liable to make repayment to the grantees of a sum
equal to a return to all the premiums which shall have been
paid under this contract without interest after proof thereof E
.and subject as hereinbefore provided.
(IV) The grantees shall before the option anniversary and
after it has acquired a surrender value be entitled to
surrender the contract for a cash payment equal to return F
of all the premiums (at the yearly rate) which have been
paid less the first year's premium or five per cent of the
capital sum specified in the special provision of the First
Schedule whichever shall be the lesser sum, provided that
if the deferred annuity has been reduced an equivalent
G
reduction in the guaranteed surrender value as calculated
,; above will be made."
The assessee company paid the initial sum and the
yearly premia for some years before Harvey died. In the
assessment years 1949-50, 1950- 51, 1951-52 and H
1176 SUPREME COURT REPORTS [2009] 8 S.C.R.

A 1952-!>3, it claimed a deduction of these sums from its ,.
profits or gains under section 10(2) (xv) of the Indian
Income-tax Act (hereinafter called the Act), which provides

"Such profits or gains shall be computed after making the
8
following allowances, namely :-

any expenditure (not being in the nature of capital
expenditure or personal expenses of the assessee) laid
out or expended wholly and exclusively for the purposes
c of such business, profession or vocation."

This claim was disallowed by the Department and
the Appellate Tribunal. The Tribunal held that it was not
necessary to decide if the expenditure was wholly or
0 exclusively for the purposes of the company's business,
and if so, whether it was of a capital nature, because in
the Tribunal's opinion there was no expenditure at all. The
reason why the Tribunal held this way may be stated in its
own words:
E "ClausE~s (I) and (II) do not contain any provision having a
material bearing upon clause (Ill). Therefore, if it happens
that both Mr. and Mrs. Harvey die before 20th September,
1955, all the payments till then made through the trustees
.to the Insurance Society will come back to the trustees
F and, as there is not the slightest trace of any indication
anywhere that the trustees should have any beneficial
interest in these moneys there would be a resultant trust
in favour of the company in respect of the moneys thus far
paid out. In other words, what has been done amounts to
G a provision for a contingency which may never arise. Such
a provision can hardly be treated as payment to an
employee whether of remuneration or pension or gratuity,
and cannot be a proper deduction against the incomings
of the business of the company for the purpose of
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1177
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.)
computing its taxable profits. In short, there has been no A
expenditure by the company yet; there has been only an
allocation of a part of its funds for an expenditure which
may (or may not) have to be incurred in future."

16. The question which arose for determination was : B
whether during the assessment years 1949-50, 1950-51, 1951-
52 and 1952-53 the assessee-company was entitled to claim
,. deduction of the yearly premium from its profits under Section
10(2)(xv) of the Income-tax Act, 1922. It was held that the
provision in the policy for surrendering annuity and the provision
in policy for return of premium was not entitled to deduction as
c
the payment made to the trustees by the assessee-company
was towards a contingent liability or towards a liability
depending on a contingency, namely, the life of a human-being.
It was held that putting aside of money which may become
.> D
expenditure on the happening of an event is not an expenditure
under Section 10(2)(xv) of the 1922 Act. It was held on facts
that the money was placed in the hands of trustees and/or the
insurance company to purchase annuities, if required, but to be
returned if the annuities were not purchased. Therefore, it was
a case of setting apart of the money and consequently the
E
-l
assessee was not entitled to deduction under the said section.
..;
17. At this stage, we once again reiterate that a liability is
a present obligation arising from past events, the settlement of
which is expected to result in an outflow of resources and in F
respect of which a reliable estimate is possible of the amount
of obligation. As stated above, the case of Indian Molasses
Co. (supra) is different from the present case. As stated above,
in the present case we are concerned with an army of items of
sophisticated (specialiased) goods manufactured and sold by G
the assessee whereas the case of Indian Molasses Co.
(supra) was restricted to an individual retiree. On the other hand,
the case of Metal Box Company of India (Supra) pertained to
an army of employees who were due to retire in future. In that
case the company had estimated its liability under two gratuity H
1178 SUPREME COURT REPORTS [2009] 8 S.C.R.

A schemes and the amount of liability was deducted from the
gross receipts in the profit and loss account. The company had
worked out its estimated liability on actuarial valuation. It had
made provision for such liability spread over to a number of
years. In such a case it was held by this Court that the provision
B made by the assessee-company for meeting the liability
incurred by it under the gratuity scheme would be entitled to
deduction out of the gross receipts for the accounting year
during which the provision is made for the liability. The same
principle is laid down in the judgment of this Court in the case
c of Bharat Earth Movers (supra). In that case the assessee
company had formulated leave encashment scheme. It was
held, following the judgment in Metal Box Company of India
(supra), that the provision made by the assessee for meeting
the liability incurred under leave encashment scheme
D proportionate with the entitlement earned by the employees, was '·
entitled to deduction out of gross receipts for the accounting
year during which the provision is made for that liability. The
principle which emerges from these decisions is that if the
historical trend indicates that large number of sophisticated
E goods were being manufactured in the past and in the past if
the facts established show that defects existed in some of the
items manufactured and sold then the provision made for
>·
warranty in respect of the army of such sophisticated goods
would be entitled to deduction from the gross receipts under
F Section 37 of the 1961 Act. It would all depend on the data
systematically maintained by the assessee. It may be noted that
in all the impugned judgments before us the assessee(s) has
succeeded except in the case of Civil Appeal Nos. of 2009 -
Arising out of S.L.P.{C) Nos.14178-1.4182 of 2007 - Mis.
G Rotork Controls India (P) Ltd. v. Commissioner of Income Tax,
Chennai, in which the Madras High Court has overruled the \.
decision of the Tribunal allowing deduction under Section 37
of the 1961 Act. However, the High Court has failed to notice
the "reversal" which constituted part of the data systematically
maintained by the assessee over last decade.
H
ROTORK CONTROLS INDIA (P) LTD. v. COMMISSIONER 1179
OF INCOME TAX, CHENNAI [S.H. KAPADIA, J.]

18. For the above reasons, we set aside the impugned A
~
judgment of the Madras High Court dated 5.2.07 and
accordingly the civil appeals stand allowed in favour of the
assessee with no order as to costs.

Civil Appeal No. of 2009 - Arising out of S.L.P. (C)
B
No.7490 of 2009

Civil Appeal No. of 2009 - Arising out of S.L.P. (C)
1'
No.5616 of 2009

Civil Appeal No. of 2009 -Arising out of S.L.P. (C) No. of c
2009 (SLP(C) ......... CC No.4633 of 2009)

Civil Appeal No. of 2009 -Arising out of S.L.P. (C) No.722
of 2009 Civil Appeal No. of 2009 - Arising out of S.L.P. (C)
No.723 of 2009 Civil Appeal No. of 2009 -Arising out of S.L.P.
J (C) No.4776 of 2009 Civil Appeal No. of 2009 -Arising out of D
S.L.P. (C) No.3440 of 2009 Civil Appeal No. of 2009 -Arising
out of S.L.P. (C) No.4182 of 2009 Civil Appeal No. of 2009 -
Arising out of S.L.P. (C) No.4183 of 2009 Civil Appeal No. of
2009 -Arising out of S.L.P. (C) No.4184 of 2009 Civil Appeal
No. of 2009 - Arising out of S.L.P. (C) No.8983 of 2009 Civil E
Appeal No. of 2009 -Arising out of S.L.P. (C) No.8982 of 2009

Civil Appeal No. of 2009 - Arising out of S.L.P. (C)
No.8311 of 2009
F
Civil Appeal No. of 2009 -Arising out of S.L.P. (C) No. of
2009 (SLP(C) ......... CC No.5279 of 2009)

19. For the reasons given hereinabove in Civil Appeal
Nos. of 2009 - Arising out of S.L.P.(C)
Nos.14178-14182 of 2007 - Mis. Rotork Controls India (P) Ltd. G
v. Commissioner of Income Tax, Chennai, the civil appeals
filed by the Department stand dismissed with no order as to
costs.

D.G. Appeals disposed of.
H