MRF LTD.,CHENNAI V. DCIT LTU-2, CHENNAI

ITTPA 68/CHNY/2018

AI Insights

The case involves M/s. MRF Ltd., which appealed against the final assessment order passed by the Deputy Commissioner of Income Tax, LTU-2, Chennai, for the assessment year 2014-15. The primary issues in the appeal included the transfer pricing adjustment related to the electricity supplied by the eligible power unit, disallowance of depreciation on retention money, disallowance of deduction under section 80JJAA, and disallowance of premium charges on forward contracts. The Tribunal examined each issue in detail, considering the arguments presented by both parties and relevant legal provisions and precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107390 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Other Referred Cases: Bharat Earth Movers vs. CIT, CIT Vs Woodward Governor India Ltd, Texas Instruments case, ACIT Vs. Vireet Investments, Rotork Controls India (P) Ltd. vs. CIT, Hero Cycles (P) Ltd. vs. CIT, Dalmia Cement (Bharat) Ltd. vs. CIT, Mavilayi Service Co-operative Bank Ltd. case, VATIKA Township (P.) Ltd. case, CIT vs. Madras Refineries Ltd., CIT vs. Industrial Development Corporation of Orissa Ltd., CIT vs. Jeevandas Laljiee & Sons, CIT vs. Infosys Technologies Ltd., CIT vs. Sambandam Spinning Mills (P) Ltd., CIT vs. Kuber Singh Bhagwandas, CIT vs. JJ Glastronics P Ltd, CIT vs. Texas Instruments, CIT vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: VIKRAM VIJAYARAGHAVAN
• Keywords: Set aside; Revenue expenditure; Transfer pricing; Retrospective amendment; Business expenditure; Question of law; Depreciation; Commercial expediency; Earning of tax free income; Rule 8D
• Section: 22; 13; 37; 14A; 115JB; 37(1); 20

Judgement Text

"आयकर अपीलीय अिधकरण, ’डी’ \u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ी अिमताभ शु\u0018ा, लेखा सद\t क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER IT (TP) A No.68/Chny/2018 िनधा\u000eरण वष\u000e/Assessment Year: 2014-15 M/s.MRF Limited, New No.114, (Old No.124), Greams Road, Chennai – 600 006. v. The Deputy Commissioner of Income Tax, LTU-2, Chennai – 600 034. [PAN: AAACM 4154G] (अपीलाथ\u0015/Appellant) (\u0016\u0017यथ\u0015/Respondent) अपीलाथ\r की ओर से/ Appellant by : Shri Vikram Vijayaraghavan, Advocate \u0011\u0012थ\r की ओर से /Respondent by : Shri A. Sasikumar, CIT सुनवाईकीतारीख/Date of Hearing : 13.12.2024 घोषणाकीतारीख /Date of Pronouncement : 28.02.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Assessing Officer passed u/s.143(3) / 144C(13) of the Income Tax Act, 1961 [herein after “Act”] dated 09.10.2018 for assessment year 2014-15 (hereinafter in short “AY\") pursuant to the DRP directions dated 27.09.2018. 2. Brief facts of the case are that, the assessee company is engaged in the business of manufacturing and selling of automobile tyres, tubes, IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 2 :: flaps and other rubber products. The assessee company had filed its return of income for the assessment year 2014-15 on 28.11.2014 admitting total income of Rs.1054,17,99,530/- and book profit u/s.115JB of the Act of Rs.770,49,49,961/-. Later the case of the assessee was selected for scrutiny under CASS and the AO issued statutory notices and pursuant to it, assessee replied and the AO referred certain Specified Domestic Transaction (SDT) to the Transfer Pricing Officer (TPO), who vide order dated 25.10.2017 ordered downward adjustment of Rs.66,94,650/- on the SDT referred by the AO and based on that, the AO passed the draft assessment order on 29.12.2017. The assessee preferred objections before the Ld. DRP, which passed its directions dated 27.09.2018 and pursuant to it, the AO had passed the final assessment order dated 09.10.2018, determining the total assessed income as under;- - Particulars Rs. Income as per return dated 28/11/2014 1054,17,99,530 1 Transfer Pricing Adjustment 66,94,650 2 Disallowance of depreciation on retention money payable 87,57,934 3 Disallowance excess claim of deduction u/s 80JJAA 3,15,55,429 4 Disallowance of Forward Cover Premium Charges 52,32,74,580 5 Disallowance u/s 14A r.w.Rule 8D 31,10,129 6 Disallowance of expenses incurred on Cricket Pace Foundation 3,89,00,000 7 Disallowance of excess claim of weighted deduction u/s. 35(2AB) 95,500 8 Disallowance of excess provision for warranty 20,54,23,000 Assessed Income Assessed Income (rounded off) 1135,96,10,752 1135,96,10,750 IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 3 :: Aggrieved by the final order of AO, the assessee is now in appeal before us. 3. Ground No. 1 is general in nature and therefore does not call for any specific adjudication. 4. Ground Nos. 2.1 to 2.3 - Transfer Pricing Adjustment u/s.80- IA r.w.s. 92BA of the Act 4.1 Brief facts are that, the assessee company has its wind energy division which generates electricity at Nettur and was eligible for deduction u/s 80-IA of the Act. During the year, the assessee had generated electricity of 20,489,250 units, which were transferred to the manufacturing units through the transmission lines of Tamil Nadu Electricity Board (TNEB/TANGEDCO). For the electricity transferred to the non-eligible unit, the eligible power units recorded revenue [Rs.11,35,28,828/-] at the rate of Rs. 5.50 per unit in terms of Section 80-IA(8) of the Act. For arriving at this rate, the assessee is noted to have applied CUP Method and accordingly, the power generating unit has benchmarked the same to the rate at which TNEB supplies to industrial consumers including the consuming unit of the assessee located in Thiruvottiyur, Chennai i.e. Rs.5.50 per unit. It was brought to our notice that, this rate of Rs.5.50 per unit has been accepted by the TPO while computing the profits and gains in respect of electricity supplied by the IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 4 :: eligible power unit to the consuming manufacturing unit. However, the TPO noted that the consuming unit was also paying wheeling charges to TNEB which inter alia included sum of Rs.58,56,697/- paid towards the electricity wheeled and supplied through transmission lines which was received from the eligible power generating unit. According to the TPO, the assessee had omitted to adjust the wheeling charges while determining the ALP transfer rate and accordingly adjusted the same to the transfer value of power and thereby computed a downward adjustment of Rs.66,94,650/-, which was confirmed by the DRP. Aggrieved, the assessee is before us. 4.2 Assailing the action of the lower authorities, the Ld. AR pointed out that, ordinarily, the wheeling charges is always borne by the consumer of electricity i.e., in this case by the consuming non-eligible unit at Thiruvotriyur and therefore the eligible power unit was not required to factor the same into its transfer rate. Our attention was invited to Section 42 of the Electricity Act, 2003, which permits free access to electricity generated by any person other than the TNEB; and also, Sub-section (2) of 42 of the Electricity Act, which provides for levy of surcharge and wheeling charges that may be collected from the user of the electricity generated by third party. Further, Sub-section (3) of Section 42 of the Electricity Act provides that, when a consumer requires supply of IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 5 :: electricity from a generating company (other than the distribution licensee i.e., TNEB), it has to obtain permission from TNEB for wheeling such electricity; Sub-section (4) of Section 42 of the Electricity Act provides that where TNEB permits a consumer to receive supply of electricity from a person other than TNEB, such consumer shall be liable to pay an additional surcharge on charges of wheeling. In the light of these provisions, according to Ld.AR, when a consumer purchase electricity from other generators, TNEB charges wheeling fees for using their transmission and distribution networks to deliver their electricity; and according to him, it is the consumer of electricity, who is liable to pay wheeling charges, and that the power generating unit i.e. eligible unit, in the present case, is not required to be bear the same. The Ld. AR thereafter showed us that, the consuming unit was not only bearing the wheeling charges in relation to the electricity received from the eligible power generating unit, but also, incurred wheeling charges qua the electricity purchased from TNEB. In this regard, he invited our attention to the details of wheeling charges which was added in the electricity bill under “other adjustments” of the consuming unit (Thiruvotriyur) in respect of the electricity procured by the same consuming unit from TNEB. The Ld.AR drew our attention to the sample bill, placed at Page 256 of the convenience compilation, which shows that the wheeling charges included in the ‘other adjustments’ amounted to Rs.6,84,183/-, IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 6 :: and this was charged over and above the price of Rs.5.50/unit. According to Ld.AR therefore, it is the consumer of electricity who is liable to pay wheeling charges as per the Electricity Act, 2003, over and above the normal electricity rate charged by TNEB. The Ld. AR thus contended that, the assessee had rightly applied the CUP parameters and had made a like-for-like comparison viz., since the benchmark rate of TNEB of Rs.5.50/unit was exclusive of wheeling charges; the eligible unit had likewise adopted the same transfer rate at Rs.5.50 per unit without making adjustment for wheeling charges. Per contra, the Ld. CIT, DR supported the order of the lower authorities. 4.3 Heard both the parties. As noted above, there is no dispute between the parties regarding the determination of transfer rate of power at Rs.5.50 per unit, which as noted above, has been benchmarked to the rate charged by the TNEB for supply of power to the same manufacturing unit. The limited issue for adjudication before us is, whether the wheeling charges paid by the consuming unit to TNEB, towards the electricity supplied by the captive power unit, should have been adjusted / reduced from the said benchmark rate or not. Having taken note of the above facts, we observe that, it is a matter of fact that, the amount paid by the consuming unit to TNEB was Rs. 5.50/unit plus wheeling charges. Meaning thereby, the consuming unit was paying wheeling charges to IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 7 :: TNEB over and above the industrial electricity rate of Rs.5.50/unit, which was used as the basis to benchmark the transfer price of power between the eligible power unit and the manufacturing consuming unit. Hence, as a matter of parity and applying the principles of CUP Method, we are in agreement with the assessee that, when the wheeling charges paid to third party was not included/adjusted for the purposes of arriving at the ALP electricity rate, then, correspondingly, the wheeling charges borne by the consuming unit in relation to the electricity supplied by the eligible unit, was also not required to be adjusted from the transfer price of Rs.5.50/unit, on the given facts of the present case. According to us therefore, the transfer rate Rs.5.50 per unit adopted by the eligible unit does not call for any interference. Hence, the impugned transfer pricing adjustment made by the TPO/AO is held to be unjustified and is accordingly directed to be deleted. This ground is therefore allowed. 5. Ground No. 3 to 3.4 - Disallowance of depreciation / expenses in relation to the retention money payable. 5.1 The facts as noted are that, the assessee entered into purchase contracts for both capital goods and revenue items, wherein there is a retention money component, which is essentially a small portion of the bills value for the contract. The assessee withholds the retention money component of the contract value and the same is paid only upon after IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 8 :: successful performance of the machinery / item. The assessee however records the liability to pay such retention money once obligation is created on the basis of invoices by following the mercantile system of accounting. However, according to the AO, the retention money component accounted in the books of accounts, is contingent in nature and therefore not allowable. The AO has therefore disallowed the depreciation relatable to the retention money component on the capital goods and also the expenditure qua the retention money component on the revenue items, while assessing the total income. It is noted that the Ld. DRP has confirmed the action of the AO. Aggrieved by the aforesaid action, the assessee is before us. 5.2 We have heard both the parties and perused the records. At the outset, the Ld. AR of the assessee brought to our notice that the very same issue had come up for adjudication before this Tribunal in assessee’s own case for AY 2017-18 to 2019-20 in ITA Nos.64 & 65/CHNY/2022 & 41/CHNY/2023, wherein the Tribunal had deleted the disallowance, by holding as under: - “5.2 The Ld. Counsel of the assessee stated that the retention moneys payable represents a liability that has actually accrued, and the full value of the liability is recognized in the books in accordance with the accounting principles and applicable mercantile system of accounting. 5.3 Further the Ld.Counsel relied on the Hon'ble Supreme Court in Bharat Earth Movers vs. CIT [2000] 245 ITR 428 (SC) held as follows: IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 9 :: \"4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date.\" Hence, the ld. Counsel argued that the entire liability is allowable as revenue expenditure/ depreciation on the capitalised expenditure. Further he stated that this issue has been decided in favour of the assessee in its own case by this Hon'ble ITAT in ITA No.641 to 645/Chny/2018 (Enclosed in Page No.13 of the paper book of case laws - Para 3.1 of the order) and hence prayed for deleting the addition of Rs.80,65,113/- made by the AO, by allowing the ground of the assessee. 5.4 Per contra the Ld.DR relied on the assessment order of the AO. 5.5 We heard the rival arguments and perused the materials on record. We note that the very same issue has already been dealt by this tribunal in assessee’s own case by holding as under: “3.1 We heard the rival contentions, find merit in the submissions made by the AR. Since, the assessee is maintaining mercantile system of accounting, upon the basis of which the profits or gains are computed under the head “Profits and gains of business or profession” for the relevant assessment years and it has been regularly following it, the assessee’s claims are in accordance with law and hence the AO is directed to allow depreciation on the retention money on capital account and also allow the retention money with held on revenue account. Corresponding grounds of the assessee are allowed for both these assessment years.” 5.6 In view of the matter and considering the facts and circumstances of the case, by respectfully following the decision of the tribunal(supra) we are of the considered opinion that the assessee’s claims are in accordance with law and hence the is AO directed to delete the addition and recompute the income of the assessee. Thus, the ground Nos.2 to 5raised by the assessee is allowed.” 5.3 Since the Revenue was unable to point out any change in facts or law, respectfully following the decision of the Tribunal in assessee’s own case (supra), the AO is directed to delete the impugned disallowance. Accordingly Ground No. 3 stands allowed. IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 10 :: 6. Ground Nos. 4 to 4.2 - Disallowance of deduction claimed u/s. 80JJAA of the Act 6.1 The facts as noted are that, the assessee had recruited employees in FY 2010-11 and FY 2011-12 in three of its units. However, these employees did not complete continuous employment of more than 300 days, during these respective years of joining but completed the same only in the succeeding FYs 2011-12 & 2012-13 respectively. The assessee is accordingly noted to have claimed deduction prescribed in Section 80JJAA of the Act in respect of the wages paid to such additional employees starting from FYs 2011-12 & 2012-13 respectively over a period of three (3) years. Accordingly, the relevant AY 2014-15 was the 3rd year of claim relating to FY 2011-12; and 2nd year of claim qua FY 2012-13. The AO however is noted to have disallowed the deduction on the principal premise that the deduction had already been denied in the initial year, since the workmen did not complete 300 days in the year of joining. The AO further held that, the deduction claimed in relation to the employees who joined in FY 2010-11 but completed 300 days in FY 2011- 12 was not admissible as the impugned AY was the 4th year and that deduction u/s 80JJAA is allowable only in the first three (3) years. On appeal the DRP is noted to have upheld the AO’s action of rejecting the IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 11 :: claim. Aggrieved by the aforesaid action of the AO/DRP, the assessee is before us. 6.2 We have heard both the parties and perused the records. The Ld. AR brought to our notice that, Section 80JJAA was introduced in the year 1999, to provide an impetus for additional employment. In terms of this provision, an assessee was entitled to additional deduction of 30% of the additional wages paid across three (3) years. It was further brought to our notice that, the condition precedent for availing this deduction was that, the ‘eligible workmen’ should be employed for a period of more than 300 days during the previous year of employment. The relevant provision reads as under: - “80JJAA(2): (ii) “regular workman”, does not include— … (c) any other workman employed for a period of less than three hundred days during the previous year;” 6.3 The Ld. AR pointed out that the plain language of the above restriction meant that, any new employees recruited/employed after the month of May in any previous year could not be included for the purpose of claiming deduction under section 80JJAA, as he could not have possibly completed 300 days of employment in that year. According to Ld. AR, realizing this lacuna, the Legislature introduced a curative & beneficial IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 12 :: amendment in the form of a proviso, by the Finance Act 2018, whereby it was provided that the period of employment of a new employee would also take into account his continuous employment in the immediately preceding previous year. The relevant second proviso to section 80JJAA(2)(ii) [as amended] in 2018, read as under: “80JJAA(2)(ii) … Provided further that where an employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly” 6.4 In view of the above curative amendment, therefore, if the workman is employed for less than 300 days in the year of joining but his period of stay exceeds 300 days in the succeeding year, then such workman would qualify as ‘eligible workman’ in the succeeding year and his wages shall be eligible for additional deduction u/s 80JJAA of the Act. According to Ld. AR, the above amendment being a curative and beneficial amendment ought to be held as retrospective in nature and hence applicable to the year in question as well. He thus argued that, the assessee had rightly claimed deduction u/s 80JJAA in respect of the new employees who did not complete continuous employment of more than 300 days during their respective years of joining i.e., FYs 2010-11 & IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 13 :: 2011-12, but completed the same only in the succeeding FYs 2011-12 & 2012-13 respectively. According to the Ld. AR therefore, the AO ought to have allowed the pro-rata remaining deduction in the relevant year as well. 6.5 Per contra, the Ld. DR argued that this Tribunal in assessee’s own case for AY 2012-13 in ITA No.614 /CHNY/2018 had decided this issue against it and therefore urged that the order of the AO be upheld. 6.6 The Ld. AR in his rejoinder, brought to our notice that, the earlier decision of this Tribunal in their own case for AY 2012-13 was rendered by following the decision of the Bangalore Bench of this Tribunal in the case of M/s.Texas Instruments (reported in 82 taxmann.com 264) wherein the deduction claimed u/s 80JJAA of the Act was disallowed on the ground that the new employees had not put in service of 300 days in the year of employment. The Ld. AR however brought to our notice that, subsequently the Bangalore Bench of this Tribunal in the same case of M/s Texas Instruments (115 taxmann.com 154) took note of the above referred amendment/proviso brought in Section 80JJAA by the Finance Act 2018 and held such amendment to be clarificatory in nature. The Tribunal accordingly held that the company was entitled to claim deduction under section 80JJAA, even if an employee completes service of 300 days across two (2) successive years, starting from the year in which IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 14 :: the service of 300 days was completed, and that the benefit of such proviso was available in the years prior to 2018 as well. We note that this decision of the Bangalore Tribunal has since been affirmed by the Hon’ble Karnataka High Court which is reported in 435 ITR 1. The relevant findings taken note of by us is as follows: - “16.8 Admittedly, the provisions concerned, i.e. Section 80JJ-AA, comes under Chapter-VI-A of the IT Act, which deals with deductions in certain income; this deduction is issued and or permitted as an incentive to the Assessee on fulfilling certain criteria as required under the various provisions under Chapter-VI-A. The incentive of the deduction provided under section 80JJ-AA is with an intention to encourage the Assessee to employ more and more people, provide employment and, in lieu thereof, permit the employer/assessee to deduct certain amounts from the income when the returns are filed. It is with this object, purport and intent of section 80JJ-AA of the Act that the present facts and circumstances would have to be considered. It is also required for the Assessing Officer, CITA, Income-tax Appellate Tribunal, as also any other officer to always interpret and or apply the provisions of the Act, taking into consideration the intent and purport of the said provision. 16.9 The meaning or interpretation now sought to be given by Sri. Aravind, learned Senior Panel counsel is that only if the employee were employed for a period of 300 days in a particular financial year, only then deductions could be claimed, if not the deductions could not be claimed even though such employee has been employed for 300 continuous days or more. 16.10 We would disagree with the said contention. What is required is for a person to be employed for a period of 300 days continuously. There is no such criteria made out for a person to be employed in any particular year or otherwise. If such a restrictive interpretation is given, then any person employed post 5th June of a particular year would not entitle the Assessee to claim any deduction. Thus in order to claim the benefit under section 80JJ-AA, an employer would have to hire the workmen before 5th June of that year. As a corollary, since the Assessee would not get any benefit if the workmen were engaged post 5th June, the employer/Assessee may not even employ anyone post 5th June, which would militate against the purpose and intent of section 80JJ-AA, which is the encourage creation of new employment opportunities. IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 15 :: 16.11 The Income-tax Appellate Tribunal, while considering a similar situation as in Bosch Ltd. (supra) held that so long as the workman employed for 300 days, even if the said period is split into two blocks, i.e. the assessment year or financial year, the Assessee would be entitled to the benefit of Section 80JJ-AA in the next assessment year and so on so forthwith for a period of three years. The Income-tax Appellate Tribunal, having held to that effect, in our considered opinion, it would not be open for the Revenue to now contend otherwise, more so since the said order has attained finality on account of the Revenue not having filed an appeal. 16.12 It is sought to be contended by Sri. K.V. Aravind, learned Senior Panel counsel that the fact that such an interpretation could not be given is established by the curative amendment carried out in the year 2018 wherein it is clarified that an assesses whose employee completes 300 days in a second year would also be entitled to a deduction for three years therefrom. Thus he submits that the amendment having been brought into force in the year 2018 the present matter relating to the year 2007-2008, the said curative or clarificatory amendment would not come to the rescue of the Assessee and as such, the finding of the Tribunal in this regard is required to be set aside. 16.13 We are unable to agree with such a submission- the amendment of the year 2018 though claimed curative by Sri. Aravind, we are of the considered opinion that the same is more an explanatory amendment or a clarificatory amendment which clarifies the methodology of applying section 80JJ-AA of the Act. If the submission of Sri. K.V. Aravind is accepted, then no employer/assessee would be able to fulfil the requirement of employing its labour/assessee prior to 5th June of that assessment year so as to claim the benefit of Section 80JJ-AA. Such a narrow and pedantic approach is impermissible. It also being on account of the fact that section 80JJ-AA relating to deductions under Chapter is an incentive and, therefore, has to be read liberally. In this aspect, we are also supported by the decision of the Apex Court in Mavilayi Service Co-operative Bank Ltd.'scase (supra), wherein the Apex Court has held that a benevolent provision has to be read liberally and reasonably and if there is an ambiguity in favour of the Assessee. 16.14 The Apex Court in the case Vatika Township (P.) Ltd. (supra) has also held similarly, in that if there is a benefit conferred by legislation, the said benefit being legislative's object, there would be a presumption that such a legislation would operate with retrospective effect by giving a purposive construction. Thus the clarificatory amendment of the year 2018 can also be said to apply retrospectively for the benefit of the Assessee even though the Revenue contends that there was no provision in the year 2007 permitting the Assessee to avail the benefit of IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 16 :: deduction when the employee works for a period of 300 days in consecutive years. 16.15 In view thereof, the substantial question No. 1 is answered by holding that the software professional/engineer is a workman within the meaning of section 2(s) of ID Act, so long as such a software professional does not discharge supervisory functions, the benefit of section 80JJ-AA can be claimed by an employer/assessee even if the employee were not to complete 300 days in a particular assessment year but in the subsequent year so long as there is continuity of employment, the Assessee could continue to claim further benefit in the next two years as provided in under section 80JJ-AA of the Act. 16.16 Accordingly, we answer Question No. 1 by holding that a software engineer in a software industry is a workman within the meaning of section 2(s) of the Industrial Disputes Act so long as the Software engineer does not discharge any supervisory role. 16.17 The period of 300 days as mentioned under section 80JJAA of the Act could be taken into consideration both in the previous year and the succeeding year for the purpose of availing benefit under section 80JJAA. It is not required that the workman works for entire 300 days in the previous year. 16.18 Hence, in the facts and circumstances of the case, the software engineer being workman having satisfied the period of 300 days, the assessee is entitled to claim deduction under section 80JJAA.” 6.7 Having regard to the above, we deviate from the view expressed in assessee’s own case for AY 2012-13 and respectfully follow the ratio laid down by the Hon’ble Karnataka High Court in the case of Texas Instruments (supra), and hold that the assessee was entitled to claim deduction u/s 80JJAA of the Act in respect of the new employees who did not complete continuous employment of more than 300 days during their respective years of joining i.e., FYs 2010-11 & 2011-12, but completed the same only in the succeeding FYs 2011-12 & 2012-13, in light of the IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 17 :: curative amendment made by insertion of proviso to Section 80JJAA, by the Finance Act, 2018. 6.8 We now come to the AO’s finding that, the relevant AY 2014-15 being the 4th year of claim, the deduction u/s 80JJAA was not allowable. As noted earlier, the assessee had recruited employees in FY 2010-11 and FY 2011-12 in three of its units and these employees did not complete 300 days of employment in that respective year of joining but completed 300 days when taking into account the succeeding FY (i.e., in FY 2011-12 and FY 2012-13 respectively). Having regard to the plain language used in the above referred proviso to Section 80JJAA, the assessee is noted to have rightly considered the 1st year of employment of those employees as FY 2011-12 (for employees who joined in FY 2010-11). Consequently, the assessee was eligible to claim deduction u/s 80JJAA in FY 2011-12, FY 2012-13 and FY 2013-14 (i.e., subject AY 2014-15) for employees joined in FY 2010-11. In the light of the aforesaid facts, we note that, the assessee company had claimed deduction only for a period of 3 years and not 4 years, as wrongly assumed by the AO. In support of this, the Ld.AR rightly drew our attention to the certificate issued by the Chartered Accountant in Form 10DA, which is found to be placed at Page No. 98 of the convenience compilation; wherein we note that, the relevant details in respect of this issue, such as, name of employee, date of joining and IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 18 :: salary details etc., were also filed before the AO. The Ld. CIT, DR was unable to controvert this factual aspect. For the aforesaid reasons, this particular reasoning given by the AO to deny the deduction claimed u/s 80JJAA of the Act in respect of the employees who joined in FY 2010-11 but completed 300 days in service in FY 2011-12 is held to be unjustified and is accordingly rejected. 6.9 In view of the above, we accordingly reverse the order of the lower authorities on this issue and direct the AO to allow the deduction u/s 80JJAA of the Act as claimed by the assessee in the return of income. Accordingly, this ground stands allowed. 7. Ground No. 5 to 5.4 - Disallowance of premium charges on forward contract on import of raw materials 7.1 The facts as noted are that, the assessee had incurred forward contract premium charges, which according to the assessee was in relation to the foreign exchange hedge/cover taken in relation to their import / export transactions and was therefore an allowable business expenditure. The AO, however, in the draft assessment order is noted to have disallowed the same. The DRP while disposing off the objections took note of the judgment of Supreme Court in the case of CIT Vs Woodward Governor India Ltd (312 ITR 254), and held that the premium paid for any forward contracts entered into to hedge any capital IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 19 :: expenditure, re-payment of borrowings or any other item of expenditure of capital account shall not be allowed, since the same is in capital field. It accordingly set aside this issue to AO to verify and accordingly allow / disallow the same. The AO in his final order is noted to have observed that, “In order to reduce the risk of exposing to the fluctuations in the foreign currency exchange rates, the assessee company entered in to hedging contracts with the banks. These contracts are entered in to keeping in mind the possible future fluctuations…..” With these observations, the AO however is noted to have concluded that, the forward contracts though for the purpose of protecting the assessee from exchange fluctuation risk, was speculative in nature and hence, retained the disallowance. Aggrieved by the final order of the AO, the assessee is now in appeal before us. 7.2 We have heard both the parties and perused the records. We note that this issue is no longer res integra, since the same issue had come up before the Tribunal in assessee’s own case in AY 2017-18, supra, wherein the Co-ordinate Bench of the Tribunal held as under: - “6.3 We heard the rival arguments and perused the materials on record. We note that the very same issue has already been dealt by this tribunal in assessee’s own case by holding as under: “5.1 We heard the rival submissions. Since, the assessee pleads that the foreign currency loan was used for the purpose of acquiring the assets in India, it is clear from the orders of the lower authorities that the relevant facts in connection with this claim have not been verified and hence this issue is remitted IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 20 :: back to the AO for verification as to whether the impugned asset(s) were purchased in India with the foreign currency loan or not. If it is/they are of Indian origin, then section 43A would not apply. In such case, since the assessee is maintaining its books of account on mercantile system basis and following the Accounting Standard-11, then the ratio of Woodward Governor India Pvt. Ltd., [312 ITR 244 (SC)] would apply and accordingly the loss claimed by the assessee has to be allowed. Subject to the above verification and findings, the issue is remitted back to the AO and the assessee’s corresponding grounds of appeals are treated as partly allowed for statistical purposes. 5.2. With regard to the premium charges on foreign currency loan, on the same ratio laid by the Supreme Court in 312 ITR 244, the loss claimed by the assessee has to be allowed over a period of contracts. The corresponding grounds of the assessee’s appeals are allowed for both the assessment years.” 6.4 In view of the matter and considering the facts and circumstances of the case, by respectfully following the decision of the tribunal we are of the considered opinion that the forward contract premium charges on foreign currency claimed by the assessee is allowed and hence we delete the addition by directing the AO to recompute the income of the assessee. Thus we allow the ground Nos.6 to 10 taken by the assessee.” 7.3 The Ld. CIT, DR was unable to point out any change in law or facts and therefore we respectfully following the above decision of the co- ordinate Bench direct the AO to delete the impugned addition and allow the deduction for forward premium charges paid by the assessee. These grounds are therefore allowed. 8. Ground No. 6 to 6.6 – Disallowance u/s 14A read with Rule 8D 8.1 The facts as noted are that, the assessee had derived exempt income of Rs.15,36,383/- against which no disallowance was offered u/s 14A of the Act. The AO not being agreeable to the stand taken by the IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 21 :: assessee is noted to have invoked Rule 8D of the Income Tax Rules, 1962 [herein after the Rules] and computed an amount of Rs.31,10,129/- disallowable u/s 14A r.w.r 8D of the Rules. The AO accordingly added the disallowance of Rs.31,10,129/- u/s 14A r.w. Rule 8D both while computing income under normal provisions as well as book profit u/s 115JB of the Act. The Ld. DRP is noted to have principally upheld the disallowance, but directed the AO to re-compute the disallowance u/s 14A read with Rule 8D after excluding the investments in debt-oriented funds which were not capable of yielding exempt income. Aggrieved by the aforesaid order, the assessee is now in appeal before us. 8.2 We have heard both the parties and perused the records. We note that assessee has earned exempt income of Rs.15,36,383/- and the AO has disallowed an amount of Rs.31,10,129/- u/s.14A r.w. Rule 8D, which action per-se cannot be accepted because the disallowance u/s.14A should not exceed the exempt income received by the assessee, as held by the Hon’ble Madras High Court in the assessee’ own case in Tax Case Appeal No. 217 of 2021, wherein the Hon’ble High Court held as under:- “5. The Tribunal, after taking note of the submissions made by the assessee and also the decision in the case of Joint Investments Pvt. Ltd. Vs Commissioner of Income Tax [372 ITR 694 (Delhi)], had noted that the assessee earned dividend income for the assessment years 2012~13 and 2013~14 and disallowance, if any, has to be restricted to the dividend income earned as per the decision in Joint Investments (supra). Therefore, the matter was remanded to the Assessing Officer IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 22 :: to restrict the disallowance in accordance with the said decision. The decision of the Division Bench of this Court in the case of Marg Ltd. Vs Commissioner of Income Tax [(2020) 120 taxmann.com 84] is also to the same effect. 6. Therefore, we find that there is no error in the order passed by the Tribunal and no substantial question of law arises for consideration on the said issue. Accordingly, the tax case appeal is dismissed and the substantial question of law is left open and the Assessing Officer shall comply with the directions issued by the Tribunal. No costs.” 8.3 Therefore, respectfully following the decision of the Hon’ble Madras High court in assessee’s own case (supra), we are of the considered view that the assessee’s claim of disallowance U/s.14A r.w. Rule 8D be restricted to the dividend income earned i.e. Rs.15,36,383/-. The AO is accordingly directed to delete disallowance to the extent of Rs.15,73,746/- [31,10,129 – 15,36,383]. 8.4 We now come to the issue regarding the addition made on account of disallowance u/s 14A r.w. Rule 8D while computing book profit u/s 115JB of the Act. After hearing both the sides, and going through the records of this case, we find that the issue in hand is squarely covered by the decision of the Special Bench of the Tribunal in the case of ACIT Vs. Vireet Investments (165 ITD 27), wherein the Special Bench has categorically held that provisions of section 14A read with Rule 8D will not apply while computing the book profit u/s.115JB of the Act. Our view is also endorsed by the decision of Hon’ble Delhi High Court in the case of PCIT vs Bhushan Steel Ltd (ITA No. 593, 594 of 2015) and Hon’ble Karnataka High Court in the case of PCCIT v. JJ Glastronics P Ltd (139 IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 23 :: taxmann.com 375), wherein also it was held that disallowance u/s.14A in terms of Rule 8D shall not be extended to the provision of section 115JB of the Act. Following the decisions (supra), we direct that no adjustment u/s 14A r.w. Rule 8D is to be made u/s.115JB of the Act and the AO is accordingly, directed to delete this addition made to the book profit. 8.5 Overall therefore, these grounds are partly allowed. 9. Ground Nos. 7 to 7.1 :- Disallowance of expenditure incurred on brand promotion and advertising by promoting Cricket pace foundation 9.1 The facts as noted are that, the assessee had incurred expenditure in relation to brand promotion and advertising by promoting Cricket Pace Foundation. The AO is noted to have disallowed the expenditure on the ground that the same was not incurred for the purpose of business as the Assessee does not get any publicity out of the same. The reasoning given by the AO is noted to be on the same lines as set out in the assessment orders for AYs 2006-07 & 2007-08. On appeal, the Ld. DRP following the decision of this Tribunal in assessee's own case for AY 2003-04, AY 2006- 07 and AY 2007-08 vide order in ITA No.1374 to 1377/Mds./2010 dated 11.03.2011 upheld the disallowance. Aggrieved, the assessee is now in appeal before us. IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 24 :: 9.2 We have heard both the parties and perused the records. We note that this issue is no longer res integra as, the Hon’ble Madras High Court in assessee’s own case in TCA No 1024 and 1025 of 2019 dated 29.03. 2021 has decided the issue in favour of assessee and allowed the deduction for the expenditure incurred for promoting Cricket Pace Foundation. The questions of law framed before the Hon’ble High Court were as under: - “i) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure incurred towards business promotion in the form of MRF Pace Foundation is being charity in nature and hence not an allowable deduction? (ii) Whether on the facts and circumstances of the case, the Tribunal was right in holding that the expenditure incurred towards business should be only in the nature of advertisement by way of sponsorship of sport and not by any other mode? and (iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that by providing training through MRF Pace Foundation it does not get huge publicity for allowing the expenditure u/s.37 of the Act?” 9.3 Answering the above questions in favour of the assessee, the Hon’ble High Court held as under: - “12. Aggrieved by the same, the Revenue preferred appeals before the Tribunal contending that the CIT(A) committed an error in deleting the addition of Rs.1.70 Crores being the expenditure on MRF Pace Foundation. It was contended that the amount spent was in the nature of appropriation of profit and not a charge on profit and hence, does not fall under Section 37(1) of the Act. The assessee was also on appeals before the Tribunal on other issues, which we are not concerned. The Tribunal allowed the Revenue-s appeals and restored the order passed by the Assessing Officer. 13. The Tribunal was of the view that the assessee having not sponsored any sport activity for its sales promotion, but formed Pace Foundation for training bowlers and such activity cannot, by any IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 25 :: stretch of imagination, be treated as business activity. Further, the Tribunal observed that if such expenses are allowed to this assessee or any other assessee, they can evade tax by such gimmick. Further, the expenses in question are not for the sponsorship of cricket so as to get publicity through hoardings and media advertisements. That the case of the assessee is it exports its products to 65 countries, out of which some are cricket loving countries and even then it is not known how promoting bowling activity in one country would affect the sale of tyres in other countries. With these observations, the appeals filed by the Revenue were allowed. Challenging the same, the assessee is before us by way of these appeals. 14. Before we examine the correctness of the reasons assigned for reversing the order passed by the CIT(A), we need to take note of the legal position as to how and in what manner, business decisions can be taken by the assessee and whether the Assessing Officer would be justified in deciding what would be best for the assessee and for the health of its business. We are guided by a few decisions, which were relied on by Mr.Vikram Vijayaraghavan. 15. In CIT vs. Dalmia Cement (Bharat) Ltd. [(2002) 254 ITR 0377 (Del)], it was pointed out that the term commercial expediency” is not a term of art; it means everything that serves to promote commerce and includes every means suitable to that end. Further, it was held that the Revenue cannot justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the said role to decide how much is a reasonable expenditure having regard to the circumstances of the case. 16. The said decision was approved by the Hon’ble Supreme Court in Hero Cycles (P) Ltd., vs. CIT [(2015) 379 ITR 0347 (SC)] wherein it was held that once it was established that there was nexus between expenditure and purpose of business, Revenue could not justifiably claim to put itself in the arm-chair of a businessman or in the position of Board of Directors and decide how much was reasonable expenditure. The Hon’ble Supreme Court took note of the decision in the case of S.A.Builders Ltd. vs. Commissioner of Income Tax (Appeals) and Another [2007 (288) ITR 1 (SC)]. 17. Thus, in the light of the above legal position, it is not for the Assessing Officer to decide what would be good for the assessee in promoting its business and therefore, decision cannot be arrived at by the Assessing Officer based on his own personal perceptions and it should be left to the decision of the assessee, who is the best person, who knows that what would be best for his business activity. 18. Bearing the above legal principle in mind, if we test the correctness of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal, we have no hesitation to hold that the order passed by the CIT(A) is a well reasoned order. We support such conclusion with the following reasons. IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 26 :: 18.1. Admittedly, MRF Pace Foundation is part of the assessee- organisation and the expenditure incurred for the Foundation has been claimed as a business expenditure under Section 37 of the Act. Therefore, it is clear that the Assessing Officer assumed certain matters, which were not on record and attempted to compare the expenditure incurred to that of giving donations. 18.2. Firstly, the concept of charity or donation can never be implanted to the present facts, which were clearly explained by the assessee in their reply to the show cause notice issued by the Assessing Officer. Once we steer clear of this issue, by holding that it is never the case of the assessee that what was spent was in the nature of donation, the Assessing Officer cannot draw a parallel or assume certain facts, which are not on record. If such is our conclusion, then the decisions relied on by Mr.T.Ravikumar in the case of Nahar Spinning Mills Ltd. vs. CIT, Ludhiana [(2014) 226 Taxman 364 (Punjab & Haryana)]; CIT vs. Industrial Development Corporation of Orissa Ltd. [(2001) 249 ITR 0401 (Orissa)]; CIT vs. Jeevandas Laljiee & Sons [(2000) 245 ITR 0719 (Madras)]; and CIT vs. Infosys Technologies Ltd. [(2012) 349 ITR 588 (Karnataka)] can never be of any assistance to the case of the Revenue. 19. Mr.T.Ravikumar, placed reliance on the decision in Malayalam Plantations Ltd. (supra) more particularly, the observations in paragraph 8 of the said decision. In fact, the legal issues, which should be culled out from the observations are that the expression “for the purpose of business” is wider in scope than the expression “for the purpose of earning profits”. It was further held that the range, for the purpose of business, is wide, it may take in not only the day to day running of a business, but also the rationalization of its administration and modernization of its machinery; it may include measures for preservation of the business and for protection of its assets and property from expropriation, coercive process or assertion etc. The decision explains the scope of the expression “for the purpose of business”. Therefore, we could safely use the said decision to support our above conclusion. On facts, the case was totally different and cannot assist the Revenue. 20.In Atofina Peroxides India Ltd. vs. Deputy Commissioner of Income Tax, Chennai [T.C.(A) Nos.670 & 671 of 2010, dated 29.01.2020], one of the questions was with regard to admissibility of contribution paid to a hospital, which is not the case before us, as Pace Foundation is part of the assessee-company. The decision in the case of CIT vs. Sambandam Spinning Mills (P) Ltd. [(2003) 263 ITR 0115 (Mad)] pertains to travelling expenses of the Managing Director, his wife and another Director accompanying him. The decision is wholly distinguishable on facts. Equally the decision of the Hon’ble Full Bench of the Madhya Pradesh High Court in ACIT vs. Kuber Singh Bhagwandas [(1979) 118 ITR 0379 (MP)], as it also pertains to a case of donation. The decision of the Hon’ble Supreme Court in CIT vs. Madras Refineries Ltd., [(2009) 313 ITR 3034 (SC)] was a case of remand by the Hon-ble Supreme Court because the Assessing Officer IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 27 :: did not examine the claim of the assessee that the aid given to the residents living in the vicinity of the factory of the assessee therein as a business expenditure. Since there was no factual finding, the matter stood remanded to the Assessing Officer for fresh decision. Therefore, the said decision cannot be treated as a precedent. 21. As already observed, the expenditure incurred by the assessee in the Pace Foundation cannot be regarded as a donation and it was never the case of the assessee, nor there was anything on record for the Assessing Officer to draw such a conclusion. Secondly, the assessee has been able to point out certain facts before the Assessing Officer as well as before the First Appellate Authority as to how the training of pace bowlers has helped them in a business activity. The contentions placed by the assessee have not been found to be false or baseless. In such circumstances, it is best for the Department to leave it to the assessee to take a decision as to what is best for them and for the health of the company. These aspects were rightly taken note of by the CIT(A) by observing that the assessee-company is able to get popularity because of its close association with the game of cricket and it is comparable to any other mode of advertisement establishing hoardings, publicity material and other conventional modes of advertisement. 22. Further, the CIT(A) rightly took note of the decision in Delhi Cloth and General Mills Co. Ltd. (supra) by observing that the power of the Revenue is confined only to examine the purpose of genuineness of the expenditure and not the expediency or the quantum. Nowhere there is any observation either made by the Assessing Officer or the Tribunal that the expenditure was not genuine. In fact, Mr.T.Ravikumar would fairly submit that all other expenditure, which have been claimed by the assessee towards sponsorship, advertisement, have been allowed in its entirety. The Tribunal fell in error in coming to a conclusion that donations were extended towards the Pace Foundation, when the fact remains that the assessee has established the foundation and it is part and parcel of the assessee themselves and not a separate entity to draw any such inference of donation. 23. Thus, for the above reasons, we hold the Tribunal committed an error in reversing the order of the CIT(A). 24. In the result, the tax case appeals are allowed, the order passed by the Tribunal is set aside and the order passed by the CIT(A) is restored. The substantial questions of law are answered in favour of the assessee. No costs.” 9.4 In the light of the Hon’ble High Court’s decision on this issue (supra), we, respectfully follow the same, and direct the AO to delete the impugned disallowance. This ground is therefore allowed. IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 28 :: 10. Ground No. 8 to 8.3: - Disallowance of weighted deduction u/s 35(2AB) of the Act 10.1 The facts as discernible from records are that, the assessee had incurred scientific research expenditure, both revenue & capital, at their approved in-house R&D facility. The assessee had accordingly claimed weighted deduction of the expenditure u/s 35(2AB) of the Act, in terms of Form 3CLA issued by the auditor. The AO however noted that the expenses certified by DSIR in Form 3CL was lower and therefore restricted the weighted deduction to the extent of expenditure approved by DSIR and allowed normal deduction in respect of the balance sum. Accordingly, the disallowance of weighted component of deduction u/s 35(2AB) of the Act was worked out to Rs.95,500/-. 10.2 Heard both the parties. The undisputed facts are that, the assessee has an approved in-house R&D facility for which the DSIR has issued approval in Form 3CM. Further, the assessee has maintained separate accounts for the R&D facility which has been audited in Form 3CLA. Having regard to the provisions of sub-clauses (1) to (4) of Section 35(2AB) of the Act, it is noted that the assessee had satisfied the three conditions set out therein, for claiming weighted deduction in respect of the expenditure incurred at the in-house R&D facility. According to the AO however, since the expenditure as set out in the audited accounts had not IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 29 :: been entirely certified and approved by the DSIR in their Form 3CL, he had restricted the claim of weighted deduction u/s 35(2AB) of the Act, only to the extent of expenses which were approved by the DSIR. The Ld. AR brought to our notice that Rule 6 of the Income Tax Rules, 1962, which contained the procedure for obtaining the approval from DSIR, as it stood then, nowhere prescribed that the DSIR was required to certify the quantum of weighted deduction or the amount certified in Form 3CL was to be considered as the sum eligible for weighted deduction. It was shown to us that, the above Rule 6 underwent amendment by the Income Tax (10th Amendment) Rules, 2016, wherein sub-clause (7A) was amended with effect from 01.07.2016, hence applicable from AY 2017-18 and onwards, in terms of which the legislature mandated the DSIR to quantify the quantum of deduction allowable u/s 35(2AB) of the Act in Part-B of Form 3CL. Hence, the position prevailing prior to amendment of the Rule was that, the Form 3CL issued by DSIR was not relevant to ascertain the claim of weighted deduction u/s 35(2AB) of the Act. Accordingly, having regard to the foregoing, in our considered view therefore, the requirement to claim weighted deduction u/s 35(2AB), prior to AY 2017-18, was (a) entering into an agreement between the facility and the DSIR and (b) recognition of the R&D facility by DSIR in Form 3CM, and once these two conditions are met, the expenditure set out in separate audited accounts of the R&D facility i.e. Form 3CLA, will qualify for weighted deduction u/s IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 30 :: 35(2AB) of the Act. We further note that the impugned issue stands squarely covered in assessee’s favour by the decision rendered by this Tribunal in the case of Ashok Leyland Ltd Vs DCIT (ITA Nos. 361- 362/Chny/2024) wherein at Para 3.4, it was held as under: “3.4. We have heard both the parties and perused the material available on record……. It is noted that DSIR is an authority for approval of R&D facility. And once facility is approved, expenditure incurred by it qualifies for deduction u/s.35(2AB), irrespective of DSIR approval as per the law in force. As noted, the R & D Facility has been approved as required by the authority i.e. DSIR. The settled position as per the law in force is that once facility is approved, expenditure incurred in this regard qualifies for deduction u/s.35(2AB) of the Act until amendment was brought in Rule 6(7A) of the of the Income Tax Rules, 1962 (hereinafter in short ‘the Rules’) w.e.f. 01.07.2016 (relevant to AY 2017- 18). Therefore, the AO/Ld.CIT(A) erred in disallowing the weighted deduction u/s.32(2AB) of the Act on the expenditure incurred in an approved in-house R & D facility. In other words, deduction can’t be restricted to the amount of expenditure quantified by the DSIR before the AY 2017-18….” 10.3 In light of the above therefore, we hold that the AO was not justified in curtailing the deduction u/s 35(2AB) in the pre-amended period and direct deletion of the disallowance of the weighted component of deduction of Rs.95,500/-. This ground is therefore allowed. 11. Ground No. 9 to 9.4 :- Disallowance of provision of warranty under normal provisions and u/s. 115JB of the Act 11.1 The facts as noted are that, the AO had disallowed the provision for warranty debited in the Profit & Loss Account holding it to be an unascertained liability, as according to him, there was no scientific basis followed while determining the provision for warranty. The Ld. DRP also IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 31 :: held that, the assessee was unable to provide the basis to show that the provision for warranty had been scientifically ascertained. Aggrieved, the assessee is before us. 11.2 We have heard both the parties and perused the records. We note that the issue raised by the assessee is no longer res integra. The Ld.AR brought to our notice that, on the same set of facts, this Tribunal had remanded the issue in assessee’s case for AY 2011-12 to 2013-14 back to the AO for fresh verification and, in the second round, the AO noted that, the assessee was able to satisfy the conditions as laid down by the Hon’ble Supreme Court in the case of Rotork Controls India (P) Ltd., vs. CIT,(180 Taxman 422) and had demonstrated that the provision was made in respect of ascertained liability on scientific basis and therefore the deduction for provision for warranty was allowed by the AO. Taking note of the foregoing, this Tribunal in assessee’s own case for AYs 2017-18 to 2019-20, is noted to have allowed the claim for provision for warranty expenses by holding as under:- “8.4 We have observed that, the AO has accepted the methodology adopted by the assessee for claiming the provision for warranty expenses and deleted the addition in the A.Ys.2011-12, 2012-13 &2013-14 as per the directions of the co-ordinate bench of this Tribunal’s decision(supra).Since, methodology for provision for warranty is adopted by the Assessee historically including the relevant A.Y. in appeal without any change which has been verified and accepted by the AO for the AYs 2011-12, 2012-13 & 2013-14 and considering the facts and circumstances of the case, by respectfully following the decision of this tribunal in assessee’s own case(supra), we are of the considered view that the AO has erred in disallowing the provision for warranty and hence we direct the AO to allow the IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 32 :: expenditure of provision for warranty and to re-compute the income of the assessee accordingly. Thus, we allow the ground Nos.15 to 19 taken by the assessee.” 11.3 Respectfully following the decision of this Tribunal in assessee’s own case (supra) and finding no change in facts or law, we allow the claim of assessee and direct the AO to delete the addition. 11.4 Coming next to the disallowance made u/s.115JB of the Act, it is noted that Explanation 1(c) to Section 115JB provides that provision for any unascertained liability is to be added back for computation of book profits. As noted above, in the assessee’s own case the AO in the remand orders passed for AY 2011-12 to 2013-14 has found that the warranty liability to be in the nature of an ascertained liability satisfying the tests laid down in Rotork Controls (supra). In light of the foregoing, we find force in the submission of Ld.AR that, the impugned provision for warranty was in the nature of ascertained liability and hence no adjustment is required u/s. 115JB of the Act. Therefore, the adjustment made u/s. 115JB on this issue is held to unsustainable. 11.5 For the above reasons, this ground of the assessee is allowed. 12. Ground No. 10 – Re-computation of MAT credit 12.1 This ground relates to the AO’s action of not re-computing and quantifying the assessable MAT credit to be carried forward u/s. 115JAA of the Act. In this regard, we note that the assessee is eligible for IT (TP) A No.68/Chny/2018 (AY 2014-15) M/s. MRF Ltd. :: 33 :: consequential MAT credit as per the provision of the Act and therefore, we direct the AO to verify and allow the credit of consequential MAT credit eligible to the assessee for the subject AY in accordance to law. This ground is allowed for statistical purposes. 13. In the result, appeal of the assessee is partly allowed. Order pronounced on the 28th day of February, 2025, in Chennai. Sd/- (अिमताभ शु\u0018ा) (AMITABH SHUKLA) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे\tई/Chennai, \u0018दनांक/Dated: 28th February, 2025. TLN आदेश क\u001c \u0016ितिलिप अ\u001fेिषत/Copy to: 1. अपीलाथ\r/Appellant 2. \u0011\u0012थ\r/Respondent 3. आयकरआयु\u001e/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0011ितिनिध/DR 5. गाड$फाईल/GF "