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

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM WEDNESDAY,THE 22ND DAY OF SEPTEMBER 2021/31ST BHADRA, 1943 ITA NO. 44 OF 2017 AGAINST THE JUDGMENT IN ITA 223/Coch/2015 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/Respondent: THE PRINCIPAL COMMISSIONER OF INCOME TAX KOCHI-I, KOCHI, INCOME TAX OFFICES, CENTRAL REVENUE BUILDING, I.S.PRESS ROAD, KOCHI - 682 018. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT RESPONDENT/Appellant: M/S. APOLLO TYRES LTD 6TH FLOOR, CHERUPUSHPAM BUILDING, SHANMUGHAM ROAD, ERNAKULAM - 682 031. (PRESENT ADDRESS 3RD FLOOR, AREEKAL MANSION, NEAR MANORAMA JUNCTION, PANAMPILLY NAGAR, KOCHI - 682 036) BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SRI.P.G.CHANDAPILLAI ABRAHAM SHRI.VIPIN ANTO H.M. SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 22.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA No.44/2017 -2- ITA No.44/2017 J U D G M E N T S.V.Bhatti, J. The Principal Commissioner of Income Tax, Kochi- 1/Revenue is the appellant. M/s.Apollo Tyres Ltd., Kochi/Assessee is the respondent. The Revenue being aggrieved by the order in ITA No.223/Coch/2015 dated 10.01.2017 for the Assessment Year 2010-11 has filed the instant appeal. 2. On 01.10.2010 the assessee filed income tax returns for the Assessment Year 2010-11. On 23.10.2012 the assessment has been referred to the Transfer Pricing Officer-1, Kochi under Section 92CA of the Income Tax Act, 1961 (for short 'the Act'). On 29.01.2014, the Joint Director of Income Tax, Transfer Pricing Officer-1, Kochi, made the order under Section 92CA(3)

ITA No.44/2017 -3- of the Act. The Assessing Officer through Annexure-B draft assessment order dated 28.03.2014 proposed to finalize the income tax return of the assessee assessed total income as Rs.481,78,02,530/-. The assessee raised objections to the draft assessment order dated 28.03.2014. The issues were referred to Dispute Resolution Panel (DRP), Bangalore, for decision and direction in terms of Section 144C of the Act. The DRP, through Annexure-C dated 26.12.2014, issued directions under Section 144C(5) of the Act to the A.O. The Assessing Officer, through Annexure-D order dated 18.02.2015, finalized the assessment for the Assessment Year 2010-11, determining the total income of the assessee as Rs.458,92,01,660/-. The assessee, aggrieved by the order in Annexure-D dated 18.02.2015, filed ITA No.223/Coch/2015 before the Income Tax Appellate Tribunal (for short 'the Tribunal'), Cochin Bench, Cochin. The Tribunal, through the order impugned in the appeal, allowed in part the

ITA No.44/2017 -4- appeal of the assessee, either accepted the case of the assessee or desired that the matter needs re-examination by the Assessing Officer, accordingly remitted a few issues. 2.1 The Revenue, being aggrieved by the order of the Tribunal rendered under following heads filed the appeal: “1 Disallowance of claim of preoperative expenditure disallowed in the assessment made u/s. 143(3) r.w.s. 144C dt. 18/02/2015 was directed to be deleted : 26,97,79,538 2 Claim of preoperative expenditure disallowed in the assessment made u/s. 143(3) r.w.s. 144C dt. 18/02/2015 was directed to be deleted : 4,70,07,847 3 Disallowance of claim of additional weighted deduction u/s.35(2AB) restricted to : 94,98,220 4 Disallowance of claim of loss on sale of investment in shares as deduction : 4,07,24,151 5 Disallowance of claim of unrealized foreign exchange fluctuation gain for adjustment against cost of assets as per section 43A on actual payment restricted to : 4,72,34,591 6 Disallowance of claim of MTM loss on forward contract as deduction : 98,10,765

ITA No.44/2017 -5- 7 Disallowance of claim of prepaid expenses as deduction : 5,15,34,726 2.2 We have heard learned Counsel Mr Christopher Abraham and Senior Advocate Mr Joseph Markos for the parties. 3. Substantial Question Nos.1, 1.1, 1.2: “1 Whether the Hon'ble Tribunal, in the facts and circumstances of the case as well as in law, is right to hold that the expenditure on setting up of new unit at Chennai as revenue expenditure, thereby directing to delete the disallowance of Rs.26,97,79,538/-, which was held to be preoperative expenditure in the impugned assessment order? 1.1 Whether the Hon'ble ITAT, in the facts and circumstances of the case as well as in law, is right in directing to delete the above addition purely on "175" the basis of assessee's contention that impugned expenditure were of routine administrative expenses not relating to acquisition and installation of any capital asset in relation

ITA No.44/2017 -6- to setting up of the new unit at Chennai, in the light of Hon'ble ITAT's decision in assessee's case for A.Y.2009-10, wherein similar matter was involved and the Hon'ble ITAT remitted the issue back to the file of the Assessing Officer for ascertaining the exact nature of the impugned expenditure and decision afresh? 1.2 Whether the Hon'ble ITAT, in the facts and circumstances of the case as well as in law, is right in holding without appreciating the fact that the assessee company had claimed loan processing fee and bank charges as forming part of expenditure incurred in connection with setting up of new unit at Chennai before coming to the conclusion that the above expenditure was administrative nature as contended by the assessee? 3.1 The assessee claims as revenue expenditure a sum of Rs.26,97,79,538/-. The assessee claims to have expended Rs.26,97,79,538/- as part of the expansion of its business activity in the process incurred as direct and indirect expenditure for setting up the new manufacturing plant at Chennai. The nature of expenditure during the setup period comprises expenditure

ITA No.44/2017 -7- incurred on salaries, travelling and the commercial expenditure met by the staff/consultants involved and engaged by the assessee in the capacity expansion of assessee's manufacturing capacity. The assessee claimed the said expenditure, as revenue expenditure, as the assessee intended to horizontally expand its manufacturing capacity by setting up a new plant at Chennai, and the expenditure substantially satisfies the definition and meaning of 'revenue expenditure'. It is contextual to advert at this juncture that the Revenue does not dispute the genuineness or veracity of the expenditure claim by the assessee. The claim for deduction of preoperative expenditure incurred by the assessee is rejected on the ground that the assessee, since had capitalized the expenses in its books of accounts and treated the ongoing establishment of a unit as work-in-progress, the expenses are added to the cost of the plant and the machinery etc. of the new plant in terms of Section 43(1) of the Act.

ITA No.44/2017 -8- Thereafter available depreciation could be claimed by adding the expenditure to the capital expenditure. In other words, the assessee, according to Revenue, is entitled to claim depreciation on the capitalized value of the new plant but cannot be allowed to book expenses towards preoperative expenditure incurred by the assessee for establishing the plant. 3.2 The Assessing Officer disallowed the claim of Rs.26,97,79,538/- towards preoperative expenditure. The Tribunal examined the rival contentions of the assessee and the Revenue; relied on the judgments reported in Commissioner of Income Tax v. Sakthi Sugars1 and Commissioner of Income Tax v. Priya Village Roadshows Ltd2 and allowed the claim of assessee as revenue expenditure amounting to Rs.26,97,79,538/-. 4. Mr Christopher Abraham contends that the expenditure does not strictly satisfy the characteristic of 1 (2011) 339 ITR 400 (Mad) 2 (2011) 332 ITR 594 (Del)

ITA No.44/2017 -9- revenue expenditure even by a liberal approach or going by the accountancy standards followed by the assessee. The assessee has capitalized the expenditure, and the permissible deduction in such circumstances is only by way of depreciation under Section 40(3)(i) of the Act. The abstract application of the reported judgments in Sakthi Sugars and Priya Village Roadshows Ltd cases resulted in an unacceptable finding, particularly, in the available circumstances of the case. He prays for setting aside the allowance granted by the Tribunal. 5. Per contra, learned Senior Advocate Mr Joseph Markos contends that the assessee in its armchair has discretion and can decide on the business dynamics including expansion of business by setting up a new unit to develop capacity building. The effort of the assessee in establishing a new unit at Chennai is a horizontal expansion of the capacity building at a new location. Capitalization is required for the purpose of

ITA No.44/2017 -10- accounting standards and when it comes to the Income Tax Act, the expenditure is incurred as simple and revenue expenditure, to bring into existence a new plant. The Tribunal did not miss any of the important aspects in appreciating the claim of the assessee made as revenue expenditure. He relies on the judgments reported in Sakthi Sugars (supra), Jay Engineering Works Ltd, v. Commissioner of Income Tax3, Commissioner of Income Tax v. Havells India Ltd.4, Commissioner of Income Tax v. Relaxo Footwears Ltd5., and Deputy Commissioner of Income-Tax v. Core Health Care Ltd.6 for demonstating the ratio of counts in treating the expenditure as revenue expenditure, prays for answering the questions in favour of the assessee and against the Revenue. 6. The substantial questions deal with the amount expended by the assessee towards preoperative expenses for establishing a plant, whether would constitute capital 3 (2009) 311 ITR 405 (Delhi) 4 (2013) 352 ITR 376 (Delhi) 5 (2007) 293 ITR 231 (Delhi) 6 (2008) 298 ITR 194 SC

ITA No.44/2017 -11- expenditure or revenue expenditure in the facts and circumstances of the case. Section 37 of the Act enables deduction of any expenditure which is laid out or expended wholly and exclusively for the purpose of the business or profession, as the case may be, and which is not in the nature of capital expenditure. In the infinite variety of situations and diversities in which the concept of what constitutes capital expenditure or revenue expenditure, it is not possible to formulate a general rule having universal application. However, a few broad and general tests have been suggested from time to time to ascertain on which side of the line the outlay in any particular case might reasonably falls. These tests are generally efficacious and serve as useful servants; but as masters, they tend to be over-exacting. The question in each case would necessarily be whether the tests relevant and significant in one set of circumstances are relevant and

ITA No.44/2017 -12- significant in the case on hand also, [see Alembic Chemical Works Co. Ltd. v. Commissioner of Income Tax, Gujarat7]. We would not repeat the decisions considered by the Tribunal while recording a conclusion on the question under consideration. For brevity and also to complete the narrative on how this aspect of the matter is examined by the Courts, we refer to the following decisions: Core Health Care Ltd: Section 36(1)(iii) of the Income-tax Act, 1961, has to be read on its own terms: it is a code by itself. It makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account. Unlike Section 37 which expressly excludes an expense of a capital nature, section 36(1)(iii) emphasises the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital. The Legislature has,therefore, made no distinction in section 36(1)(iii) between "capital borrowed for a revenue purpose" and "capital borrowed for a capital purpose". An assessee is entitled to claim interest paid on borrowed capital provided that the capital is used 7 (1989 3 SCC 329

ITA No.44/2017 -13- for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed." Actual cost of an asset has no relevancy in relation to Section 36(1)(iii). The proviso inserted in section 36(1)(iii) by the Finance Act, 2003, with effect from April 1,2004, will operate prospectively. Held accordingly, that the assessee was entitled to deduction under section 36(1)(iii) prior to its amendment by the Finance Act,2003, in relation to money borrowed for purchase of machinery even though the assessee had not used the machinery in the year of borrowing. Decision of the Gujarat High Court in Deputy CIT v Core Health Care Ltd. [2001]251 ITR 61 affirmed on this point. Held also, remanding the matters to the High Court, that the questions: (a) whether advertisement expenses incurred by the assessee to create a brand image with enduring benefit are allowable as revenue expenditure (b) whether the Tribunal had erred in granting deduction under Section 35D regarding short-term loan, in view of the Explanation to Section 35D(3) which refers only to long-term borrowings, and (c) whether the Tribunal had erred in directing deduction under Section 80HH and 80-I on the miscellaneous income of Rs.26,64,113 being income on sale of empty containers, were substantial questions of law and the High Court erred in dismissing the application of the Department on those questions and the High Court had to decide them."

ITA No.44/2017 -14- Relaxo Footwears Ltd: This order was challenged by the Revenue as well as the assessee. The Tribunal allowed the appeal filed by the assessee and dismissed the appeal of the Revenue. On further appeal by the Revenue contending that (i) the expenses incurred in a new unit earlier to the commencement of the manufacturing process had to be capitalised and the new business of the assessee could not be said to be an extension of the existing business, (ii) the expenditure incurred in connection with the purchase and installation of plant and machinery was capital in nature and thus disallowable, and (iii) the pre-operative expenses could not be written off at one go but had to be capitalised and admissible depreciation allowed thereon: Held, dismissing the appeal, that the new unit was a part of the existing business and there was no dispute that there was unity of control and inter lacing of the units. Thus the expenses incurred by the assessee for the setting up of the new unit which was a part of the existing business were therefore to be allowed as a revenue expenditure.” (emphasis supplied) 6.1 The Revenue does not contend on the tenability or

ITA No.44/2017 -15- genuineness of the expenditure incurred by the assessee as preoperative expenditure for establishing a radial car tyre manufacturing unit in Chennai. The objection raised by the Assessing Officer is that the capitalization of expenditure since has been adopted by the assessee in its books of account, the outflow cannot be booked and claimed as expenditure under Section 37(1) of the Act. Now, therefore, the question raised is whether the expenditure incurred by the assessee for establishing a unit in Chennai is to be treated as revenue expenditure or should be capitalized in the asset of unit at Chennai. As noted by the Supreme Court in Alembic Chemical Works Co. Ltd. case, though the tests are available for determining what constitutes revenue expenditure and capital expenditure, the final analysis depends on case to case basis. The reported cases in Sakthi Sugars and Priya Village Roadshows Ltd cases, the following tests or requirements for identifying the

ITA No.44/2017 -16- expenditure, whether as capital or revenue, are juxtaposed for our consideration as well: “"34. From the above decisions the test for identifying an expenditure as to whether it is 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. (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 a view to produce the profits, it is a revenue expenditure. (3) For instance if the interest paid was in respect of the asset, which was acquired 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 expenditures 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

ITA No.44/2017 -17- 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, manufacturing 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 shows, 332 ITR 594 observed as under: "10. A harmonious reading of the aforesaid two judgments of this Court, namely, Triveni Engg. Works Ltd. (supra) on the one hand and Modi Industries (supra) on the other, would demonstrate that one has to keep in mind the essential purpose for which such an expenditure is incurred. If the expenditure is 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 expenditure incurred is in respect of the same business 'which is already carried on by the assessee, even if it is for the

ITA No.44/2017 -18- 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 such an expense is to be treated as

business

expenditure.” 6.2 The case on hand satisfies all the independent and interrelated tests broadly laid down by the Sakthi Sugars and Priya Village Roadshows Ltd cases. The proposed new plant is evidencing unity of control and interlacing of the units of the assessee for capacity building of production of Radial tyres. The horizontal expansion is to sustain/earn more profitability from the business, the assessee is already doing. The assessee, in accordance with the accounting standard practices has capitalised the expenditure in its books of accounts, it is not claiming depreciation on the value of the capitalised asset. 6.3 Mr Joseph Markos has argued that the depreciation claimed is not upon including the preoperative expenses to the new plant at Chennai. The expenses are in effect outflow for

ITA No.44/2017 -19- increasing the business of the assessee and, therefore, rightly treated and held as revenue expenditure by the Tribunal. The question, again, is not whether the assessee should be called upon to capitalise and claim depreciation; the question is whether the claim of the assessee conforms the deduction permissible under Section 37(1) of the Act. In the facts and circumstances of this case, we are of the view that the preoperative expenses amounting to Rs.26,97,79,538/- incurred by the assessee are revenue expenses, and are correctly so held by the Tribunal. The above view is fortified by a catena of decisions in favour of the assessee. We do not, as a matter of fact, see any reason distinguishable in the case on hand to accept the contest of the Revenue. For the above reasons and discussion, substantial question Nos.1, 1.1 and 1.2 are answered in favour of the assessee and against the Revenue.

ITA No.44/2017 -20- 7. Substantial Question No.2: “2. Whether the Hon'ble ITAT, in the facts and circumstances of the case as well as in law, is justified in directing to delete the addition of Rs.4,70,07,847/- being loan processing fee and bank charges claimed as revenue expenditure relating to setting up of new unit at Chennai as expansion of assessee's business as contended by the assessee without appreciating the nature of expenditure and ascertain as to whether the expenditure was incurred for acquisition and installation of new assets?” 7.1 Substantial question No.1 relates to expenses incurred on salary, travelling and commercial expenditure incurred in connection with staff, consultants etc. involved in establishing the new plant at Chennai. Substantial question no.2 relates to the expenditure incurred by the assessee towards loan processing fee, bank charges etc amounting to Rs.4,70,07,847/- as revenue expenditure. 8. Mr Christopher Abraham argues that the nature and character of expenses, namely, loan processing fee and bank

ITA No.44/2017 -21- charges are akin to interest payable by the assessee on the loan the assessee has borrowed, Section 36(1) proviso is kept in mind while entertaining the present claim of the assessee. The expenditure, if treated as akin to interest, there is bar under Section 36(1) proviso for allowing the expenditure and Section 37 cannot be relied upon which deals with other expenses not covered by any other provision. 8.1 For the assessee, it is argued that the proviso relied on by the Department is not applicable or attracted to the case on hand. The processing fee and bank charges are expenses incurred for getting the loan, and interest is always paid on the loan availed/sanctioned by the bank, as the case may be. The simple expenditure incurred by way of outflow from the books of account of the assessee cannot be again included in the loan borrowed by the assessee and give a complexion of interest only to attract the proviso of Section 36(1) of the Act. He places

ITA No.44/2017 -22- strong reliance on the judgments of the Supreme Court in Deputy Commissioner of Income Tax v. Gujarat Alkalies and Chemicals Ltd8 and order of the Tribunal in assessee’s own case reported in Assistant Commissioner of Income Tax v. Apollo Tyres Ltd.9 The operative portion of the judgment reads as follows: Gujarat Alkalies and Chemicals Ltd “Regarding question No. (1), we may state that the assessee had borrowed Rs. 30 crores (approximately) from IDBI which in turn was refinanced by COFACE which foreign company had charged interest, commitment charges and insurance charges payable by the assessee. The said "commitment charges" was upfront payment. We have also examined the contract between IDBI and the assessee. In the case of Addl. CIT v. Akkamamba Textiles Ltd. [1997] 227 ITR 464, this court has held that com mission paid by the assessee to the banker and the insurance company was admissible deduction under section 37 of the Income-tax Act, 1961. To the same effect is the judgment of this court in the case CIT v. Sivakami Mills Ltd. [1997] 227 ITR 465. For the aforestated reasons, we answer question No. (1) in favour of the assessee and against the Department. We may 8 (2008) 299 ITR 85 (SC) 9 (2013) 33 taxmann.com 575 (Cochin-Trib.)

ITA No.44/2017 -23- clarify that both the above judgments allow deduction under section 37 of the 1961 Act and not under section 36(1)(iii) of the 1961 Act. In this case, the Tribunal has allowed the claim under section 37 and not only section 36(1)(iii), hence there is no infirmity therein. As regards question No. (2) it may be stated that the assessee established a phosphoric acid project as an extension to its present business activities and for that purpose obtained a foreign currency loan from IDBI which in turn was refinanced by COFACE subject to the assessee paying finance charges to COFACE which according to the assessee was similar to payment of interest. The Department disallowed the said item on the ground that finance charges paid to COFACE on the foreign currency loan were in the nature of interest and commitment charges and since the charges have been paid in relation to the project of manufacturing phosphoric acid which did not commence production during the assessment year under consideration, the expenses incurred were capital in nature. The Department also placed reliance in this connection on Explanation 8 to section 43(1) of the Income-tax Act, 1961. On the facts and circumstances of this case, once the Department equated the charges payable to COFACE with interest, our judgment in the case of Deputy CIT v. Core Health Care Ltd. in Civil Appeals Nos. 3952-55 of 2002 comes in.

ITA No.44/2017 -24- Accordingly, the said question No. (2) is also answered in favour of the assessee and against the Department. Before concluding, we may also mention that in this case the finance charges paid by the assessee to COFACE have also been equated by the Department with commitment charges which, as stated above, are held to be revenue expenditure and deductible under section 37 of the Income-tax Act, 1961 [see Akkamamba Textiles Ltd. (supra) and Sivakami Mills Ltd. (supra)]. Therefore, on either count the above question No. (2) is answered in favour of the assessee and against the Department.” The conclusion recorded by the Tribunal is in line with the principles laid down by various High Courts and this Court in I.T.R. No.68/2000. Hence, substantial question no.2 is answered in favour of the assessee and against the Revenue. Substantial Question No.3 3. Whether the Hon'ble ITAT, in the facts and circumstances of the case, is legally right in deleting waited deduction of Rs.94,98,220/- under S.35(2AB) claimed by the assessee in respect of expenditure claimed on R & D expenses met outside India?

ITA No.44/2017 -25- 3.1 Whether the Hon'ble ITAT, in the facts and circumstances of the case as well in law, is correct in applying the decision of Gujarat High Court in CIT v Cadila Healthcare Ltd. Reported in 31 Taxmann.com 300 to the facts of the assessee's case, which are entirely distinguishable from the said decision? 3.2 Whether the Hon'ble ITAT, in the facts and circumstances of the case, is correct to hold that being an incentive provision, section 35(2AB) should be liberally interpreted and deduction allowed in view of Hon'ble Supreme Court decision in Bajaj Tempo Ltd. Reported in 62 Taxman 480 bereft of the prerequisite of a certificate of DSIR? 10. The circumstances relating to substantial question No.3 are that the assessee under Section 35(2AB) claimed weighted deduction amounting to Rs.5,79,01,415/-. The assessee could establish before the ITAT that it is entitled to claim the expenses, salaries etc. and the Tribunal disallowed the weighted deduction amounting to Rs.2,89,50,708/-. The assessee claims to have incurred the said expenses for utilising the services of an employee working in the subsidiary of the assessee and the salaries paid in this behalf to the personnel employed by the

ITA No.44/2017 -26- assessee. The ITAT accepted the claim of assessee under Section 35(2AB) in respect of Rs.3,89,00,000/- being salary paid to Peter Becker in charge of the All India facility at Limda (Gujarat). The assessee also claimed a further sum of Rs.1,89,00,000/- spent towards clinical trial activities for testing new tyres outside India. The A.O. in the draft assessment order noted that the amount has been incurred outside the in-house facility and is, therefore, not eligible for claiming weighted deduction. The case of assessee that the trial of R & D Products undertaken by the assessee at its facility in Germany, satisfy the meaning of clinical trial was rejected. Thus, the amount spent on clinical trial amounting to Rs.94,98,220/- has been negatived. The Tribunal allowed the claim and the finding recorded by the Tribunal reads as follows: "21. It is pertinent to mention here that Section 35(2AB) was introduced as an incentive for encouraging research and development in the industrial sector and therefore, has to be liberally construed in view of the decision of

ITA No.44/2017 -27- Hon'ble Supreme court in Bajaj Tempo Ltd. V CIT, 62 Taxman 480. The AO and the DRP have misdirected themselves 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 permissible. 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. 22. Ground Nos.8 and 8.1 pertain to the disallowance of business loss of Rs.4,07,24,151/- incurred by the assessee on the sale of its wholly own subsidiary. In the year under consideration, the appellant company has shown a loss of Rs.4,07,24,151/- on the sale its 100% share holding in Apollo Tyres A.G., Switzerland (ATAG) to Apollo Tyres Cyprus Pvt. Ltd. (ATC). The said loss has been claimed as business expenditure. During the course of assessment, the appellant submitted that the ATAG was set up in 2007 as 100% subsidiary of the appellant company with an objective of undertaking sales and marketing of the products of the brand of the appellant company and the investment was made in the subsidiary company as a measure of commercial expediency. The AO in the draft assessment order was of the view that the said investment in shares cannot be held as business activity as the appellant was itself showing the said shares under the head investment. The DRP confirmed the draft assessment order in this regard." 10.1 Mr.Christopher Abraham relies on Section 35(2AB) and contends with considerable force that the Tribunal has liberally construed the incentive provided as weighted deduction

ITA No.44/2017 -28- under Section 35(2AB) of the Act. The expenses claimed on the trial runs are accepted. Weighted deduction amounting to 50% on the actual amount spent is also granted by expanding the scope and applicability of Section 35(2AB). The provision in Section 35(2AB) since being an incentive provision, the Tribunal could have done well, by firstly reading the section literally and applying the case pleaded by the assessee to the unambiguous expression in Sec.35(2AB). The claim of assessee for weighted deduction does not satisfy the basic requirements of Section 35(2AB). Therefore, the disallowance by the Assessing Officer is correct and legal, the view taken by the Tribunal, particularly, by placing reliance on Cadila case suffers from a serious infirmity in law. He prays for setting aside the view of the Tribunal by answering the question in favour of revenue. 10.2 Mr.Joseph Markos contends that the assessee has utilised the available in-house facilities and brought into

ITA No.44/2017 -29- existence a few next generation tyres. The assessee does not have a suitable track or facility to test the tyres developed at the R&D facility, Limda. The clinical trial/track expenses claimed by the assessee are for utilising the facility of assessee's own subsidiary in Germany. As a matter of fact, though the facility in Germany is not an approved facility, but the expenses claimed by the assessee originate from the approved R&D facility and are continued till the product is satisfactorily cleared by R & D. The expenses which are admitted for utilising the facility of assessee's subsidiary in Germany are rightly allowed. On the same analogy the weighted deduction is rightly held in favour of assessee by the Tribunal. 10.3 The substantial question deals with the incentive granted by the Act in a few circumstance. Section 35(2AB) reads as follows: "Where a company engaged in the business of (bio technology or in any business of manufacture or

ITA No.44/2017 -30- production of any article or thing, not being an article or things specified in the list of 11th schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority then, there shall be allowed a deduction of a sum equal to [one and one half] times of expenditure so incurred: Provided that where such expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility is incurred in a previous year relevant to the assessment year beginning on or after the Ist day of April, 2021, the deduction under this clause shall be equal to the expenditure so incurred. Explanation—For the purpose of this clause, "expenditure on scientific research", in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, state or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970).

10.4 Section 35 deals with expenditure on scientific research and the procedure to be followed on computation of business income of the assessee. The question does not relate to regular revenue expenditure incurred by the assessee for the

ITA No.44/2017 -31- new version of radial tyres. But it deals with incentive in the nature of weighted deduction provided for by Sec.35(2AB). The incentive can be claimed by the assessee only upon satisfying the conditions set out by Section 35(2AB) as weighted deduction. Section 35 (2AB) reads as follows: "Where a company engaged in the business of (bio technology or in any business of manufacture or production of any article or thing, not being an article or things specified in the list of 11th schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority then, there shall be allowed a deduction of a sum equal to [one and one half] times of expenditure so incurred. " 10.5 The assessee satisfies that it is engaged in the business of manufacture of an article or thing i.e. tyres and tyres are not included in the Eleventh schedule and now, the assessee claims expenditure on scientific research towards clinical trials for availing the facility of its subsidiary in Germany. The claim of assessee does not satisfy the 2nd and 3rd limbs of Section 35(2AB)

ITA No.44/2017 -32- i.e. expenditure of scientific research on in-house research and development facility. The expenditure clears to be more in the nature of revenue expenditure and the expenditure is also incurred at a facility not approved by the prescribed authority. 10.6 In our considered view, the Tribunal fell in a substantial error of law by not taking note of the qualifying words such as expenditure on scientific research on in-house research and development facility as approved by the prescribed authority. As rightly contended by Mr.Christopher Abraham, there is no need for liberal interpretation of a tax provision when the language is unambiguous and grant an incentive not provided by the Parliament to a set of cases. The incentive is admissible only when the expenditure is incurred on scientific research on in-house research and development facility. The object of incentive is to encourage indigenisation of technology and show up the know-how of the assessee/entrepreneurs. The

ITA No.44/2017 -33- Tribunal's conclusion is accepted the same opens a new eligibility facility without reference to approval by the prescribed authority for claiming incentive of weighted deduction. The circumstances considered and the principle laid in Cadila Healthcare are completely distinguishable. He takes note of the circumstances that the claim of the assessee now encomposes revenue expenses said to have been incurred at assessee's subsidiary at Germany. The said expenditure allowed as weighted deduction then the words which have substantial meaning in Section 35(2AB) of the Act viz. that in-house research and development facility as approved by the prescribed authority would become otiose. The preference to liberal interpretation for literal construction is the correct principle. The meaning of words ought not to be stressed and strained while constructing the application of a provision in a statute. We are convinced that the Tribunal fell in a serious error by

ITA No.44/2017 -34- accepting the claim of assessee for weighted deduction amounting to Rs.94,98,220/-. The assessee fails to establish essential requirements for claiming weighted deduction. Therefore the conclusion recorded by the Tribunal warrants interference under Section 260A of the Act and the question is answered in favour of the revenue and against the assessee. Substantial Question No.4 "Whether the Hon'ble ITAT, in the facts and circumstances of the case, is correct in allowing loss of Rs.4,07,24,151/- on transfer of 100% shareholding of assessee company in its AE Apollo tyres A.G.Switzerland (ATAG) to another Apollo Tyres, Cyprus Pvt.Ltd.(ATC) as revenue loss and the contention of the assessee that the same was incurred out of commercial expediency. 4.1 Whether the Hon'ble ITAT, in the facts and circumstances of the case and in law is correct in applying the judgment of the Hon'ble Supreme court in SA Builders reported in 288 ITR 01 to allow the above claim? 11. The assessee during the assessment year 2010-2011

ITA No.44/2017 -35- sold its 100% shareholding in Apollo Tyres A.G., Switzerland (ATAG) to Apollo Tyres Cyrus Pvt.Ltd., (ATC). The assessee had shown a loss of Rs.4,07,24,151/- on sale of its share in ATAG in favour of ATC. The said amount is claimed as business expenditure and sale of shares is necessitated by business expediency. DRP examined the total circumstances surrounding the sale of assessee's interest in one subsidiary, in favour of another subsidiary and rejected the claim by recording a finding as follows: "11.6 It is also pertinent to point out that in submissions to ground no eighteen where the issue of interest charge on convertible loan given to the subsidiary ATAG has been contested the assessee has averred as follows: In this regard, it is respectfully submitted that the AE is principally an investment company/brand owning company, without clearly identified operating business revenue streams and does undertake any operating activity. 11.7 From the above averments available in the submissions made before the DRP it is revealed that the claim of commercial expediency made by the assessee on the ground that ATAG a Swiss based subsidiary was undertaking marketing related activities of the assessee in Singapore is entirely

ITA No.44/2017 -36- fallacious and not supported by a shred of evidence. The loss on sale of the subsidiary ATAG is a made up affair, contrived to enable the assessee to claim a deduction from its taxable income. This objection of the assessee therefore deserves to be rejected.". 11.1 The Assessing Officer in Annexure-D order held that: "11.3 The facts, for A.Y.2010-11 are totally different from those of the A.Y.2002-03. In the relevant A.Y. 2002-03. In the relevant A.Y. 2002-03, the assessee company has sold the subsidiary concern to another subsidiary concern and the resultant capital loss had been claimed as business loss. Hence, the reliance of the assessee on the order of the ITAT for A.Y. 2002-03 in totally misplaced as the facts were totally different in A.Y.2002-03. 11.4 The investment was made by the assessee in a separate juridical corporate entity. The transaction between the two distinct, separate legal entities are subject to tax in their respective hands. The accretion/enhancement or decease in the value of investment is dependent on various factors. Merely because the said entity ATAG was doing business transaction with the assessee, the investment in shares cannot be held as a business activity. In fact, the assessee itself is showing the said shares under the investment. As the assessee has incurred loss on sale of its investment in shares, the resultant loss cannot be allowed a business loss. Considering the above mentioned facts,claim of loss of Rs.4,07,24,151/- was disallowed by the AO in the Draft Order. The DRP after considering the objections raised by the assessee has upheld that the additions made by the AO is in order. Accordingly, Rs.4,07,24,151, is added

ITA No.44/2017 -37- back to the total income. 11.2 On the contrary, the Tribunal examined the claim of assessee, more particularly, from the perspective of commercial expediency and held in favour of the assessee. Hence we prefer to excerpt the relevant portion of the order of the Tribunal hereunder: "25. We have heard the rival submissions. The appellant has submitted during the course of assessment proceedings, that the objective of ATAG was undertaking sales and marketing related activities for the brand of the appellant in Singapore. The said factual assertion has not been rebutted by the AO in the impugned assessment order. There is nothing on record to show that the said subsidiary company was doing any activity completely independent and unrelated to the activities carried out by the appellant company. Thus, the claim of the appellant that the investment was made for commercial purpose and not for purpose of accretion of investment cannot be rejected. The only thing that was required to be examined in the present case was whether the expenditure was made as a prudent business man for the purpose of business. Int he case of S.A.Builders v CIT, 288 ITR 1, the Hon'ble Supreme Court held as under: "The expression 'commercial expediency' is an expression of wide import and include such expenditure as a prudent business man incurs for the

ITA No.44/2017 -38- purpose of business. The expenditure may not have been incurred under any legal obligation, yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency.". 25. The unity of objectives of the appellant company and the subsidiary company clearly shows that the investment was in the nature of a trade investment only. The decision to invest in the subsidiary was not such that a prudent businessman would not have made it. In a similar case of DCIT v Gujarat small Industries Corporation (4 SOT 239), the ITAT Ahmedabad Bench held as under: "As per the memorandum of association of the assessee, the main object of the assessee was to promote the interest of SSI units in the State. The main object of the assessee was to help industrial concerns in various ways and help industrial growth of the State. Obviously, the company G was floated for the same purpose as a subsidiary and later on sold off when the loss started mounting. In view of the fact, it was found that investment in shares of company by the assessee was in the nature of trade investment. The Commissioner (Appeals) had correctly followed the judgment of the Supreme Court int he case of Brooke Bond India Ltd. vs. CIT [1986] 162 ITR 373. The commissioner (appeals) had also followed the judgment of the Rajasthan High Court in the case of Rajasthan Financial Corpn. V CIT [1967] wherein it was held that if the investment in shares and sale thereof is closely linked with the business of the assessee, the loss suffered on account of such sale would be a trading loss. 26. We, therefore, hold that the business loss claimed by the appellant is in accordance with law. Ground

ITA No.44/2017 -39- Nos.8 and 8.1 are allowed." 11.3 Mr.Christopher Abraham challenging the findings of the Tribunal contends that the substantial question of law in effect arises for consideration of this Court is whether the Tribunal is justified in applying the concept of commercial expediency de hors the reality of the circumstances which weighed with the Dispute Resolution Panel and the Assessing Officer for negativing the claim of the assessee. Firstly, according to him, this is a shadow transaction and the assessee is not entitled in law or fact to claim Rs.4,07,24,151/- as revenue expenditure. Secondly, the Tribunal, without recording a finding whether the loss of sale of the subsidiary ATAG is a made up affair, contrived to enable the assessee to claim a deduction from its taxable income, is justified in treating everything as commercial expediency and allow the claim. Therefore, the decisions have been in a very abstract manner applied the case

ITA No.44/2017 -40- on hand. 11.4 Mr.Joseph Markos next contends that the Tribunal since is entitled to record a finding of fact, however, by applying the principles of law in an abstract way accepted the case of assessee that the commercial expediency is present in the case on hand, which has driven the assessee to sell its interest in one subsidiary in favour of another subsidiary and the reported judgments are fully applicable to the case on hand. Alternatively, without prejudice to the first argument, it is contended that this Court in its jurisdiction under Section 260A if is not convinced with the approach of the Tribunal, remand the matter and leave it open to the Tribunal to re-examine the issue. This Court avoids entertaining a detailed examination of the case of both the parties which may lead to this Court recording the findings of the fact for the first time. In other words the issue is remanded to the Tribunal for a decision

ITA No.44/2017 -41- afresh. 12. The Dispute Resolution Panel recorded that ATAG Subsidiary, undertaking marketing related activities of the assessee in Singapore, is entirely malicious and not supported by evidence. The loss on sale of subsidiary ATAG is a made-up affair contrived to enable the assessee to claim deduction from its taxable income. The objection of the assessee, therefore, deserves to be rejected. The above conclusion, primarily, relates to the tenability in fact of the very claim of the assessee for deduction of Rs.4,07,24,151/-. The Tribunal examined the discretion available to the assessee in matters of commercial expediency and by applying the test on commercial expediency accepted the claim for deduction. The first objection of the Revenue is that the Tribunal has taken the acceptability of the allowance on commercial expediency as first, without actually examining what weighed with the Dispute Resolution Panel and

ITA No.44/2017 -42- the Assessing Officer for disallowing the loss on account of sale of shares of subsidiary company in favour of subsidiary company. Assuming the assessee has acceptable margin and latitude in matters of commercial expediency, examination of commercial expediency is the second one in the sequence of considerations of relevant circumstances. No finding is recorded on the crucial aspect on which the Dispute Resolution Panel observed against the assessee. Therefore, the argument is that the Tribunal committed an error of law and the substantial question of law must be answered in favour of the Revenue and against the assessee. 12.1 Senior Advocate Mr Joseph Markos invites the attention of the Court to the overall consideration by the Tribunal and contends that the acceptability of the deduction is considered in the right perspective and the observation of the Dispute Resolution Panel is also unavailable in the

ITA No.44/2017 -43- circumstances of the deduction claimed by the assessee. He, however, endeavors to convince the Court on merits that the finding recorded by DRP is also untenable for a reason both in law and fact. 12.2 We have taken note of the arguments of both sides. What is clear from the candid submissions made by both the counsel is that the reason that weighed with the Dispute Resolution Panel is not adverted to by the Tribunal while setting aside the dis-allowance of Rs.4,07,24,151/-. Either we accept the case of the Revenue and restore the conclusion recorded by the DRP or accept the explanation of the assessee that the claim is part of business expenditure, in such consideration this Court would be entering into a simple fact by re-examining the case of both sides for the first time. We are of the view that the Tribunal reconsiders this issue after taking note of the entire circumstances, the tenability of the claim and

ITA No.44/2017 -44- records such finding commensurate to the material on record. Thereafter party aggrieved, certainly can approach this Court under Section 260A. Having regard to the above consideration, the question is answered in favour of the Revenue and against the assessee wit, i.e., matter remitted to Tribunal for disposal in accordance with law. Question No.5 Whether the Hon'ble ITAT is factually correct in holding that since foreign exchange gain of Rs.4,72,34,591/- was offered by the assessee in assessment year 2011-2012, addition in A.Y.2010-11 will amount to double addition, when in fact the foreign exchange gain of Rs.4,72,34,591/- offered in A.Y. 2011-12 has been removed from A.Y.2011- 12 based on the direction of the Dispute Resolution Panel?. 13. Addition in assessment year 2010-11 will amount to double addition when in fact to foreign exchange gain of Rs.4,72,34,591/- offered in assessment year 2011-12 has been removed from assessment year 2011-12 based on the direction of Dispute Resolution Panel.

ITA No.44/2017 -45- 13.1 Both the counsel appearing for the parties state that the similar question is considered in assessee's case in ITA No.249 of 2015 and by following the said judgment, the question is answered in favour of assessee and against the revenue. Substantial Question No.6 6. Whether the Hon'ble ITAT, in the facts and circumstances of the case as well as in law, is correct in directing to allow foreign exchange loss of Rs.98,10,765/- on forward exchange contract in the facts and circumstances of the case? 14. The assessee entered into forward contracts with Barclays Bank, Standard Chartered Bank and YES Bank for the purchase of raw material from foreign suppliers. The assessee entered into forward contracts with the said banks to avoid any loss that may occur due to foreign exchange fluctuation. Under this head on account of upward fluctuation the assessee claimed Rs.98,10,765/- as deductable allowance. The DRP and the

ITA No.44/2017 -46- Assessing Officer disallowed the loss claimed by the assessee on account of value fluctuation on foreign exchange contracts on the ground that it is notional and contingent in nature. The DRP/Assessing Officer while rejectingthe claim of assessee relied on CBDT instruction No.3 of 2010. The case of assessee is that the allowance relates to loss on forex forward contracts for purchase of raw materials. The nature of foreign exchange purchases and the loss on forex forward contracts are covered in revenue field as revenue expenditure. The revenue expenditure is not covered by Section 43A of the Act. According to Accounting Standard-11 the gain or loss on account of forex forward contracts is to be offered for tax, gain arises or allowable as deduction is under Section 37 of the Act if it results in loss. The issue is no more res integra and squarely covered by the judgments of the Supreme Court in Commissioner of Income-

ITA No.44/2017 -47- Tax v. Woodward Governor India P. Ltd.10 and Oil and Natural Gas Corporation Ltd (ONGC) v. Commissioner of Income-Tax11 . 14.1 Mr Christopher Abraham reiterated the very argument which found favour with the DRP and contended that the notional loss ought not to have been allowed under Section 37 of the Act by the Tribunal. 14.2 We have perused the reasons recorded by the Tribunal in paragraph nos.29 to 31 of the order under appeal. The Tribunal, as a matter of fact, found in categorical terms, the error which was committed by the DRP/Assessing Officer. Now the revenue is commending the very same argument and such argument is untenable, unless and until the fallacy in the findings recorded by the Tribunal is established within the scope of Section 260A. The Revenue has not made up a ground for interfering with the findings recorded by the Tribunal. 10 (2009) 312 ITR 254 (SC) 11 (2010) 322 ITR 180 (SC)

ITA No.44/2017 -48- Suffice to note that the decision of the Supreme Court in Woodward Governor India P. Ltd. and ONGC are applicable to the case on hand. The correct proposition is applied and the Tribunal had recorded a finding in favour of the assessee. We do not, for brevity, propose to re-state the very reasons, we are in complete agreement in the order under appeal. On the contrary, the Revenue failed to make out a case warranting interference of this Court under Section 260A of the Act. We accept the findings recorded by the Tribunal. Hence Substantial question no.6 is answered in favour of the assessee and against the Revenue. Question no.7 Substantial Question No.7: 7. Whether the Hon'ble ITAT's direction to delete the disallowance of Rs.5,15,34,726/- on account of prepaid expenses is legally justified in the facts and circumstances of the case?

ITA No.44/2017 -49- 15. The assessee in the previous year ending 31.03.2010 claimed deduction of Rs.5,15,34,726/-. The said claim is claimed towards prepaid expenses, insurance, interest, rent and general. The said expenditure can be termed as advance payment by the assessee to suppliers of services/goods, in other words, advance payment. The Assessing Officer rejected the claim for deduction on the ground that these expenses are not relatable to the income earned by the assessee during the previous year ending on 31.03.2010 (Assessment Year 2010-11). The Tribunal allowed the claim of advance payment towards expenses by the assessee. 15.1 Mr Christopher Abraham argues that the decisions relied on by the Tribunal are completely inapplicable to the circumstances under which the advance payments are claimed as expenses for the Assessment year 2010-11. There is no legal basis for entertaining the claim. The nature of payment since is

ITA No.44/2017 -50- advance, the said advance cannot be deducted from the net income of the assessee and corresponding benefit in tax liability could be given to the assessee. To merit the said ground, within the scope of Section 260A of the Act, the Standing Counsel invited our attention to the brief consideration of this aspect by the Tribunal in paragraphs 36 and 37. At this juncture, it is very apt to observe that the Tribunal has not actually appreciated the admissibility of the advance payment as an expenditure for this Assessment Year. The payment is an advance expenditure and is to be booked in the year in which the expenses are actually incurred. The deduction of advance payment expenditure is to be appreciated from the perspective of accounting standard followed by the assessee. The effect of said entries is limited to the accounts of the assessee but could not be extended for claiming deduction in the return filed in the Assessment Year 2010-11. The assessee is, as a matter of

ITA No.44/2017 -51- fact, entitled to claim deduction of Rs.5,15,34,726/- in the Financial Year in which the actual expenditure is incurred by the assessee. We are not convinced with the reasons assigned by the Tribunal for interfering with the orders of the Assessing Officer. 15.2 The question is answered in favour of the Revenue and against the assessee. The entitlement of assessee for claim is not accepted on the ground that the assessee is required to claim the deduction in the year in which the expenses are incurred/services received and the claim made has to be considered in the applicable Assessment Year by the Department. Hence the question is answered in favour of revenue and the findings of the Tribunal are set aside. Question No.8 7. Whether on the facts and in the circumstances of the case, is the Tribunal right to delete the difference between the conversion rate of Rs.44.57/CHF and Rs.42.88/CHF?"

ITA No.44/2017 -52- 16. The Revenue though has raised the additional ground could not substantiate with. The ground refers to the direction issued by the Tribunal. The direction is preceded by reasons and they are self-explanatory. For immediate appreciation, we prefer to excerpt the reasons weighed with the Tribunal for partly allowing the claim of assessee under these heads: “42. The appellant had sold its equity holding in its wholly owned subsidiary Apollo Tyres AG to its associate enterprise namely Apollo Tyres (Cyprus) Pvt. Ltd for a consideration of CHF 2.26 million. In the order giving effect to the DRP directions dated 26.12.2014, the TPO determined the conversion rate of CHF to INR in F.Y.2009-10 at INR 44.57/CHF. The Ld.AR contends that the DRP in the order passed under section 154 of the Act dated 15.06.2015 has determined the conversion rate at Rs.42.88/CHF. 43. We have heard the rival submissions. The order dated 15.06.2015 passed by DRP under section 154 r.w.s. 144C(5) of the Act clearly shows that the DRP has held that the valuation should be made at Rs.42.88/CHF as against Rs.42.68/CHF claimed by the appellant in the application under section 154.

ITA No.44/2017 -53- The TPO ought to have given effect to the directions of the DRP in the order dated 15.06.2015. The addition on account of the difference between the conversion rate of Rs.44.57/CHF and Rs.42.88/CHF is deleted. Ground No.14 is partly allowed.” 17. In our considered view, a finding of fact by referring to the orders made by the competent authority is recorded. Firstly, it is not shown to us how those directives are incorrect or inapplicable to the case on hand, and, secondly, to interdict with a finding of fact, no reasons are stated with the directions issued by the Tribunal. Looked at it from either perspectives and the direction itself, we are of the view, the view taken by the Tribunal for the Assessment Year 2010-11 does not warrant interference of this Court. The question is answered in favour of the assessee and against the Revenue.

ITA No.44/2017 -54- The Income Tax Appeal is allowed in part as indicated above. Sd/- S.V.BHATTI JUDGE sd/- VIJU ABRAHAM JUDGE jjj/css/

ITA No.44/2017 -55- APPENDIX OF ITA 44/2017 PETITIONER ANNEXURE ANNEXURE A COPY OF THE ORDER U/S.92CA(3) DATED 29/01/2014 FOR AY 2010-11 PASSED BY THE JDIT, TRANSFER PRICING OFFICER-1, KOCHI. ANNEXURE B COPY OF THE DRAFT ASSESSMENT ORDER U/S. 144C RWS 143(3) DATED 28/03/2014 FOR AY 2010-11. ANNEXURE C COPY OF ORDER U/S. 144C(5) DATED 26/12/2014 CONTAINING DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL, BANGALORE IN F.NO. 183/DRP-BNG/2014-15. ANNEXURE D COPY OF FINAL ASSESSMENT U/S. 143(3) R.W.S. 144C DATED 18/02/2015 FOR AY 2010-11. ANNEXURE E COPY OF THE APPELLATE ORDER OF THE ITAT COCHIN BENCH IN ITA NO.223/COCH/2015 DATED 10/01/2017 (COMBINED ORDER IN ITA NO.223/COCH/2015 (AY 2010-11), IT(TP)A NO.189/COCH/2016(AY 2011-12), ITA NO.222/COCH.2016 (AY 2010-11), ITA NO.257/COCH/2015 (AY 2010-11) AND IT (TP)A NO.130/COCH/2016 (AY 2011-12).