MRF Limited Vs DCIT (ITAT Chennai)
In , the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) decided appeals relating to Assessment Years (AYs) 2015-16 and 2016-17 arising from reassessment orders passed under Sections 147 and 144C(13) of the Income Tax Act.
The assessee, a Chennai-based tyre manufacturer, challenged several additions and transfer pricing adjustments made by the Assessing Officer (AO), Transfer Pricing Officer (TPO), and confirmed by the Dispute Resolution Panel (DRP). The issues primarily concerned disallowance of deduction under Section 35(2AB), transfer pricing adjustments relating to transactions with MRF SG Pte Ltd, corporate guarantee adjustments, provisions for litigation-related liabilities, Chapter VI-A deductions, TDS credit, interest levy, and penalty proceedings.
For AY 2015-16, the Tribunal noted that reassessment validity grounds and limitation grounds were withdrawn or not pressed by the assessee. The principal dispute related to deduction claimed under Section 35(2AB) for expenditure incurred on the Thiruvottiyur R&D facility. The AO had disallowed the claim on the basis of survey findings and employee statements, alleging that the facility was engaged only in sample testing, lacked qualified technical manpower, and claimed deduction on equipment allegedly not installed at the facility. The DRP upheld the disallowance.
The Tribunal observed that the Department of Scientific and Industrial Research (DSIR) is the prescribed authority for approving and quantifying deductions under Section 35(2AB). Relying on earlier Tribunal decisions in the assessee’s own cases for AYs 2013-14, 2014-15, 2017-18, 2018-19 and 2019-20, the Tribunal held that the AO and DRP could not override DSIR approval or reject deductions certified in Form 3CL merely on the basis of statements recorded during survey proceedings under Section 133A. It further held that findings from a survey conducted in 2019 could not invalidate deductions already certified for earlier years. Accordingly, the disallowance under Section 35(2AB) was deleted.
