M/S.APOLLO TYRES LTD vs. THE ASSITANT COMMISSIONER OF INCOME - TAX

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM THURSDAY, THE 26TH DAY OF AUGUST 2021 / 4TH BHADRA, 1943 ITA NO. 147 OF 2014 AGAINST THE ORDER IN ITA 616/2011 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: M/S.APOLLO TYRES LTD 6TH FLOOR, CHERUPUSHPAM BUILDINGS, KOCHI-682031, PAN: AAACA 6990 Q. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ABRAHAM VARGHESE THARAKAN SRI.BINU MATHEW SRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/S: THE ASSITANT COMMISSIONER OF INCOME - TAX CIRCLE-1(1), RANGE-1, ERNAKULAM, KOCHI-682018. BY ADVS. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

I.T.A. No.147/2014 -2- J U D G M E N T S.V. Bhatti, J. Heard learned Senior Counsel Mr Joseph Markos and learned Standing Counsel Mr Christopher Abraham for parties. 2. M/s. Apollo Tyres Ltd Kochi/Assessee is the appellant. The Assistant Commissioner of Income Tax, Circle- 1(1), Range-1, Kochi/Revenue is the respondent. 2.1 The assessee aggrieved by the order dated 20.12.2013 of the Income Tax Appellate Tribunal (for short ‘Tribunal) Cochin Bench in ITA No.616/Coch/2011 has filed the subject appeal. The appeal deals with the issues arising from the return filed by the assessee for the Assessment Year 2007-08. The assessee raises the following substantial questions of law: “1)Whether on the facts and in the circumstances of the case,

I.T.A. No.147/2014 -3- the learned Tribunal is justified in law in confirming the disallowance of the foreign exchange fluctuation loss of Rs.45,58,79,584 which has arisen on account of change in value of the loan in foreign exchange given to the Mauritius subsidiary on grounds of business expediency? 2) Whether on the facts and in the circumstances of the case the very basis adopted by the Tribunal for confirming the disallowance namely that the acquisition of the business Dunlop by the subsidiary of the appellant is in fact acquisition of capital asset by the appellant itself runs contrary to the separate legal entity principle endorsed by the Hon'ble Supreme Court in Azadi Bachao Andolan 263 ITR 706 (SC) and Vodafone International Holdings 3441TR1(SC)? 3) Whether on the facts and in the circumstances of the case the Tribunal is justified in law and on facts in sustaining the disallowance of part depreciation of Gurgaon office building aggregating to Rs. 16,29,673 in relation to let out portion to Apollo International Ltd? 4) Whether on the facts and in the circumstances of the case the Tribunal is justified in law and on facts in sustaining the disallowance of part depreciation ignoring the fact that concept of block of assets had been inserted in the Act and individual items included in the block are not to be considered separately for the purposes of granting depreciation?

I.T.A. No.147/2014 -4- 3. The substantial questions raised by the assessee are covered by the view already we have taken in disposed of I.T. Appeals. Substantial questions nos.1 and 2 relate to confirming the dis-allowance of foreign exchange fluctuation loss. In the appeal filed by the assessee for the Assessment Year 2006-07 a similar or identical question was canvassed in ITA No. 272/2013. This Court, after taking note of the reasoning adopted by the Tribunal and the authorities under the Act, found that in view of the principle laid down by the Supreme Court in Union of India (UOI) v. Azadi Bachao Andolan1 and other cases felt that the matter is required to be re-examined and reconsidered by the Tribunal. By following the reasoning stated by us in ITA No.272/2013, substantial question nos 1 and 2 are answered in favour of the assessee to the extent of reconsideration by the Tribunal. By following the view taken by us in ITA 272/2013, 1 (2003) 263 ITR 706 (SC)

I.T.A. No.147/2014 -5- the matter is remitted to the Tribunal for consideration and disposal along with the connected tax appeal. 4. Substantial question nos.3 and 4 relate to the dis- allowance of part depreciation claimed by the assessee towards the Gurgaon office building which was leased to a subsidiary of the assessee. The dis-allowance by the authority, but sustained by the tribunal, was the subject matter of ITA No.26/2013 before this Court. We have confirmed the finding recorded by the Tribunal as well as the authorities under the Act on the dis- allowance claimed by the assessee towards depreciation for Gurgaon building. By adopting the same reasoning, question nos.3 and 4 are answered against the assessee and in favour of the Revenue. Having regard to the aforementioned view we have taken, ITA No.147/2014 is allowed in part: Question nos. 1 and 2 dealing with the dis-allowance of foreign exchange fluctuation

I.T.A. No.147/2014 -6- loss is remitted to Tribunal for consideration and disposal afresh. It is desirable that upon the appeal being restored to file by the Tribunal, the instant appeal is heard and decided along with the connected Tax Appeal. Sd/- S.V.BHATTI JUDGE Sd/- VIJU ABRAHAM JUDGE jjj

I.T.A. No.147/2014 -7- APPENDIX OF ITA 147/2014 PETITIONER ANNEXURE ANNEXURE A1 TRUE COPY OF THE DRAFT ASSESSMENT ORDER DATED 27/12/2010 PASSED BY THE RESPONDENT FOR ASSESSMENT YEAR 2007-08. ANNEXURE A2 TRUE COPY OF THE ASSESSMENT ORDER DATED 21/10/2011 PASSED BY THE RESPONDENT FOR AY 2007- 08. ANNEXURE A3 TRUE COPY OF ORDER DATED 14/09/2011 PASSED BY THE DISPUTE RESOLUTION PANEL, CHENNAI. ANNEXURE A4 CERTIFIED COPY OF THE IMPUGNED ORDER DATED 20/12/2013 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.