M/s.Apollo Tyres Ltd, Cochin V. The DCIT, Cochin

ITA 35/COCH/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3891 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 06-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: SALIL KAPOOR MS ANANYA KAPOOR
• Keywords: Capital asset; Depreciation; Transfer pricing; Business expenditure; Rectification of order; Opportunity of being heard; International transaction; Additional depreciation; Initiation of penalty proceedings; Revised return; Revenue expenditure; Capital expenditure
• Section: 14A; 115JB; 37; 12; 144

Judgement Text

ITA NO 35/COCH/2017 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH KOCHI BEFORE S/ SH RI ABRAHAM P GEORGE , A M & GEORGE GEORGE K, JM ITA NO 35/COCH/2017 ( A SST YEAR 2012 - 13 ) M/S APOLLOTYRES LTD 3 RD FLOOR INCOME TAX AREEKAL MANSION NEAR MANORAMA JUNCTION PARAMPILLY NAGAR KOCHI 682 036 VS THE DY COMMR OF INCOME TAX CIRCLE 1(1) KOCHI ( APPELLANT) (RESPONDENT) PAN NO. AAACA6990Q ASSESSEE BY SH SALIL KAPOOR/MS ANANYA KAPOOR REVENUE BY SH SHANTAM BOSE, CIT - DR DATE OF HEARING 25 MAY 2017 DATE OF PRONOUNCEMENT 24 TH JULY 2017 OR D ER PER ABRAHAM P GEORGE, AM; THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 31.3.2017 OF DY COMMR OF INCOME TAX, CORPO RATE RANGE - 1 KOCHI ON 25.1.2017, P URSUANT TO DIRECTIONS OF DISPUTE RESOLUTION PANEL ( D RP ) U/S 1 44 C OF THE I T ACT , 1961 . 2 A SSESSEE HAS ALTOGE THER RAISED 19 GROUNDS. OF THESE, G ROUND NOS. 1, 3, 16, 17 ARE GENERAL IN NATURE AND NO SPECIFIC ADJUDICATION IS REQUIRED. HOWEVER, IT HAS TO BE MENTIONED THAT ASSESSEE HAS A GRIEVANCE REGARDING DISALLOWANCE OF A DEDUCTION OF RS. 4,87,20,504/ - CLAIMED BY IT U/S 80IA OF THE I T ACT THOUGH ALLOWED BY DRP WHICH, AS ITA NO 35/COCH/2017 2 PER ITS PLEADINGS, ARE COVERED BY THE GENERAL GROUNDS. GROUND NO.18 OF THE ASSESSEE ON LEVY OF INTEREST U/S 234B, C & D OF THE ACT IS CONSEQUENTIAL IN NATURE. GROUND NO.19 IS AGAINST INITIATION OF PENALTY PROCEEDINGS U /S 271(1) C ) AND 271 AA OF THE ACT , ARE PREMATURE IN NATURE. OUT OF THE OTHER EFFECTIVE GROUNDS , 4 & 11 ARE ON ISSUES CONNECTED TO MINIMUM ALTERNATIVE T AX (MAT) AND THESE WILL BE DEALT WITH SEPARATELY. OTHER GROUNDS RELATING TO CORPORATE TAX ARE TAKEN FIRST FOR ADJUDICATION . 3 VIDE ITS GROUND NO.2 , ASSESSEE IS AGGRIEVED THAT THE ASSESSING OFFICER WHILE COMPUTING ITS INCOME HAD STARTED WITH THE INCOME OF RS.3,96,40,290/ - DECLARED BY IT IN THE ORIGINAL RETURN IGNORING THE INCOME OF RS. 1,67,86,870/ - DECLARED BY IT IN A REVISED RETURN . LD AR SUBMITTED THAT ASSESSEE WHICH WA S ENGAGED IN THE BUSINESS OF MANUFACTURE AND S ALE OF AUTOMOTIVE TYRES , HAD FILED TWO RETURN S OF INCOME FOR THE IMP UGNED ASSESSMENT YEAR ON THE SAME DAY. AS PER THE LD AR, ASSESSEE HAD FILED A RETURN DECLARING TOTAL INCOME OF RS.3,96,40,290 / - AND ANOTHER RETURN DECLARING TOTAL INCOME OF RS. 1,67,86,870/ - ON 26 TH NOV 2012. CONTENTION OF THE LD AR THAT BOTH THESE R ETURNS WERE ACKNOWLEDGED BY ASSESSING OFFICER IN THE ASSESSMENT ORDER. HOWEVER,, ACCORDING TO HIM, WHILE COMPUTING THE INC OME, LD AO HAD STARTED WITH INCOME SHOWN IN THE ORIGINAL RETURN. AS PER THE LD A R , ASSESSEE DID NOT RAISE A GROUND IN THIS REGARD BE FORE DRP; BUT STILL THE ISSUE BEING CLEAR FROM RECORD AND NEEDING NO SPECIFIC DEBATE HAS TO BE CONSIDERED BY THE TRIBUNAL . PER CONTRA, LD DR SUBMITTED THAT THE ASSESSEE HAVING NOT RAISED ANY GROUND BEFORE THE DRP IT COULD NOT BE CONSIDERED AT THIS STAGE. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ASSESSING OFFICER HAS ACKNOWLEDGED IN THE ASSESSMENT ORDER THAT ASSESSEE HAD FILED ITA NO 35/COCH/2017 3 TWO RETURNS ON 26.11.2012 , ONE DECLARING INCOME OF RS.1,67,86,870/ - AND ANOTHER DECLARING INCOME OF RS. 3,96,40,290/ - . HOWEVER, OUT OF THESE WHICH ONE WAS THE REVISED RETURN WHICH WAS THE ORIGINAL RETURN , IS NOT CLEAR FROM THE ASSESSMENT ORDER. FURTHER, THE SUMMARIZED GROUNDS OF OBJECTIONS BEFORE DRP PLACED AS ANNEX URE TO PAPER BOOK NO.1 OF THE ASS ESSEE , DOES NOT SHOW ANY SUCH OBJECTIONS HAVING BEEN RAISED BEFORE THE DRP. NEVERTHELESS , IN OUR OPINION , FOR THE CORRECT COMPUTATION OF INCOME , IT IS REQUIRED TO START FROM THE INCOME SHOWN IN THE REVISED RETURN OF INCOME , FILED BY THE ASSESSEE , ONCE IT IS ACKNOWLEDGED THAT SUCH A RETURN IS ON RECORD. AT THE SAME TIME, IT IS ALSO IMPERATIVE FOR ASSESSING OFFICER TO VERIFY WHAT WERE THE DIFFERENCE S BETWEEN THE DECLARED INCOME AS PER THE ORIGINAL RETURN AND DECLARED INCOME AS PER THE REVISED RETURN AND M AKE ENQUIRIES AS TO WHAT PROMPTED SUCH DIFFERENCE . HE HAS TO VERIFY WHETHER THERE ARE ANY ITEMS , WHICH WERE MISSED OUT WHILE DOING THE ASSESSMENT, AND IF SO, HE HAS TO CONSIDER IT. IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT THE ASSESSING OFF ICER SHALL ASCERTAIN THE REASONS FOR THE DIFFERENCE IN THE INCOME RETURNED IN BETWEEN THESE TWO RETURNS , AND PROCEED IN ACCORDANCE WITH LAW. GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 5 VIDE GROUND NO.5, ASSESSEE IS AGGRIEVED O N A DISALLOWANCE OF PRE OPERATIVE EXPENSES OF RS. 21,67,95,249/ - . 6 LD AR FOR THE ASSESSEE SUBMITTED THAT THE ABOVE EXPENSE S WERE INCURRED FOR SETTING UP NEW UNIT S AT CHENNAI AND BARODA. AS PER THE LD AR JUST BECAUSE SUCH EXPENSE WAS SHOWN AS PRE - O PER ATIVE IN NATURE AND CAPITALIS E D AS PART OF WORK - IN - ITA NO 35/COCH/2017 4 PROGRESS IN ITS BOOKS WOULD NOT BE A REASON TO DISALLOW IT S CLAIM . ACCORDING TO THE LD AR ENTRIES IN THE BOOKS WERE NOT DETERMINATIVE FOR DECIDING THE ISSUE S ON TAXATION. FURTHER, AS PER THE LD AR, EXPEN SE COMPRISED OF SALARIES, WAGES, BONUS, TRAVELLING, CONVEYANCE, VEHICLE EXPENSES, RENT, POWER AND FUEL ETC., WHICH WERE ALL REVENUE IN NATURE AND HAD TO BE ALLOWED. ACCORDING TO HIM, AT THE BEST WHAT C OULD BE CAPITALIZED WAS ONLY INTEREST PAID ON BORROWAL S TAKEN FOR ACQUIRING NEW ASSETS. FURTHER, A CCORDING TO THE LD AR, THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2010 - 11 AND 2011 - 12 ( ITA NO S . 223/COCH/2015 AND 189/COCH/201 6 DATED 10.1.2017 ) HAD CONSIDERED THE VERY SAME ISSUE AND DE CIDED IT IN FAVOUR OF THE ASSESSEE. PER CONTRA, LD DR SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT EXPENSES AGGREGATING TO RS. 26,97,79,538/ - WAS I NCURRED B Y THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2010 - 11 , AND CLAIMED AS PRE - OPERATIVE REVENUE EXPENDITURE. ASSESSEE HAD ARGUED THAT THESE WERE INCURRED FOR EXPANSION OF ITS EXISTING BUSINESS OF MANUFACTURE OF TYRES AND ALLOWABLE FOR TAX PU RPOSES. IN THE SAID YEAR ALSO , IT WAS DISALLOWED BY THE LD AR AS PRE - OPERATIVE IN NATURE. B REAKUP OF THE EXPENSES FOR THE PREVIOUS YEAR RELEVANT TO ASST YEAR 2010 - 11 READ AS UNDER: PARTICULARS AMOUNT (RS/MILLION) RAW MATERIAL CONSUMED 33.86 SALARIES, WA GES AND BONUS 114.98 ITA NO 35/COCH/2017 5 CONTRIBUTION TO PROVIDENT AND OTHER FUNDS 5.97 WELFARE EXPENSES 26.12 RENT 4.10 TRAVELLING, CONVEYANCE AND VEHICLE EXPENSES 17.27 POSTAGE, TELEX TELEPHONE AND STATIONERY 1.57 POWER AND FUEL 38.21 INSURANCE 8.69 MISCELLANEOUS EX PENSES 19.01 TOTAL 269.78 BREAKUP OF EXPENSES FOR THE IMPUGNED ASSESSMENT YEAR READ AS UNDER: PARTICULARS AMOUNT (RS/MILLION) RAW MATERIAL CONSUMED 78.44 SALARIES, WAGES AND BONUS 71.14 CONTRIBUTION TO PROVIDENT AND OTHER FUNDS 4.45 WELFARE EXPENSES 13.12 RENT 2.12 TRAVELLING, CONVEYANCE AND VEHICLE EXPENSES 11.05 POSTAGE, TELEX TELEPHONE AND STATIONERY 0.24 POWER AND FUEL 17.91 ITA NO 35/COCH/2017 6 INSURANCE 6.80 LEGAL & PROFESSIONAL EXPENSES 247 MISCELLANEOUS EXPENSES 9.05 TOTAL 216.79 8 A COMPARISON OF THE E XPENDITUR E , SHOW THAT MANY OF THE EXPENDITURE INCURRED DURING THE RELEVANT PREVIOUS YEAR WERE SIMILAR TO THE EXPENDITURE INCURRED FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2010 - 11. ON ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010 - 11,T HIS TRIBUNAL HAD HELD AS FOLLOWS: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THE PRESENT ASSESSMENT YEAR, THE FACTS REVEAL THAT NO PLANT OR MACHINERY HAS BEEN ACQUIRED BY THE APPELLANT COMPANY FOR THE UNIT UNDER CONSIDERATION AND THERE WAS NO CO NSTRUCTION WORK CARRIED OUT AT THE PLANT. THE EXPENSES DISALLOWED IN THE IMPUGNED ORDER HAVE NOT RESULTED IN THE ACQUISITION OF A CAPITAL ASSET. THE APPELLANT HAS AVERRED THAT THE BUSINESS ORGANIZATION, THE ADMINISTRATION AND THE FUNDS OF BOTH THE EXISTING AS WELL AS THE NEW PLANT IN CHENNAI ARE THE SAME AND CONTROLLED BY COMMON MANAGEMENT OF THE APPELLANT COMPANY. IT WAS FURTHER SUBMITTED THAT COMMON BOOKS OF ACCOUNTS ARE MAINTAINED AND ALSO THE EXISTING AS WELL AS THE NEW UNIT IS ENGAGED IN THE MANUFACTUR ING OF TYRES. THE SAID FACTUAL SCENARIO HAS NOT BEEN DISPUTED BY THE A.O. OR THE DRP. THIS CLEARLY SHOWS THAT THE EXPENDITURE INCURRED WAS FOR EXPANSION OF AN ALREADY EXISTING BUSINESS AND NOT FOR SETTING UP A NEW BUSINESS. SECTION 37 PROVIDES FOR DEDUCTIO N OF EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF AN ASSESSEE PROVIDED THAT THE EXPENDITURE SHOULD NOT BE IN THE NATURE OF A CAPITAL EXPENDITURE. IN THE PRESENT CASE, THE EXPENSES BY ITS VERY NATURE ARE REVENUE EXPENSES LIKE S ALARY, TRAVELING, CONVEYANCE, PROVIDENT FUND, POSTAGE ETC. 10. IN THE CASE OF CIT VS. SAKTHI SUGARS LTD. (339 ITR 400), THE HON'BLE MADRAS HIGH COURT HELD AS UNDER: - 34. FROM THE ABOVE DECISIONS THE TEST FOR IDENTIFYING AN EXPENDITURE AS TO WHETHER IT I S A REVENUE EXPENDITURE OR CAPITAL EXPENDITURE CAN BE STATED AS UNDER ( 1 ) IF THE AMOUNT SPENT WAS FOR THE PURPOSE OF BRINGING INTO EXISTENCE A NEW ASSET OR OBTAINING A NEW ADVANTAGE, IT WOULD BE A CAPITAL EXPENDITURE. ITA NO 35/COCH/2017 7 ( 2 ) IF ON THE OTHER HAND, IT IS NOT MADE FOR THE PURPOSE OF BRINGING INTO EXISTENCE ANY SUCH ASSET OR ADVANTAGE BUT FOR RUNNING THE BUSINESS OR WORKING IT WITH O VIEW TO PRODUCE THE PROFITS, IT IS O REVENUE EXPENDITURE. ( 3 ) FOR INSTANCE IF THE INTEREST PAID WAS IN RESPECT OF THE ASSET, WHICH WAS ACQUIRE D ON AN OUTRIGHT BASIS THAN IT WAS INTIMATELY LINKED WITH THE VALUE OF THE ASSET. THAT DETERMINES THE CHARACTER OF THE EXPENDITURE AND IT WAS CAPITAL IN NATURE. KEEPING THE ABOUT TESTS IN MIND, WHEN WE EXAMINE THE CASE ON HAND, THE VARIOUS KINDS OF EXPENDI TURES RELATING TO THE SUM OF 6,84,78,570/ - , THE DETAILS OF WHICH HAVE BEEN MENTIONED IN PARAGRAPHS 19 AND 20, DISCLOSE THAT ALL THOSE EXPENDITURES WERE INCURRED IN THE RELEVANT YEARS FOR THE PURPOSE OF MANUFACTURE OF SUGAR IN THE RESPECTIVE FACTORIES WITH A VIEW TO EARN PROFITS AND THEREFORE THEY ARE NOTHING BUT REVENUE EXPENDITURE ONLY. IN OTHER WORDS, ALL EXPENSES WHICH WERE INCURRED BY WAY OF SALARIES, WAGES, BONUS, PROVIDENT FUND CONTRIBUTION, WORKMEN WELFARE EXPENSES, POWER, FUEL AND WATER, MANUFACTURI NG EXPENSES, RENT FOR OFFICE BUILDING ETC., WERE ALL EXPENSES WHICH WERE INCURRED FOR THE PURPOSE OF RUNNING OF THE BUSINESS AND IT CANNOT BE HELD TO BE BY WAY OF INVESTMENT. IN FACT THERE WAS NO DISPUTE THAT WHATEVER INVESTMENTS MADE FOR BARAMBA UNIT AND DHENKANAL UNIT WERE CAPITALISED AND WERE NEVER CLAIMED BY WAY OF REVENUE EXPENDITURE.' 11. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRIYA VILLAGE ROADSHOWS, 332 ITR 594 OBSERVED AS UNDER: - '10. A HARMONIOUS READING OF THE AFORESAID TWO JUDGMENT S OF THIS COURT, NAMELY, TRIVENI ENGG. WORKS LTD. (SUPRA) ON THE ONE HAND AND MODI INDUSTRIES (SUPRA) ON THE OTHER, WOULD CLEARLY DEMONSTRATE THAT ONE HAS TO KEEP IN MIND THE ESSENTIAL PURPOSE FOR WHICH SUCH AN EXPENDITURE IS INCURRED. IF THE EXPENDITURE I S INCURRED FOR STARTING NEW BUSINESS WHICH WAS NOT CARRIED OUT BY THE ASSESSEE EARLIER, THEN SUCH EXPENDITURE IS HELD TO BE OF CAPITAL NATURE. IN THAT EVENT IT WOULD BE IRRELEVANT AS TO WHETHER PROJECT REALLY MATERIALISED OR NOT. HOWEVER, IF THE EXPENDITUR E INCURRED IS IN RESPECT OF THE SAME BUSINESS 'WHICH IS ALREADY CARRIED ON BY THE ASSESSEE, EVEN IF IT IS FOR THE EXPANSION OF THE BUSINESS, NAMELY, TO START NEW UNIT WHICH IS SAME AS EARLIER BUSINESS AND THERE IS UNITY OF CONTROL AND A COMMON FUND, THEN S UCH AN EXPENSE IS TO BE TREATED AS BUSINESS EXPENDITURE ' 12. IN VIEW OF THE AFORESAID POSITION OF LAW THE AFORESAID EXPENSES ARE TREATED AS REVENUE IN NATURE AND DEDUCTION IS PERMISSIBLE UNDER SECTION 37 OF THE ACT. GROUND NO. 3 AND 3.1 ARE ALLOWED. TH OUGH IT HAS BEEN ALLOWED BY THIS TRIBUNAL IN THE PRECEDING YEAR, WHETHER THE EXPENDITURE INCURRED IN RELEVANT PREVIOUS YEAR WAS FOR EXPANSION OF EXISTING BUSINESS ITA NO 35/COCH/2017 8 OR STATING A NEW BUSINESS IS NOT CLEAR FROM THE RECORDS. THOUGH THE LD ASSESSING OFFICER HAS MENTIONED THAT THE EXPENDITURE WAS FOR SETTING UP UNITS AT CHENNAI AND LIM DA (VADODARA), THERE IS NO FINDING WHETHER IT WAS FOR EXPANSION OF EXISTING LINE OF BUSINESS OR STARTING A NEW BUSINESS. NO DOUBT, AS HELD BY THE TRIBUNAL, IF IT WAS FOR EXPANSIO N OF EXISTING BUSINESS THE EXPENDITURE HAD TO BE CONSIDERED AS A BUSINESS OUTGO. THIS ASPECT, IN OUR OPINION, REQUIRES A CAREFUL VERIFICATION. WE, THEREFORE, SET ASIDE THE ORDER OF THE AUTHORITIES BELOW ON THIS ISSUE AND REMIT IT BACK TO THE ASSESSING OFF ICER FOR CONSIDERATION AFRESH. GROUND NO.5 IS ALLOWED FOR STATISTICAL PURPOSE. 9 V IDE GROUND NO.6 , ASSESSEE IS AGGRIEVED ON A DISALLOWANCE OF RS. 98,103/ - MADE U/S 14A OF THE A CT. 10 ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 52, 880/ - WHICH WAS CLAIMED BY THE ASSESSEE AS EXEMPT U/S 10(34) OF THE ACT. ASSESSING OFFICER HAD INVOKED RULE 8D R.W.S 14A OF THE ACT AND ARRIVED AT A DISALLOWANCE OF RS. 98,103/ - . 11 LD AR SUBMITTED THAT THE ASSESSEE HAD SU O - MOT U MADE A DISALLOWANCE OF R S. 1,08,996/ - IN ITS OWN COMPUTATION WHICH WAS IGNORED BY THE ASSESSING OFFICE R. ACCORDING TO HIM , FURTHER DISALLOWANCE WOULD RESULT IN DOUBLE TAXATION O F THE SAME AMOUNT. PER CONTRA, LD DR SUBMITTED THAT THERE WA S NO SUCH GROUND RAISED BY THE ASSESSEE BEFORE THE DRP. 12 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE GROUNDS RAISED BY THE ASSESSEE BEFORE THE DRP. IF ASSESSEE HAD SU O - MOT U DISALLOWED RS. 1,08,996/ - U/S 14A OF THE ACT IN ITS OWN COMPUTATI ON THEN ITA NO 35/COCH/2017 9 THE ADDITION OF RS. 98,103/ - MADE BY ASSESSING OFFICER WILL BE SUBSUMED IN IT. HOWEVER, WHETHER SUCH SU O - MOT U DISALLOWANCE WAS DONE BY ASSESSEE IN THE ORIGINAL RETURN OR REVISED RETURN HAS NOT BEEN LOOKED INTO BY THE LOWER AUTHORITIES. THEREFORE, WE ARE OF THE OPINION THAT THIS ISSUE ALSO REQUIRES FRESH CONSIDERATION BY ASSESSING OFFICER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO LOOK INTO THIS ISSUE AFRESH AND DECIDE THE SAME IN ACCORDANCE WITH LAW. GROUND NO.6 STANDS ALLOWED FOR STATIST ICAL PURPOSE. 13 VIDE GROUND NO.7, ASSESSEE WAS AGGRIEVED ON DISALLOWANCE OF ITS CLAIM OF WEIGHTED DEDUCTION OF RS. 10,09,63,660/ - U/S 35(2AB) OF THE ACT. 14 LD AR SUBMITTED THAT THE ASSESSEE HAD CLAIMED THE ABOVE AMOUNT AS WEIGHTED DEDUCTION IN RESPECT OF EXPENDITURE INCURRED BY IT F OR ITS IN - HOUSE R&D FACILITY . AS PER LD AR, LOWER AUTHORITIES FAILED TO APPRECIATE THAT THE PRE CONDITIONS REQUIRED TO BE SATISFIED FOR APPLICATION OF SECTION 35(2AB) OF THE ACT , WERE FULFILLED BY THE ASSESSEE. AS PER AR, LOWER AUTHORITIES GAVE RESTRICTIVE INTERPRETATION TO THE TERM IN - HOUSE. ACCORDING TO HIM , JUST BECAUSE EXPENSES WERE INCURRED IN DIFFERENT LOCATIONS WOULD NOT MEAN THAT THESE WERE NOT FOR IN - HOUSE R&D FACILITY . FURTHER , AS PER LD AR NON FILING OF FORM 3CL , C OULD NOT BE CONSIDERED AS A REASON FOR DENYING THE CLAIM. ACCORDING TO HIM FILING OF FORM 3CL WAS PROCEDUR AL . IN ANY CASE, ACCORDING TO HIM, FORM NO. 3CL DATED 28.10.2016 WAS SUBMITTED BY THE ASSESSEE THROUGH A RECTIFICATION APPLICATION DATED 7.5.2017. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS CADILA HEALTHCARE LTD (214 TAXMAN 672). T HE CLAIM, AS PER LD AR , INCLUDED R &D EXPENSE OF RS. 3.27 CRORES FOR CLINICAL TRIAL OUTSIDE INDIA , RS. 4.92 ITA NO 35/COCH/2017 10 CRORES BEING SA LARY REIMBURSEMENT OF THE EMPLOYEES OF M/S APOLLO VREDESTEIN BV NETHERLANDS & APOLLO GERMANY AND R&D EXPENSES OF RS. 1.89 CRORES FOR TESTING AND CERTIFICATION BEFORE CLINICAL TRIAL S . ACCORDING TO HIM, SIMILAR EXPENSES WERE INCURRED BY ASSESSEE FOR R& D I N ASSESSMENT YEAR S 2010 - 11 & 2011 - 12 WERE INITIALLY DENIED BY THE ASSESSING OFFICER, BUT ON ASSESSEES OBJECTION LD DRP ALLOWED SUCH CLAIMS IN THESE YEARS. FURTHER, AS PER LD AR , REVENUE HAD CARRIED THIS ISSUE BEFORE THE TRIBUNAL FOR TH E SE YEARS AND TRIB UNAL HAD HELD THAT SECTION 35(2AB) COULD NOT BE GIVEN A RESTRICTIVE INTERPRETATION AND THE TERM IN - HOUSE WAS TO BE GIVEN WIDER INTERPRETATION. 15 PER CONTRA, LD DR SUBMITTED THAT FOR THE IMPUGNED ASSESSMENT YEAR, ASSESSEE HAD NOT FILED FORM 3CL WHICH W A S MANDATORY IN NATURE ALONG WITH THE RETURN. AC CORDING TO LD DR SUCH FORM WAS FILED ONLY WHEN THE MATTER WAS PENDING BEFORE DRP. AS PER LD DR, THE DRP HAD ALLOWED THE CLAIM TO THE EXTENT MENTIONED IN FORM 3CL. IN ANY CASE, ACCORDING TO LD DR , THE EXPEN DITURE INCURRED WAS NOT FOR ANY IN - HOUSE FACILITY AND WAS NOT ELIGIBLE FOR WEIGHTED DEDUCTION. 16 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. OUT OF THE TOTAL CLAIM FOR R&D EXPENSES, A SUM OF RS. 3,27,61,904/ - WAS FOR CLINICAL TRIAL OF NEW TYRES DONE AT ITS BARODA R&D BUT TH R OUGH TEST TRACTS FACILIT IES OUTSIDE INDIA. WE FIND THAT THERE WAS A SIMILAR CLAIM MADE BY THE ASSESSEE IN ASSESSMENT YEAR S 2010 - 11 AND 2011 - 12 ALSO . THE RELEVANT OBSERVATIONS MADE BY THE TRIBUNAL IN ITS OR DER DATED 10.1.2017(SUPRA) AT PARAS 17 TO 21 ARE REPRODUCED HEREIN UNDER: 18. GROUND NO. 7 PERTAINS TO THE DISALLOWANCE OF WEIGHTED DEDUCTION OF RS. 94,98,220/ - CLAIMED BY THE APPELLANT UNDER SECTION 35(2AB) OF THE ACT IN RESPECT OF ITA NO 35/COCH/2017 11 EXPENDITURE OF RS. 1. 89 CRORES INCURRED BY THE COMPANY ON ITS R & D FACILITY. IT IS THE CASE OF THE APPELLANT THAT THE EXPENSES OF RS. 1.89 CRORES WERE INCURRED FOR TESTING THE NEW TYRES DEVELOPED BY THE COMPANY AT ITS R & D FACILITY AT BARODA. IN THE ABSENCE OF PROPER TECHNOL OGY IN INDIA, THE SAID TYRES WERE SENT TO TEST TRACKS FACILITIES IN GERMANY FOR TESTING AND CERTIFICATION. THE A.O WAS OF THE VIEW THAT THE EXPENDITURE CAN ONLY BE ALLOWED UNDER SECTION 35(2AB) IF IT IS INCURRED ON IN - HOUSE RESEARCH AND DEVELOPMENT FACILIT Y AND SINCE THE EXPENDITURE IN THE PRESENT CASE WAS MADE TOWARDS TRIAL ACTIVITIES OUTSIDE THE APPROVED FACILITY, THE DEDUCTION WAS NOT PERMISSIBLE. THE DRP AFFIRMED THE VIEW TAKEN IN THE DRAFT ASSESSMENT ORDER BY HOLDING THAT DEDUCTION FOR TESTING OF TYRES OUTSIDE INDIA IS NOT PERMISSIBLE AND THE EXPLANATION TO SECTION 35(2AB) IS LIMITED TO THE DRUG TRIAL ONLY. 19. THE LD. AR SUBMITS THAT THE AO AND DRP HAVE MISUNDERSTOOD THE SCOPE OF SECTION 35(2AB) AND THE LAW ONLY REQUIRES THAT THE EXPENDITURE SHOULD H AVE BEEN INCURRED ON IN - HOUSE R & D FACILITY. HE FURTHER SUBMITS THAT THE CLINICAL TRIAL OF TYRES IS RELATED TO TYRES PRODUCED AS A RESULT OF R & D ACTIVITIES IN THE IN - HOUSE FACILITY OF ASSESSEE AT BARODA AND THEREFORE, THE DEDUCTION U/S 35(2AB) IS PERMI SSIBLE. THE LD. DR HAS RELIED UPON THE ORDERS PASSED BY THE DRP AND THE AO. 20. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE RECORDS AND THE JUDGMENTS RELIED UPON. SECTION 35(2AB) PROVIDES FOR WEIGHTED DEDUCTION OF EXPENDITURE ON SCIENTIFIC RESEARCH BY A COMPANY IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING PROVIDED THAT THE EXPENDITURE INCURRED IS ON IN - HOUSE RESEARCH AND DEVELOPMENT FACILITY OF THE ASSESSEE, WHICH IS APPROVED BY THE PRESCRIBED AUTHORITY. THE ONLY QUESTION THAT IS TO BE DETERMINED IS WHETHER THE EXPENDITURE INCURRED WAS ON IN - HOUSE R & D FACILITY. THE APPROVED R& D FACILITY OF THE APPELLANT COMPANY IS IN BARODA. THE TYRES PRODUCED AS A RESULT OF R & D ACTIVITIES IN THE SAID FACILITY ARE TESTED IN GERMANY. THE SAID FACT IS NOT DISPUTED BY THE AO THAT THE TYRES WHICH ARE TESTED IN GERMANY UPON WHICH THE EXPENDITURE'IS INCURRED BY THE APPELLANT COMPANY RELATE TO THE TYRES PRODUCED BY THE R & D FACILITY OF THE APPELLANT COMPANY IN INDIA. THE INTENTION OF LEGISLATURE IS NOT TO OUST SUCH EXPENDITURES MADE BY AN ASSESSEE AND THE SAME IS EVIDENT FROM THE EXPLANATION TO SECTION 35(2AB) WHICH PROVIDES THAT EXPENDITURE ON SCIENTIFIC RESEARCH IN RELATION TO DRUGS SHALL INCLUDE EXPENDITURE INCURRED ON CLINICAL DRUG TRIAL. IN THE CASE OF CIT VS. CADILA HEALTHCARE LTD. (2013) 31 TAXMANN.COM 300, THE HON'BLE GUJARAT HIGH COURT HELD AS UNDER: - 'D. WHETHER THE APPELLATE TRIBUNAL HAS SUBSTANTIALLY ERRED IN HOLDING THAT THE EXPENSES INCURRED OUTSIDE THE APPROVED R&D FACILITY WOULD ALSO GET WEIGHTED DEDUCTION BASED ON THE WORD UNDER 'ON THE HOUSE' INTERPRETING CONTRADICTORILY TO THE FINDING OF COORDINATE BENCH IN CONCEPT PHARMACEUTICALS LTD. VS. ACIT(ITAT, MUM) REPORTED AT 43 '16. THE WHOLE IDEA THUS APPEARS TO BE TO GIVE ENCOURAGEMENT TO SCIENTIFIC RESEARCH. BY THE VERY NATURE OF THINGS, CLINICAL TRIALS MAY NOT ALWAYS BE POSSIBLE TO BE CONDUCTED IN CLOSED LABORATORY OR IN SIMILAR IN - HOUSE FACILITY PROVIDED BY THE ASSESSEE AND APPROVED BY THE PRESCRIBED AUTHORITY. BEFORE A PHARMACEUTICAL D RUG COULD BE PUT IN THE MARKET, THE REGULATORY AUTHORITIES WOULD INSIST ON STRICT TESTS AND RESEARCH ON ALL POSSIBLE ASPECTS, SUCH AS POSSIBLE REACTIONS, EFFECT OF ITA NO 35/COCH/2017 12 THE DRUG AND SO ON. EXTENSIVE CLINICAL TRIALS, THEREFORE, WOULD BE AN INTRINSIC PART OF DEVE LOPMENT OF ANY SUCH NEW PHARMACEUTICAL DRUG. IT CANNOT BE IMAGINED THAT SUCH CLINICAL TRIAL CAN BE CARRIED OUT ONLY IN THE LABORATORY OF THE PHARMACEUTICAL COMPANY. IF WE GIVE SUCH RESTRICTED MEANING TO THE TERM EXPENDITURE INCURRED ON IN - HOUSE RESEARCH AN D DEVELOPMENT FACILITY, WE WOULD ON ONE HAND BE COMPLETELY DILUTING THE DEDUCTION ENVISAGED UNDER SUB - SECTION (2AB( OF SECTION 35 AND ON THE OTHER, MAKING THE EXPLANATION NOTED ABOVE QUITE MEANINGLESS. WE HAVE NOTICED THAT FOR THE PURPOSE OF THE SAID CLAUS E IN RELATION TO DRUG AND PHARMACEUTICALS, THE EXPENDITURE ON SCIENTIFIC RESEARCH HAS TO INCLUDE THE EXPENDITURE INCURRED ON CLINICAL TRIALS IN OBTAINING APPROVALS FROM ANY REGULATORY AUTHORITY OR IN FILING AN APPLICATION FOR GRANT OF PATENT. THE ACTIVITIE S OF OBTAINING APPROVAL OF THE AUTHORITY AND FILING OF AN APPLICATION FOR PATENT NECESSARILY SHALL HAVE TO BE OUTSIDE THE IN - HOUSE RESEARCH FACILITY. THUS THE RESTRICTED MEANING SUGGESTED BY THE REVENUE WOULD COMPLETELY MAKE THE EXPLANATION QUITE MEANINGLE SS. FOR THE SCIENTIFIC RESEARCH IN RELATION TO DRUGS AND PHARMACEUTICALS MADE FOR ITS OWN PECULIAR REQUIREMENTS, THE LEGISLATURE APPEARS TO HAVE ADDED SUCH AN EXPLANATION.' 21. IT IS PERTINENT TO MENTION HERE THAT SECTION 35(2AB) WAS INTRODUCED A S AN INCENTIVE FOR ENCOURAGING RESEARCH AND DEVELOPMENT IN THE INDUSTRIAL SECTOR AND THEREFORE, HAS TO BE LIBERALLY CONSTRUED IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN BAJAJ TEMPO LTD. VS. CIT, 62 TAXMAN 480. THE AO AND THE DRP HAVE MISDIRECTED T HEMSELVES IN NOT APPRECIATING THE TRUE INTENT AND PURPORT OF SECTION 35(2AB) OF THE ACT. HAVING NOT DISPUTED THE FACT THAT THESE TESTS ARE PART OF R & D ACTIVITIES CONDUCTED BY THE APPELLANT IN BARODA, THE DISALLOWANCE IN THE PRESENT FACTS IS NOT PERMISSIB LE. WE THEREFORE, HOLD THAT THE APPELLANT IS ENTITLED FOR DEDUCTION UNDER SECTION 35(2AB) OF THE ACT. GROUND NO. 7 AND 7.1 ARE ALLOWED. BY VIRTUE OF THE ABOVE ORDER OF THE TRIBUNAL, THE CLAIM FOR WEIGHTED DEDUCTION FOR CLINICAL TRIAL EXPENDITURE IS ALLOW ANCE. HOWEVER, WE ARE OF THE OPINION THAT THE AMOUNT WHICH IS ELIGIBLE FOR SUCH WEIGHTED DEDUCTION HAVE TO BE COMPUTED CONSIDERING FORM 3CLAND IF THE FIGURES IN FORM 3CL IS AT VARIANCE WITH THE CLAIM THE ASSESSING OFFICER HAS TO CAREFULLY CHECK WHETHER EAC H OF THE ITEM INCLUDED IN SUCH CLAIM IS COMING WITHIN THE PURVIEW OF SECTION 35(2AB) OF THE ACT. ISSUE IS REMITTED BACK TO THE ASSESSING OFFICER FOR THIS PURPOSE. ITA NO 35/COCH/2017 13 17 SECOND PART OF THE R&D EXPENSES OF RS. 4,92,42,256/ - WERE INCURRED BY ASSESSEE BY WAY O F REIMBURSEMENT OF SALARY OF EMPLOYEES OF APOLLO NETHERLAND AND GERMANY WHO WERE IN CHARGE OF ASSESSEE R&D FACILITIES IN INDIA. WE FIND THAT SIMILAR DISALLOWANCE WERE PROPOSED BY ASSESSING OFFICER FOR ASSESSMENT YEAR S 2010 - 11 & 2011 - 12 BUT WAS DELETED BY DRP ON ASSESSEES OBJECTION. DEPARTMENT S APPEAL ON THIS ISSUE WAS ALSO DISMISSED BY THE TRIBUNAL IN ITS ORDER DATED 10.1.2017 IN ITA NO.2 23 /COCH/2015 AND 189/COCH/2016 . RELEVANT PORTION OF THE DECISION IN THE SAID ORDER IS REPRODUCED HEREUNDER: 51. GROUND NO. 3 RELATES TO THE DELETION OF DISALLOWANCE OF RS. 3,89,04,976/ - BEING THE SALARY PAID BY THE ASSESSEE TO ITS EMPLOYEE WORKING FOR APOLLO TYRES, GERMANY UNDER SECTION 35(2AB). THE ASSESSEE COMPANY IN THE RELEVANT A.Y. HAS CLAIMED DEDUCTION UNDER SECTION 35(2AB) IN RESPECT OF THE FOLLOWING EXPENSES: I . AMOUNT OF RS. 3.89 CRORES PAID TO APOLLO TYRES, GERMANY REPRESENTING R & D EXPENDITURE INCURRED BY THEM II . AMOUNT OF RS. 1.89 CRORE TOWARDS CLINICAL TRIAL ACTIVITIES INCURRED FOR TESTING OF TYRES OUTSID E THE APPROVED FACILITY. 52. IN THE PRESENT APPEAL WE ARE CONCERNED WITH THE AMOUNT OF RS. 3.89 CRORES. THE ASSESSEE SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE SAID AMOUNT REPRESENTS REIMBURSEMENT OF SALARY AND OTHER COSTS AS INCURRED TOWARDS EMPLOYEES. IT WAS FURTHER SUBMITTED THAT ONE OF THE EMPLOYEE, MR. PETER BECKER IS EMPLOYED ON THE ROLLS OF APOLLO TYRES, GERMANY, A SUBSIDIARY OF APOLLO TYRE LIMITED BUT HE IS OVERALL IN - CHARGE OF THE R & D ACTIVITIES OF THE COMPANY IN INDIA AND DE VOTES SUBSTANTIAL TIME TO THE R & D ACTIVITIES CARRIED OUT BY THE COMPANY AT IS R & D UNIT AT LIMDA, BARODA. IT WAS ARGUED THAT THE SALARY PAID TO MR. PETER BECKER IN RESPECT OF THE SERVICES RENDERED BY HIM IN RESPECT OF COMPANY'S R & D UNIT AT LIMDA, BARO DA, IS REIMBURSED BY APOLLO TYRES LTD TO ITS SUBSIDIARY APOLLO GMBH, GERMANY AND DEBITED IN THE BOOKS OF THE ASSESSEE COMPANY AND AS SUCH IS AN ALLOWABLE EXPENDITURE U/S 35(2AB) OF THE INCOME TAX ACT. THE A.O. WAS OF THE VIEW THAT DEDUCTION UNDER SECTION 3 5(2AB) IS LIMITED TO THE EXPENDITURE ON SCIENTIFIC RESEARCH ON IN HOUSE RESEARCH AND DEVELOPMENT FACILITY AND THEREFORE THE AMOUNT PAID TO THE EMPLOYEE IN GERMANY WOULD NOT ATTRACT THE BENEFIT OF THE EXTRA WEIGHTED DEDUCTED OF 50% CLAIMED UNDER THAT PROVIS ION. THE DRP, HOWEVER, DELETED THE ADDITION AND HELD THAT THE SALARY PAID TO SH. PETER BECKER WAS ENTITLED FOR DEDUCTION UNDER SECTION 35(2AB) OF THE ACT. ITA NO 35/COCH/2017 14 53. THE LD. DR HAS RELIED UPON THE DRAFT ASSESSMENT ORDER TO CANVAS HIS SUBMISSIONS THAT THE DELETIO N OF DISALLOWANCE WAS NOT IN ACCORDANCE WITH LAW. THE LD. AR ON THE OTHER HAND HAS REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE DRP. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE ARE NOT IN AGREEMENT WITH THE VIEW OF THE DEPARTMENT. ADMITTEDLY, IN THE PRESENT CASE THE NATURE OF THE EXPENDITURE FOR R & D IS NOT DISPUTED BY THE DEPARTMENT. THE DEPARTMENT HAS FURTHER NOT DISPUTED THE FACT THAT THE SAID EMPLOYEE OF THE ASSESSEE COMPANY IS OVERALL IN - CHARGE OF THE R & D ACTIVITIES AT BARODA. THE MERE FAC T THAT THE SAID EMPLOYEE WAS PAID BY APOLLO TYRES GERMANY AND THEREAFTER, REIMBURSED BY THE ASSESSEE COMPANY WOULD NOT IPSO FACTO LEAD TO A CONCLUSION THAT THE EXPENSE ON R & D IS MADE OUTSIDE INDIA. THE DEDUCTION IS THEREFORE WITHIN THE PARAMETERS OF SECT ION 35(2AB) OF THE ACT. IN VIEW THEREOF, GROUND NO. 3 RAISED BY THE DEPARTMENT IS DISMISSED. ASSESSING OFFICER WHILE MAKING THE DISALLOWANCE OF THE CLAIM U/S 35(2AB) IN THE IMPUGNED ASSESSMENT YEAR HAD SPECIFICALLY NOTED THAT THE FACTS WERE SIMILAR TO THE EARLIER YEAR. AS PER ASSESSING OFFICER THE ISSUE IN THE EARLIER YEAR WAS ALSO REMUNERATION PAID TO MR PETER BECKER FOR RESEARCH FACILITY AND PAYMENT MADE IN EARLIER YEAR OUTSIDE INDIA FOR IN - HOUSE FACILITY. SINCE COORDINATE BENCH HAD DEALT WITH THESE ISSUE S IN THE EARLIER YEAR AND HELD THAT CLAIM W AS WITHIN THE PARAMETERS OF SECTION 35(2AB) OF THE ACT, WE ARE OF THE OPINION THAT CLAIM OF WEIGHTED DEDUCTION C OULD NOT HAVE BEEN PRIMA - FACIE DENIED . HOWEVER, VERIFICATION HAS TO BE DONE WITH FIGURES REPORTED IN F ORM 3CL. ASSESSEE SHOULD BE ABLE TO PROVIDE A REASONABLE JUSTIFICATION OR VARIATION BETWEEN ITS CLAIM AND WHAT HAS BEEN MENTIONED IN FORM 3CL. FOR THIS LIMITED PURPOSE WE REMIT THIS ISSUE BACK TO THE ASSESSING OFFICER. 1 8 THIRD PART OF THE CLAIM U/S 35(2AB) IS ON AN EXPENSE OF RS. 1,89,59,500/ - INCURRED FOR OUTSIDE CERTIFICATION FOR TESTING AND CLINICAL TRIAL S. WE ARE OF THE OPINION THAT NATURE OF T HIS EXPENDITURE , WHETHER IT FALLS IN C ATEGORY OF THE EXPENSE S CONSIDER ED ITA NO 35/COCH/2017 15 BY THE COORDINAT E BENCH OF THE TRIBUNAL IN DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2010 - 11 HAS TO BE VERIFIED. IT IS ALSO REQUIRED FOR THE ASSESSING OFFICER TO HAVE A CAREFUL LOOK ON FOR 3CL. THIS PART OF THE CLAIM IS ALSO REMITTED BACK TO THE LD ASSESSING OFFICER FOR CO NSIDERATION AFRESH. 19 BEFORE PARTING WITH THE ISSUE OF CLAIM OF WEIGHTED DEDUCTION UNDER SECTION 35(2AB) OF THE ACT, WE HAVE TO TAKE NOTE OF T HE DIFFERENTIAT ING FACTOR ON THE CLAIM FOR WEIGHTED DEDUCTION FROM THAT OF THE PRECEDING YEAR. THIS IS THE FAIL URE OF THE ASSESSEE TO PRODUCE FORM 3CL ISSUED BY DSIR QUANTIF YING THE ELIGIBLE DEDUCTION BEFORE THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS . IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE HAD FILED FORM 3CL ALONG WITH A RECTIFICATIO N PETITION DATED 7.5.2016. LD DR HAS SUBMITTED THAT DRP HAD CONSIDERED FORM 3CL AND ALLOWED THE CLAIM TO THAT EXTENT. R ELEVANCE OF THE FIGURES IN FORM 3CL WAS AN ISSUE WHICH CAME UP BEFORE THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS TORRENT PHARMACEUTICALS LTD (2009) 28 CCH 0783) . PARA 10 OF THIS DECISION IS REPRODUCED HEREUNDER: 10. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT IS ONLY THE EXPENDITURE WHICH WILL ONLY BE ALLOWED, WHEREAS THE ASSESSEE VIDE THE COPY OF THE LETTER REPRODUCED HEREINABOVE HAS VERY CLEARLY EXPLAINED AS TO HOW THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE IS ALLOWABLE. THUS THERE WAS NO JUSTIFICATION IN HARPING UPON THE FIGURE CONTAINED IN FORM NO.3CL AS IS DONE BY THE ASSESSING OFFICER . THE PROVISIONS OF THE ACT IT DOES NOT CONTAIN ANY SPECIFIC CONDITIONS FOR THE ALLOWANCE OF EXPENDITURE TO THE EFFECT THAT IT WILL BE RESTRICTED THAT CONTAINED IN FORM NO.3CL. NEEDLESS TO POINT OUT THAT SUCH ALLOWABLE EXPENDITURE ETC. IS REPORTED BY THE D SIR TO DG (INCOME - TAX EXEMPTION), KOLKATA WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHEREVER HE QUANTIFIES THE EXPENDITURE WHICH IS LESS THAN THAT CLAIMED BY THE ASSESSEE. WE FURTHER FIND THAT THE ASSESSEE HAS INCLUDED A SUM OF RS. 5 1.26 LAKHS AS ELIGIBLE EXPENDITURE BEING REVENUE EXPENDITURE RELATING TO BUILDING AND ANOTHER SUM OF RS.133.92 LAKHS BEING REVENUE EXPENDITURE OTHER THAN BUILDING, WHICH WAS CONSIDERED ITA NO 35/COCH/2017 16 AS REVENUE BY THE ASSESSING OFFICER HIMSELF. THESE ITEMS CLEARLY ARE WIT HIN THE PURVIEW OF ALLOWABLE U/S 3 5 (2AB) OF THE ACT AS WEIGHTED DEDUCTION. THE SECURITY EXPENSES ARE ALSO DIRECTLY RELATED TO IN - HOUSE RESEARCH AS PROPER SECURITY IS REQUIRED TO AVOID LEAKAGE AND ONLY IN - HOUSE STAFF WILL HAVE ASSESSED TO BUILDING. ACCORDINGLY , THIS EXPENDITURE ARE FOR PRESERVING THE RESEARCH WHICH IS COMPLETED AND ITS CLINICAL TRIAL IS PENDING. AS REGARDS TO THE ENVIRONMENTAL ISSUE, THE ASSESSEE - COMPANY HAS SET UP AN AFFLUENT PLANT AND AS IS WIDELY ACCEPTED THE VEGETATION, I.E. TREES HAVE CONT AINED THE POLLUTION. THIS EXPENDITURE OF GARDENING AND PLANTATION HAVE BEEN DONE FOR THE PERSEVERANCE OF ENVIRONMENT AND THIS IS DIRECTLY RELATED TO R & 0 FACILITIES. AS REGARDS TO SALARY PAID TO DR. C.DUTT AMOUNTING TO RS.58.54 LAKHS, HE IS IN - CHARGE OF R & D CENTRE AT BHATT. HE IS THE PERSON THROUGH WHOM ALL CO - ORDINATION OF TECHNICAL SCIENTISTS AND OTHER TECHNICAL PERSONS ARE CARRIED OUT. THE ENTIRE REPORTING OF THE RESEARCH ACTIVITY TO THE MANAGEMENT HAS BEEN TAKEN TO THE BOARD OF DIRECTORS THROUGH HIM ONLY AND FOR THIS THE SALARY IS PAID. ACCORDINGLY, THE ASSESSEE HAS RIGHTLY PAID THE ENTIRE EXPENDITURE OF RS.133.92 LAKHS AND BUILDING REPAIRS RS.37.55 LAKH AS ON WHICH WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT IS ALLOWABLE. IN VIEW OF THE ABOVE DISCUSSIO N, WE ALLOW THE CLAIM OF THE ASSESSEE AND THIS ISSUE OF THE REVENUE'S APPEAL IS DIS MISSED AND THAT OF THE ASSESSEE'S CO IS ALLOWED. MUMBAI BENCH OF TH IS TRIBUNAL IN THE CASE OF D CIT VS FAMY CARE LTD (2015) 67 SOT 85 ALSO TOOK A VIEW THAT AN ASSESSEE C OU LD NOT BE DENIED DEDUCTION U/S 35(2AB) OF THE ACT PURELY ON THE GROUND THAT PRESCRIBED AUTHORITY DID NOT FURNISH FORM 3CL IN TIME TO THE DEPARTMENT. NO DOUBT, THE FIGURES AS QUANTIFIED IN FORM 3CL, MAY NOT BE SACROSANCT . HOWEVER, ONCE FORM 3CL IS RECE IVED BY THE DEPARTMENT; WE CANNOT SAY THAT IT HAS TO BE GIVEN A GO - BYE. IT CAN BE A USEFUL TOOL IN DETERMINING THE LEGITIMACY OF THE CLAIM OF THE ASSESSEE. THIS IS THE REASON WHY WE ARE REMITTING THE ISSUE OF QUANTIFICATION OF THE CLAIM OF WEIGHTED DEDU CTION , BACK TO THE FILE OF THE LD ASSESSING OFFICER FOR CONSIDERATION AFRESH. IN THE RESULT, G ROUND NO 7 IS ALLOWED FOR STATISTICAL PURPOSE. 2 0 VIDE ITS GROUND NO.8 ASSESSEE IS AGGRIEVED THAT THERE WAS AN ADDITION OF RS. 50,26,767/ - FOR MIS - MATCH IN THE CLAIM OF TDS. ITA NO 35/COCH/2017 17 21 LD AR SUBMITTED THAT OUT OF THE TOTAL AMOUNT OF RS. 50,26,767/ - A SUM OF RS. 32,68,459/ - WAS BOOKED AS INCOME IN THE SUBSEQUENT ASSESSMENT YEAR AND TAX ES WERE PAID. FURTHER, AS PER LD AR, SIMILAR ISSUE HAD C O ME UP BEFORE THE COORDIN ATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 IN ITA NO. 223/COCH/2015 AND 189/COCH/2015 AND IT W AS DECIDED IN FAVOUR OF THE ASSESSEE. PER CONTRA, LD DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 2 2 WE HAVE HEARD THE RIVAL S UBMISSION AND PERUSED THE MATERIAL ON RECORD. ADDITION IN QUESTION IS ON ACCOUNT OF DIFFERENCE IN RECONCILIATION OF TAX DEDUCTED AT SOURCE AS REFLECTED IN FORM 26AS. AS PER LD AR, A SUM OF RS. 32,68,459/ - OUT OF THIS HAS BEEN BOOKED AS INCOME IN THE SUBSEQUENT YEAR AND TAX ES PAID. TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 HAD DELETED THE ADDITION. 32. GROUND NO. 11 RELATES TO THE ADDITION OF RS. 27,96,245/ - TO THE TOTAL INCOME OF THE APPELLANT ON THE BASIS OF AMOUNT R EFLECTED IN FORM 26AS. IT WAS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT AN AMOUNT OF RS. 19,75,315/ - OUT OF THE AFORESAID AMOUNT OF RS. 27,96,245/ - HAS BEEN OFFERED TO TAX IN THE SUBSEQUENT A.Y. 2011 - 12. REJECTING THE SAID SUBMISSION OF TH E APPELLANT, THE A.O AND THE DRP WERE OF THE VIEW THAT THE INCOME IS TO BE TAXED IN A.Y. 2010 - 11 ONLY. 33. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. ADMITTEDLY, THE AMOUNT OF RS. 19,75,315/ - IS OFFERED TO TAX IN A.Y. 2011 - 12 . TAXING THE SAME AMOUNT IN THE RELEVANT A.Y. 2010 - 11 WOULD LEAD TO DOUBLE ADDITION AND INCORRECT DETERMINATION OF TAX LIABILITY. IN VIEW THEREOF, WE DELETE THE ADDITION TO THE EXTENT OF RS. 19,75,315/ - FROM A.Y. 2010 - 11. GROUND NO. 11 IS PARTLY ALLOWED. ACCORDINGLY, WE DELETE THE ADDITION TO THE EXTENT OF RS. 32,68,459/ - OUT OF THE TOTAL ADDITION OF RS. 50,26,767/ - . GROUND NO.8 IS TREATED AS PARTLY ALLOWED. 2 3 VIDE ITS GROUND NO.9 ASSESSEE IS AGGRIEVED BY A DISALLOWANCE OF PROVISION OF RS. 1,11, 08,106/ - FOR COMMISSION ON WHICH TDS WAS NOT DEDUCTED AT SOURCE. ITA NO 35/COCH/2017 18 2 4 LD AR SUBMITTED THAT SIMILAR PROVISION WAS DISALLOWED BY THE ASSESSING OFFICER IN PRECEDING ASSESSMENT YEAR ALSO AND ASSESSEES APPEAL BEFORE THIS TRIBUNAL ON THIS ISSUE WAS UNSUCCESS FUL. F ACTS AND CIRCUMSTANCES FOR THE IMPUGNED ASSESSMENT YEAR ALSO BEING SIMILAR ; WE ARE OF THE OPINION THAT PROVISION FOR COMMISSION ON WHICH TDS WAS NOT DEDUCTED WAS RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES . W E DO NOT FIND ANY ERROR IN THE ORDERS OF THE LOWER AUTHORITIES. GROUND NO.9 IS STAND DISMISSED. 2 5 VIDE ITS GROUND NO.10 ASSESSEE IS AGGRIEVED ON THE DISALLOWANCE OF ITS CLAIM OF RS. 6,75,51,128/ - AND RS. 6,15,86,868/ - U/S 80IA OF THE ACT. 2 6 ASSESSEE HAD IN THE RETURN OF INCOME CLAIMED A DED UCTION OF RS. 4,87,02,504/ - U/S 80IA OF THE ACT IN RESPECT OF A GAS TURBINE POWER GENERATION UNITS AT LIMDA PLANT. ASSESSING OFFICER WAS OF THE OPINION THAT THIS CLAIM COULD NOT BE ALLOWED SINCE THE UNIT COULD NOT BE CONSIDERED AS AN INDEPENDENT UNDERTAKI NG. HOWEVER , ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDING, THROUGH A LETTER DA T ED 18.2.2016 MADE A FRESH CLAIM FOR DEDUCTION U /S 80IA IN RESPECT OF TWO WINDMILLS SET UP AT BARODA. THIS CLAIM WAS DIFFERENT FROM ITS CLAIM MADE IN THE RETURN OF IN COME FOR THE GAS TU RBINE POWER GENERATION UNIT. FIRST OF THE FRESH CLAIM WAS FOR A WINDMILL ACQUIRED BY IT FROM M/S ENERCON WHICH COMMENCED OPERATIONS IN MARCH 2007 , AND THE SECOND WAS FOR A WINDMILL ACQUIRED BY IT FROM M/S SUZLON , WHICH COMMENCED OPERATI ONS IN MARCH 2008. AS PER THE ASSESSEE, IT WAS ELIGIBLE FOR SUCH DEDUCTION. THE CLAIM FOR ENERCON WINDMILLS ITA NO 35/COCH/2017 19 WAS RS. 6,47,51,128/ - AND FOR SUZLON WINDMILLS WAS RS. 6,15,86,868/ - . ASSESSEE ALSO FURNISHED THE AUDIT REPORT IN FORM 10CCB BEFORE THE ASSESSING O FFICER. HOWEVER, IT SEEMS, THE ABOVE SUBMISSIONS AND THE AUDIT REPORT WERE NOT CONSIDERED BY ASSESSING OFFICER. IN OTHER WORDS, THE ASSESSING OFFICER DID NOT CONSIDER THE FRESH CLAIM S U/S 80IA OF THE AC T MADE THROUGH THE LETTER MENTIONED ABOVE. 2 7 BEFOR E THE DRP THE ASSESSEE DID RAISE A SPECIFIC GROUND ON THIS. HOWEVER, THE DRP RULED THAT ITS POWERS WERE LIMITED TO RESOLVING ISSUES ARISING FROM ADDITIONS MADE ON THE RETURNED INCOME/LOSS AND IT COULD NOT CONSIDER ANY FRESH CLAIMS. 28 NOW BEFORE US T HE LD AR ASSAILING THE ORDERS OF THE LOWER AUTHORITIES. SUBMITTED THAT THE CLAIM OF DEDUCTION OUGHT NOT HAVE BEEN DISALLOWED . AS PER AR , DRP HAD GIVEN AN ERRONEOUS RULING THAT IT COULD DEAL ONLY WITH VARI ANCE S IN INCOME OR LOSS RETURNED AND PROPOSED IN T HE DRAFT ASSESSMENT ORDER. AS PER LD AR , DRP WRONGLY INTERPRET ED THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF GOETZE INDIA LTD VS CIT REPORTED IN 284 ITR 323 . ACCORDING TO HIM, THIS JUDGMENT OF THE HONBLE APEX COURT HAD NO APPLICATION IN THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER, AS PER THE LD AR , THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 HAD HELD THAT A FRESH/ADDITIONAL CLAIM U/S 80IA C OULD BE PREFERRED BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITY. 29 PER CONTRA, LD DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO 35/COCH/2017 20 30 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL. FOR THE IMPUGNED ASSESSMENT YEAR ASSESSEE W AS DENIED THE CLAIM U/S 80IA OF THE ACT FOR THE SOLE REASON THAT IT HAD PREFERRE D SUCH A CLAIM ONLY THROUGH A LETTER FILED DURING THE ASSESSMENT PROCEEDINGS. FOR PRECEDING ASSESSMENT TEARS 2 0 10 - 11 AND 2011 - 12ALSO ASSESSEE HAD MADE SIMILAR CLAIMS ON THE SAME WINDMILLS, THROUGH A LETTER FILED DURING THE COURSE OF THE ASSESSMENT PROCEEDI NGS, WHICH WAS NOT CONSIDERED BY THE LOWER AUTHORITIES. THIS TRIBUNAL IN ASSESSEES APPEAL IN ITA NO.223/COCH/15 AND 189/COCH/2016 VIDE ITS ORDER DATED 10.1.2017 HELD AS UNDER: 45. THE APPELLANT HAS RAISED AN ADDITIONAL GROUND CLAIMING DEDUCTION UNDER SEC TION 80IA OF THE ACT IN RESPECT OF THE PROFIT DERIVED FROM THE WINDMILL UNDERTAKING. THE SAID CLAIM WAS NOT MADE BY THE APPELLANT IN ITS INCOME TAX RETURN, ASSESSMENT PROCEEDINGS OR BEFORE THE CIT(A). THE APPELLANT HAS SUBMITTED THE COPY OF DECLARATION AND AUDITED ACCOUNTS OF THE POWER GENERATION WINDMILL UNDERTAKING TO MAKE OUT A CASE UNDER SECTION 80IA OF THE ACT. THOUGH THE CLAIM IS MADE FOR FIRST TIME BEFORE THIS TRIBUNAL, WE FEEL IT APPROPRIATE TO DIRECT THE AO TO DETERMINE THE ISSUE ON MERITS AS IT IS NECESSARY TO DETERMINE THE CORRECT TAX LIABILITY OF AN ASSESSEE. THE SAID VIEW IS CLEARLY EXPRESSED IN THE JUDGMENT PASSED BY THE HON'BLE SUPREME COURT IN NTPC LTD. VS. CIT, 229 ITR 383. THE OBSERVATIONS MADE BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. PRUTHVI BROKERS & SHAREHOLDERS, 349 ITR 336 ARE RELEVANT AT THE STAGE AND THE SAME ARE EXTRACTED HEREIN BELOW: - ........ 13 THE APPELLATE AUTHORITIES, THEREFORE, HAVE JURISDICTION TO DEAL NOT MERELY WITH ADDITIONAL GROUNDS, WHICH BECAME AVAILABLE ON AC COUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILABLE WHEN THE RETURN WAS FILED. THE FIRST PART VIZ. 'IF THE GROUND SO RAISED COULD NOT HAVE BEEN RAISED AT THAT PARTICULAR STAGE WHEN THE RETURN WAS FILED OR WHEN THE ASSE SSMENT ORDER WAS MADE...' CLEARLY RELATE TO CASES WHERE THE GROUND WAS AVAILABLE WHEN THE RETURN WAS FILED AND THE ASSESSMENT ORDER WAS MADE BUT 'WERE NOT IN EXISTENCE'. GROUNDS WHICH WERE NOT IN EXISTENCE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSMENT O RDER WAS MADE FALL WITHIN THE SECOND CATEGORY VIZ. WHERE 'THE GROUND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW. 46. IN THE AFORESAID JUDGMENT IT IS CLEARLY EXPRESSED THAT AN ASSESSEE APART FROM RAISING AN ADDITIONAL GROUND CAN RAISE AN ADDITIONAL CLAIM BEFORE THE APPELLATE FORUM. IN VIEW THEREOF, THE AO IS DIRECTED TO EXAMINE THE MATTER ON MERITS AFTER CONSIDERING THE EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA. THE ADDITIONAL GROUND IS AL LOWED FOR STATISTICAL PURPOSES. THESE APPEALS OF THE ASSESSEE IN ITA NO. 223/COCH/2015 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO 35/COCH/2017 21 FOLLOWING THE ABOVE DECISION , F OR THE IMPUGNED ASSESSMENT YEAR ALSO WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE CLAIM A FRESH IN ACCORDANCE WITH LAW. GROUND NO.10 IS ALLOWED FOR STATISTICAL PURPOSE. 31 WHILE DEALING WITH THE CLAIM FOR DEDUCTION U/S 801A, IT WILL BE APPROPRIATE TO DEAL WITH ONE OTHER ISSUE RAISED BY THE ASSESSEE WHICH IS ON DENIAL OF ITS CLAIM OF DEDUCTION OF RS 4,87,02,504/ - U/S 80IA IN RESPECT OF GAS TURBINE POWER G ENERATION UNITS AT LIMDA PLANT, WHICH WAS PREFERRED IN THE RETURN OF INCOME ITSELF. T HOUGH THE CLAIM WAS ALLOWED BY DRP W HILE PASSING THE FINAL ASSESSMENT ORDER, THE LD ASSESSING OFFICER DID N OT GIVE THE BENEFIT TO THE ASSESSEE. FINDINGS OF THE DRP ON THIS ISSUE ARE REPRODUCED HEREUNDER: 15.2 WE HAVE CONSIDERED THE MATTER. THE HONBLE COCHIN TRIBUNAL IN ITA NO.429/COCH/2006 FOR A.Y 2005 - 06 AFTER CAREFULLY DISCUSSING THE FACT OF THE ASSESSEE S CASE, THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF TEXTILE MACHINERY CORPORATION LTD; BOARD CIRCULAR F NO. 178/28/2001, DTD 3.10.2001; MUMBAI TRIBUNAL DECISION IN CASE OF WEST COAST PAPER MILLS VS ACIT (SUPRA) HELD THAT THE POWER GENERATION UNI TS WERE UNDERTAKING AS PER SECTION 80IA OF THE ACT AND FURTHER CAPTIVE CONSUMPTION OF POWER GENERATED WOULD NOT DISQUALIFY THE ASSESSEE FROM CLAIMING DEDUCTION U/S 80IA OF THE ACT. IN OUR VIEW, IT IS SEEN THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR A.Y 2005 - 06. IN THIS LIGHT OF THIS, ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE. THIS OBJECTION IS ACCEPTED. HOWEVER, THE ASSESSING OFFICER , DESPITE DRPS DIRECTIONS DISALLOWED T HE CLAIM ON A PREMISE THAT GAS TURBINE POWER GENERATION UNITS AT LIMDA PLANT WAS NOT AN INDEPENDENT UNDERTAKING . IN OUR OPINION, ASSESSING OFFICER WAS BOUND TO FOLLOW THE ITA NO 35/COCH/2017 22 DIRECTIONS OF THE DRP AND COULD NOT REACH ANY INDEPENDENT CONCLUSION /DISALLOWANCE, I GNORING THE DIRECTIONS OF DRP. . WE THEREFORE, DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM AS PER DRPS RULING. RELATED GROUNDS ARE ALLOWED. 32 VIDE ITS GROUND NOS 12 TO 15 , ASSESSEE IS AGGRIEVED ON A TRANSFER PRICING ADJUSTMENT OF RS. 1,57,61,98 5/ - . TP ADJUSTMENT WAS MADE FOR THREE ITE MS; ONE FOR REIMBURSEMENT OF EXPENSES, SECOND FOR CORPORATE GUARANTEE AND THIRD WAS ON IT ENABLED SERVICES. 33 LD AR, AT THE OUTSET SUBMITTED THAT HE WAS NOT PRESSING THE GROUND AGAINST TP ADJUSTMENTS OF RS. 14 LAKHS ON REIMBURSEMENT OF EXPENSES. W ITH REGARD TO THE ADJUSTMENT DONE FOR CORPORATE GUARANTEE, LD AR SUBMITTED THAT CORPORATE GUARANTEE W AS NOT AN INTERNATIONAL TRANSACTION AND SOUGHT SUPPORT FROM THE FOLLOWING DECISIONS OF THE VARIOUS BENCHES OF T HE TRIBUNAL - SIRO CLINPHARM P LTD VS DCIT (IT NO. 2876/MUM/2014) - BHARTI AIRTEL LTD VS ADD CIT (ITA NO. 58 16/DEL/2012) - REDINGTON (INDIA) LTD VS JCIT - 49 TAXMAN.COM.146 (CHENNAI) - MARICO LTD V ACT (ITA NO. 8713 AND 8858/MUM/2011(70 TAXMAN.COM214) - M ICRO INK LTD V ACIT (ITA NO. 2873/AHD/10) - MANUGRAPH INDIA LTD V DCIT (ITA NO.2631/MUM/2015) 34 AS PER LD AR, ASSESSEE HAD GIVEN CORPORATE GUARANTEE TO ITS ASSOCIATED ENTERPRISES (AES) FOR A FIVE YEAR TERM LOAN OBTAINED FROM STANDARD CHARTERED BANK. ACCO RDING TO HIM, THERE WA S NO BENEFIT FOR THE ASSESSEE. VIZ - A - VIZ ADJUSTMENT OF RS. 25 LAKHS ON IT ENABLED SERVICES , IT WAS SUBMITTED THAT FACTS WERE SIMILAR TO AN ADJUSTMENT DONE BY THE TPO FOR THE PRECEDING ASSESSMENT YEAR. AS PER LD AR, THIS ITA NO 35/COCH/2017 23 TRIBUNAL O N ASSESSEES APPEAL FOR TH O SE YEARS HAD REMAND ED THE ISSUE BACK TO THE ASSESSING OFFICER FOR SELECTING COMPARABLES WHICH WERE HAVING FUNCTIONAL SIMILARIT Y TO THE ASSESSEE AND TO EXCLUDE DIS - SIMILAR COMPARABLES . PER CONTRA, LD DR SUBMITTED THAT TPO HAD CO RRECTLY APPLIED THE TN M METHOD FOR DETERMINING THE ARMS LENGTH PRICE OF IT ENABLED SERVICES RENDERED TO ITS AE. VIZ - A - VS CORPORATE GUARANTEE AS PER LD DR IT WAS NOTHING BUT AN INTERNATIONAL TRANSACTION AND SUSCEPTIBLE TO TP ADJUSTMENT . 35 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN ADMITTED POSITION THAT SOME OF THE COMPARABLES SELECTED BY ASSESSEE IN ITS STUDY WERE EXCLUDED BY TPO WHEREAS CERTAIN COMPARABLES WHICH WERE NOT IN THE LIST OF THE ASSESSEE WERE INCLUDE D. IN PRECEDING ASSES SMENT YEARS 2010 - 11 AND 2011 - 12 ALSO THERE WAS A SIMILAR ADJUSTMENT DONE BY TPO FOR ARM LENGTH PRICING BOTH FOR CORPORATE GUARANTEE AND FOR IT ENABLED SERVICES . WHEN THE ISSUE REACHED BEFORE THIS TRIBUNAL, IT WAS HELD AS UNDER: 75. GROUND NO. 8.2 PERTAIN TO THE TRANSFER PRICING ADDITION OF RS. 66,79,712/ - IN RESPECT OF THE CORPORATE GUARANTEE PROVIDED BY THE APPELLANT ON BEHALF OF ITS AES. THE APPELLANT IN THE RELEVANT A.Y HAS GIVEN A CORPORATE GUARANTEE TO ITS AE IN RESPECT OF A FIV E YEAR TERM LOAN OBTAINED BY THE AE FROM STANDARD CHARTERED BANK. THE TOTAL QUANTUM OF LOAN IS 19,01,480,000/ - . THE TPO MADE AN ADDITION OF A CORPORATE GUARANTEE FEE AT THE RATE OF 0.75% AND MADE THE ADJUSTMENT OF RS. 42,60,896/ - . THE TPO WAS OF THE VIEW T HAT AN ECONOMIC BENEFIT HAS BEEN PROVIDED AS A CORPORATE GUARANTEE BY THE APPELLANT. IT REJECTED THE SUBMISSIONS OF THE APPELLANT THAT THE AE WAS NOT BENEFITED BY THE GUARANTEE. 76. THE LD. AR SUBMITS THAT NO REAL BENEFIT HAD TRANSPIRED TO THE AE AS THE O VERALL DEBT POSITION OF THE AE REMAINED THE SAME. HE FURTHER SUBMITTED THAT AFTER THE CORPORATE GUARANTEE WAS EXTENDED, THE INTEREST RATE LIABILITY FOR THE AE HAD INCREASED. THE LD. DR ON THE OTHER HAND HAS RELIED UPON THE ORDER PASSED BY THE TPO AND DRP T O ADVANCE HIS SUBMISSIONS. 77. THE PERUSAL OF THE ORDER PASSED BY THE TPO AS WELL AS THE DRP SHOWS THAT THE MATTER HAS NOT BEEN EXAMINED IN A PROPER PERSPECTIVE. THE DRP WHILE DISPOSING OF THE ITA NO 35/COCH/2017 24 OBJECTIONS OF THE LD. AR DID NOT DEAL WITH THE EFFECT OF THE I NCREASED INTEREST RATES AND THE OVERALL DEBT POSITION OF THE AE AFTER THE CORPORATE GUARANTEE WAS GIVEN. THE SAID ISSUE IS REQUIRED TO BE EXAMINED AFRESH IN TERMS OF THE AFORESAID OBJECTIONS RAISED BY THE APPELLANT. THE ISSUE IS RESTORED TO THE FILE OF AO WITH THE ABOVE DIRECTIONS. THE GROUND NO. 8.2 IS ALLOWED FOR STATISTICAL PURPOSES. 78. GROUND NO. 8.3 PERTAINS TO THE TRANSFER PRICING ADDITION OF RS. 12,50,380/ - TO THE INCOME OF THE APPELLANT BY HOLDING THAT INTERNATIONAL TRANSACTIONS PERTAINING TO PROV ISION OF CORPORATE IT SERVICE DO NOT SATISFY THE ALP PRINCIPLE. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD RENDERED SOFTWARE DEVELOPMENT SERVICES TO ITS AES NAMELY AVBV AND ATSA. THE APPELLANT ADOPTED THE TNMM METHOD TO BENCH MARK ITS TRANSACTI ONS WITH AE. THE TPO SUBSTITUTED HIS OWN COMPARABLES AND DETERMINED THE ADJUSTMENT AT RS. 12,50,380/ - . THE DRP REJECTED THE OBJECTIONS RAISED BY THE APPELLANT IN THE RECTIFICATION ORDER. 79. THE LD. AR SUBMITS THAT THE COMPARABLE COMPANIES REJECTED BY THE TPO ARE WITHOUT ANY REASON AND THOUGH THE COMPANIES ARE FUNCTIONALLY COMPARABLE, THE COMPARABLES HAVE BEEN EXCLUDED. IT IS SEEN FROM THE CHART PREPARED BY THE AR AND THE FUNCTIONAL PROFILE PRODUCED THEREOF OF THE COMPARABLE COMPANIES, THE COMPANIES WHICH ARE FUNCTIONALLY SIMILAR TO THAT OF THE APPELLANT HAVE BEEN EXCLUDED. FOR EXAMPLE IN THE CASE OF MINDTREE LTD., THE SAID COMPANY HAS BEEN EXCLUDED ONLY BECAUSE IT HAS UNDER GONE MERGER. SIMILARLY IN THE CASE OF R SYSTEMS INTERNATIONAL LTD. AND HELIOS & MET HESON INFORMATION TECHNOLOGY LTD., THOUGH THE COMPANIES ARE FUNCTIONALLY COMPARABLE, THE SAME HAVE BEEN EXCLUDED ONLY FOR THE REASON THAT THEY FOLLOW DIFFERENT ACCOUNTING YEAR ENDING IN DECEMBER. THE EXCLUSION MADE ON THIS BASIS IS NOT PERMISSIBLE AND IS N OT ACCORDANCE WITH LAW. SIMILARLY, WHILE CHOOSING HIS OWN COMPARABLES, THE TPO HAS TICKED UP COMPANIES HAVING FUNCTIONS OF HIGH END IT SERVICES, IT CONSULTING, PRODUCT COMPANIES, BUSINESS INTELLIGENCE COMPANIES ETC. THE COMPANIES WHICH ARE FUNCTIONALLY DIS SIMILAR TO THAT OF THE ASSESSEE HAVE TO BE EXCLUDED FROM THE COMPARABLE LIST. 80. AS THE ISSUE REQUIRES RECONSIDERATION, WE REMIT THE SAME TO THE FILE OF AO TO PROPERLY APPLY THE COMPARABLES IN ACCORDANCE WITH THE OBJECTIONS RAISED BY THE APPELLANT IN TH E PRESENT APPEAL. GROUND NO. 8.3 IS ALLOWED FOR STATISTICAL PURPOSES. 36 FOR THE IMPUGNED ASSESSMENT YEAR ALSO WE DEEM IT APPROPRIATE TO REMIT THE ISSUE S RELATING TRANSFER PRICING ADJUSTMENT, IF ANY, REQUIRED ON CORPORATE GUARANTEE AND IT ENABLED SERVIC ES BACK TO THE FILE OF THE TPO/ ASSESSING OFFICER FOR CONSIDERATION AFRESH, IN LINE WITH THE DIRECTIONS GIVEN BY THIS TRIBUNAL FOR THE PRECEDING ASSESSMENT YEAR, REPRODUCED ABOVE. GROUND NOS 12 TO 15 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO 35/COCH/2017 25 37 NOW WE T AKE UP GROUND S 4 & 11 THROUGH WHICH ASSESSEE ASSAIL THE ADDITIONS MADE BY ASSESSING OFFICER WHILE COMPUTING THE MINIMUM ALTERNATIVE TAX U/S 115JB OF THE ACT. 38 BOOK PROFIT FOR THE PURPOSE OF 115JB WAS COMPUTED BY ASSESSING OFFICER AS UNDER: BOOK PROFIT AS COMPUTED BY THE ASSESSEE 257,50,61,465/ - ADD ADDITIONAL DEPRECATION DISALLOWED. 38,65,25,852/ - CAPITAL EXPENDITURE DISALLOWED 21,67,95,249/ - PROPOSED DIVIDEND 2,52,01,000/ - PROVISION FOR SALARY 34,22,20,000/ - PROVISION FOR WEALTH TAX 1,50,00, 000/ - PROVISION FOR SALES RELATED OBLIGATIONS 99,08,80,000/ - TOTAL BOOK PROFITS FOR MAT 455,,16,83,566/ - MAT@ 18.5% 84,20,61,460/ - LD AR SUBMITTED THAT OUT OF THE ABOVE ADDITIONS, DEPRECATION OF RS. 38,65,25,852/ - WHICH WAS DISALLOWED IN THE DRAFT AS SESSMENT ORDER WAS ALLOWED BY DRP AND THE ASSESSING OFFICER HAD GIVEN EFFEC T TO SUCH DIRECTIONS CORRECTLY AND THEREFORE, HE HAD NO GRIEVANCE. VIZ A - VIZ, DISALLOWANCE OF CAPITAL EXPENDITURE OF RS. 21,67,95, 249/ - , PROPOSED DIVIDEND OF R S. 2,52,01,000/ - , AND PROVISION FOR SALARY RS. 34,22,20,000/ - , LD AR SUBMITTED THAT THERE WA S NO CHA R GE OF THESE A MOUNTS IN THE P&L ACCOUNT . FURTHER, AS PER LD AR, PROPOSED DIVIDEND WAS NOT A PART OF P&L ACCOUNT BUT OFFERED ONLY IN P&L APPROPRIATION ACCOUNT. ACCORDING TO HIM , UNLESS THERE WAS A DEBIT IN THE P&L ACCOUNT THERE C OULD BE NO ADDITION WHILE COMPUTING MAT. LD AR SUBMITTED THAT SIMILAR ITEMS ITA NO 35/COCH/2017 26 WERE CONSIDERED FOR ADDITION WHILE COMPUTING MAT FOR PRECEDING ASSESSMENT YEAR ALSO . AS PER LD AR IN THE SAID YEAR , ON ASSESSEE S OBJECTION, DRP HAD GIVEN A FINDING THAT NO SUCH ADDITION C OULD BE MADE. LD AR SUBMITTED THAT FOR THE ASSESSMENT YEAR 2011 - 12, THE DEPARTMENT HAD NOT FILED ANY APPEAL AGAINST SUCH DIRECTIONS OF DRP. FURTHER, AS PER THE LD AR, SIMILAR ADDITION PROPOSED IN SUBSEQUENT YEAR 2013 - 14 WERE DROPPED IN THE FINAL ASSESSMENT. THUS, ACCORDING TO HIM, BY APPLYING PRINCIPLES OF CONSISTENCY, NO SUCH ADDITION C OULD HAVE BEEN MADE IN THE IMPUGNED YEAR AS WELL. LD DR , ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW. 39 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS FOR ADDITIONAL DEPRECIATION OF RS. 38,65,25,852/ - , DRP HAD DELETED SUCH ADDITION AND ASSESSING OFFICER HAD PASSED THE FINAL ASSESSMENT ORDER. THEREFORE , ASSESSEE CA N HAVE NO GRIEVANCE IN THIS REGARD. AS FOR TWO OTHER ITEMS OF EXPENSES, NAMELY CAPITAL EXPENDITURE OF RS. 21,67,95,249/ - AND PROVISION FOR SALARY OF RS. 34,22,20,000/ - , WE FIND THAT THE LD ASSESSING OFFICER HAD PROCEEDED TO ADD THESE WHILE COMPUTING THE INCOME LIABLE FOR MAT, WITHOUT ANY DISCUSSION. CLAIM OF THE ASSESSEE IS THAT THERE WERE NO DEBITS FOR THESE AMOUNTS IN THE P&L ACCOUNT. DRP ALSO DID NOT CONSIDER THE ISSUE ON MERITS. AS FOR THE PROPOSED DIVIDEND OF R S. 2,52,01,000/ - , CLAIM OF THE ASSESSEE IS THAT SUCH PROPOSED DIVIDEND WAS PART OF P&L APPROPRIATION ACCOUNT AND NOT P&L ACCOUNT AND C OMPUTATION OF MAT PROFIT STARTED ONLY FROM THE BOOK PROFIT AS PER P&L ACCOUNT. CONTENTION OF THE REVENUE IS THAT BOOK PROFIT THAT IS TO BE CONSIDERED FOR MA T IS THE NET PROFIT AS PER P&L ACCOUNT AFTER APPROPRIATIONS. SINCE NONE OF THE LOWER AUTHORITIES HAVE ITA NO 35/COCH/2017 27 CONSIDERED THE ISSUE ON MERITS, WE ARE OF THE OPINION THAT A VERIFICATION AT THE END OF THE LD ASSESSING OFFICER IS REQUIRED. ALL THESE THREE ITEMS HAVE TO BE CONSIDERED AFRESH BY LD ASSESSING OFFICER, AFTER TAKING INTO ACCOUNT OBJECTIONS RAISED BY THE ASSESSEE. 40 MAKING HIS SUBMISSION S ON THE DISALLOWANCE OF RS. 1,50,00 ,00 0/ - MADE WHILE COMPUTING MAT , LD AR SUBMITTED THAT THAT THIS SUM PROVISION FOR WEALTH TAX. AS PER THE LD AR EXPLANATION (1) TO SECTION 115JB ONLY REFERRED TO INCOME TAX . AS PER THE LD AR , DEFINITION OF INCOME TAX GIVEN IN EXPLANATION 2 D ID NOT INCLUDE WEALTH TAX . THUS, ACCORDING TO LD AR , WEALTH TAX PROVISION C OULD NOT BE ADDED WHILE COMPUTING MAT RELIANCE WAS PLACED ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF JCIT VS USHA MARTINE INDUSTRIES LTD REPORTED IN 104 ITD 249 (KOLKATA) AND THAT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ECHJAY FORGINGS P LTD REPORTED IN 251 ITR 15 . PER CONTRA, LD DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 41 WE HAVE HEARD THE RIVAL SUBMISSIONS. WHAT WE FIND IS THAT THE ASSESSING OFFICER HAD ADDED BACK THE PROVISION OF RS. 1,50,00,000/ - FOR WEALTH TAX, WITHOUT ANY DISCUSSION AS TO WHY HE ADDED SUCH AMOUNT. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT SUCH DISALLOWANCE ALSO REQUIRES A FRESH LOOK. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ALSO AND REMIT IT BACK TO THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES WITH REGARD TO THE TREATMENT OF ABOVE ITEMS WHILE COMPUTING MAT TAX ITA NO 35/COCH/2017 28 AND REMIT IT BACK TO THE LD ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 42 SUBMITTING HIS ARGUMENT ON THE LAST OF THE ADDITION, MADE FOR MAT COMPUTATION WHICH IS A PROVISION OF RS. 99,08,80,000/ - FOR SALES RELATED OBJECTIONS, LD AR STATED THAT IT WAS A CRYSTALLIZED AND SCIENTIFICALLY COMPUTED PROVISION. SUBMISSIONS OF THE LD AR W AS THAT THE PROVISION OF RS. 99,08,80,000/ - WAS AN ASCERTAINED CONTRACTUAL OBLIGATION. LD AR WAS ALSO BROUGHT TO OUR ATTENTION TO PAGES 68 & 92 OF THE ANNUAL REPORT. ACCORDING TO HIM, PROVISION CONSISTED OF ANNUAL SPECIAL INCENTIVE, DEALER PROGRAMME EXPENS ES, BUSINESS DEVELOPMENT INCENTIVE AND WARRANTY CLAIMS PROVISION. LD AR ALSO POINTED OUT THAT ADDITION OF SIMILAR PROVISION MADE IN ASSESSMENT YEAR 2011 - 12 WAS DELETED BY DRP AND DEPARTMENT NEVER APPEALED AGAINST IT. AS PER LD AR, EVEN IN THE SUBSEQUE NT ASSESSMENT YEAR 2013 - 14, NO SUCH ADDITIONS WERE PROPOSED OR DONE BY THE ASSESSING OFFICER WHILE COMPUTING MAT. RELIANCE WAS PLACED ON THE JUDGMENTS OF THE HONBLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS VS CIT (245 ITR 428), ROTORK CONTROLS INDIA P LTD VS CIT (314 ITR 62) AND RADHASOMI SATSANG VS CIT (193 ITR 321). PER CONTRA, LD DR SUBMITTED THAT THERE WAS NO SCIENTIFIC BASIS ON WHICH THE ASSESSEE HAD MADE THE PROVISIONS. 43 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECOR D. AS ALREADY STATED BY US, ASSESSING OFFICER WHILE COMPUTING MAT HAD MADE ADDITION S TO THE BOOK PROFIT WITHOUT DISCUSSING THE REASONS AS TO WHY HE MADE SUCH ADDITIONS. CLAIM OF ITA NO 35/COCH/2017 29 THE ASSESSEE IS THAT THE SUM OF RS. 99,08,80,000/ - WAS ARRIVED ON A SCIENTIF IC BASIS AND COULD NOT HAVE BEEN CONSIDERED AS AN UNASCERTAINED LIABILITY. THERE IS ALSO ONE CONTENTION THAT NO SUCH DISALLOWANCE WAS MADE WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISION OF THE ACT. AT THIS JUNCTURE , IT IS APPOSITE TO REPRODUCE THE OBSERVATIONS OF THE HONBLE APEX COURT WITH REGARD TO PROVISION FOR SALE RELATED OBLIGATIONS AS APPEAR ING IN PARA 1 4 OF THE JUDGMENT IN THE CASE OF ROTORK CONTROL INDIA P LTD (SUPRA) : 14. IN THIS CASE, WE ARE CONCERNED WITH PRODUCT WARRANTIES. TO GIVE A N EXAMPLE OF PRODUCT WARRANTIES, A COMPANY DEALING IN COMPUTERS GIVES A WARRANTY FOR A PERIOD OF 36 MONTHS FROM THE DATE OF SUPPLY. THE SAID COMPANY CONSIDERS FOLLOWING OPTIONS : (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 PER CENT. OF TURNOVER OF THE COMPANY BASED ON PAST EXPERIENCE (HISTORICAL TREND). THE FIRST OPTION IS UNSUSTAINABLE SINCE IT WOULD TANTAMOUNT TO AC COUNTING FOR WARRANTY EXPENSES ON CASH BASIS, WHICH IS PROHIBITED BOTH UNDER THE COMPANIES ACT AS WELL AS BY THE ACCOUNTING STANDARDS WHICH REQUIRE ACCRUAL 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 COSTS IN RESPECT OF REVENUE ALREADY RECOGNIZED (ACCRUED). IN OTHER WORDS, IT IS NOT BASED ON THE MATC HING CONCEPT. UNDER THE MATCHING CONCEPT, IF REVENUE IS RECOGNIZED THE COST INCURRED TO EARN THAT REVENUE INCLUDING WARRANTY COSTS HAS TO BE FULLY PROVIDED FOR. WHEN VALVE ACTUATORS ARE SOLD AND THE WARRANTY COSTS ARE AN INTEGRAL PART OF THAT SALE PRICE TH EN 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 THE MOST APPROPRIATE BE CAUSE IT FULFILS 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 THE 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 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 UNUTILISED AT THE END OF THE PERIOD PRESCRIBED IN THE WARRANTY. THEREFORE, THE COMPANY SHOULD SCRUTINISE THE HISTORICAL TREND OF WARRANTY PROVISIONS MADE AND THE ACTUA L 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 THE YEAR END OF FUTURE WARRANTY EXPENSES. SUCH ESTIMATES NEED REASSESSMENT EVERY YEAR. AS ONE REACH ES 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 THROUGH A PRO RATA REVERSAL OR OTHERWISE WOUL D REQUIRE ITA NO 35/COCH/2017 30 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 WA Y. IN OUR 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 ESTIM ATE OF THE OBLIGATION WAS ALSO POSSIBLE. THEREFORE, THE APPELLANT HAS 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 TH E THREE CONDITIONS FOR RECOGNISING A LIABILITY FOR THE 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 THE 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 TH E TRIBUNAL IN THIS CASE. 44 WE FIND THAT NEITHER THE ASSESSING OFFICER NOR THE LD DRP HAD APPLIED THEIR MIND TO THE NATURE OF THE PROVISION OF RS. 99,08,80,000. CONTENTION OF THE LD AR IS THAT NO DISALLOWANCE WAS MADE WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISION OF THE ACT . THIS MAY HAVE BEEN AN ERROR COMMITTED B Y THE ASSESSING OFFICER AND , IN OUR OPINION, IT WILL NOT STOP THE ASSESSING OFFICER FROM MAKING AN ADDITION FOR MAT WORKING, IF THIS WAS AN UNASCERTAINED LIABILITY. NO DOUBT, REVENUE I S HAVING OTHER COURSE OPEN TO IT, IF IT IS OF THE OPINION THAT THE ALLOWANCE WAS ERRONEOUSLY GIVEN WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISION OF THE ACT. CONSIDERING THE FA C T S AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THIS ISSUE ALSO REQUIR ES A FRESH VISIT BY THE ASSESSING OFFICER. WE, THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE RELATING TO MAT BACK TO THE ASSESSING OFFICER FOR CONSIDERATION AFRESH. ITA NO 35/COCH/2017 31 45 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF JULY 2017 . SD/ - SD/ - (GEORGE GEORGE K) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOU NTANT MEMBER COCHIN: DATED 24 TH JULY 2017 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN