The assessee was engaged in the business of supplying suspension systems to the motor industry. The Assessing Officer made a disallowance of Rs. 3,96,03,899 on account of “provision for warranty”. The Commissioner (Appeals) confirmed the addition holding that there was no need for the assessee to incur such expenditure in the absence of any policy or method to quantify the expenditure. On appeal ITAT held, that conditions were specified for invocation of the warranty by consumers. The assessee had a policy for payments towards the warranty expenses. By the end of the year, the assessee had created provision to the tune of Rs. 97.5 crores out of which about Rs. 81.72 crores was already incurred by the assessee. The sum of Rs.3,96,03,899 was calculated based on the policy adopted by the company. This policy had not been found erroneous by the authorities in any forum. The unutilised provision was carried forward to the subsequent years by maintaining the opening and closing balances. Therefore, the warranty expenses were deductible. The assessee had been maintained this method in principle over the years and it was not disturbed conclusively. (AY. 2011-12)