TaxTMI 
TaxTMI 
2024 (5) TMI 162
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.... 2. That on the facts and circumstances of the case and in law the order dated 28.07.2022 passed by the assessing officer under section 144C(13), having been passed beyond limitation provided in terms of Section 144C(13) read with section 153(3) of the Act, is illegal being barred by limitation, void ab initio and is liable to be quashed. 3. That the assessing officer erred on facts and in law in making transfer pricing adjustment of Rs. 21,92,40,676/- in relation to the specified domestic transactions undertaken by the appellant. 3.1 That the assessing officer erred on facts and in law in adding the transfer pricing adjustment made by the TPO to the income of the appellant not appreciating that the addition / disallowance ought to have been restricted to the deduction under section 80IC/80IE of the Act 3.2 That the assessing officer / TPO erred on facts and in law in not appreciating that the assessee being an entrepreneur is engaged in activities such as research and development, brand building and advertising and therefore cannot be selected as the tested party for the purpose of undertaking benchmarking analysis. 3.3 That the assessing off....
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....es. 6. That on the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under Section 270A of the Act." 3. The assessee has also moved an application under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 dated 08.02.2024 seeking admission of additional ground which read as under: ""Re: Disallowance of Deduction under section 35(2AB) amounting to Rs 12,01,42,780 5. That the assessing officer erred on facts and in law in allowing weighted deduction under section 35(2AB) of the Act at Rs. 100,90,68,000 as against Rs. 112,92,10,780 claimed by the appellant towards expenditure incurred on scientific research. 5.1 That the assessing officer failed to appreciate that the appellant having approved R&D Centres and having fulfilled the conditions of section 35(2AB) of the Act, is entitled to weighted deduction in respect of the entire gross expenditure incurred on scientific research. 5.2 That the assessing officer erred on facts and in law in allowing deduction under section 35(2AB) of the Act only to the extent of expenditure approved by Department of Scientific and Industrial Research ....
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.... units, Unit-II and Unit-III are eligible for deduction under Section 80-IC of the Act, whereas Unit-I is not eligible for any beneficial treatment or deduction under tax laws. Besides, the assessee has another manufacturing unit situated in Sikkim, which is eligible for deduction under Section 80-IE of the Act. 8.1 For the assessment year under consideration, the return filed by the assessee was selected for scrutiny under Section 143(3) of the Act. The case was referred to the Transfer Pricing Officer (TPO) in terms of S. 92BA r.w.s 80IA(8) & 80IA(10) of the Act for computing Arms' Length Price in respect of Specified Domestic Transactions (SDTs) towards purchase and sale of goods & services, entered into between the units eligible for deduction under Section 80IC/80IE of the Act and other units inter se and also other AEs of the assessee entity. The assessee as per its Transfer Pricing Study Report did not separately benchmark the SDTs entered into by the eligible units with the Associated Enterprises (AEs) of the assessee. The Assessee conducted entity level comparison of OP/OR of the assessee-company (combining all units) as a whole and compared it with the operating margin....
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....f the Act 64,34,78,261 Ageing of Receivables 5,72,619 Other additions/disallowances Addition w.r.t. to expenditure incurred on in-house scientific research under section 35(2AB) of the Act 12,01,42,780 Disallowance w.r.t. deduction claimed under section 80G of the Act on account of donations given 638,13,601 Addition w.r.t. difference in Duty Drawback 2,18,481 10. On receipt of the draft order, the assessee filed its objection to such variations with the Dispute Resolution Panel (DRP). 11. Pursuant to reference made by the Assessee, the DRP issued its direction dated 21.06.2022 wherein the view of the TPO that there existed an arrangement between the assessee and its Associated Enterprises (AEs) to shift profit to the eligible units from AEs in order to claim higher deductions was upheld on first principles. The transfer pricing adjustments of SDTs undertaken between eligible units and the AEs of the assessee were thus carried out based on OP/OR of comparable companies to reduce the claim of eligible deductions. The DRP, on facts, however modified and restricted the proposed adjustments in proportion to the value of Specified Domestic Transaction....
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....es 77.53 268.42 138.73 Sales to AEs 0.15 17.91 0.65 % of sales to AEs 0.19% 6.67% 0.47% Total Purchase 13.28 67.85 18.50 Purchase from AEs 4.38 19.65 5.99 % of purchase to AEs 32.98% 28.96% 32.39% (iii) The assessee did not separately benchmark the SDTs entered into by the eligible units with the AEs of the assessee-company with any specific most appropriate method but conducted entity level comparison of OP/OR of the assessee-company as a whole and compared it with the operating margins of other comparable companies. Considering the OP/OR/TNM Method of the assessee-company as a whole, the profit margin stands at 19.11% which is far more than the operating margin of comparable companies which stands at an average of 8.72% as computed by the Assessee. (iv) The operating profits of the respecting eligible units as stated are tabulated below. Units Turnover (Rs. Crores) Operating Profit (Rs. Crores) OP/OR % Paonta Unit-II 268.42 40.03 14.91 Paonta Unit-III 138.73 53.17 38.33 ....
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....the assessee more profits than what the assessee might have ordinarily expected to arise from such business. The AO/TPO has miserably failed to discharge its onus in this regard. The Ld. Counsel reiterated that the existence of 'arrangement' under Section 80IA(10) of the Act can not be alleged and presumed solely for the reason that eligible units have earned more profits than non eligible units as wrongly done by the AO/TPO without sanction of law. The AO thus has glaringly failed to discharge its onus while alleging existence of 'arrangement. 16.2 The Ld Counsel valiantly contested that even without the additional evidences, the action of the AO/TPO is outside the bounds of law on the ground of bald supposition of existence of arrangement contemplated under s. 80IA(10) without any corroboration with tangible material. The action of the AO/TPO is dictated by the sole consideration of relatively higher profits reported by the eligible units qua non eligible unit. Presumption of arrangement on such premise is contrary to stated legal position as enunciated in CIT vs. Schmetz India P. Ltd. 26 taxmann.com 336(Bom.); PCIT vs. Vedansh Jewels Pvt. Ltd. (2018) 97 taxmann.com 521 (Raj.)....
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....d on commercial considerations and at ordinary market price and consequently no breach of Section 80IA(10) of the Act can be perceived. 18. As contended, the TPO also ignored the significant contention of the assessee that each of the eligible unit manufactures different kind of products having different production process and different margins of profits by having different FARs. The TPO continued with the same exercise of conducting comparison of operating profits of eligible units at unit level with operating profits of alleged comparable companies by applying TNM Method. The entire basis of benchmarking conducted by the TPO by comparing profit of eligible unit (instead of entity level) with operating profits of alleged comparable companies is inherently fallacious without fulfilling the test of presence of 'arrangement' as judicially understood, which holds the key for invoking provisions of Section 92BA r.w. Section 80IA(10) of the Act. The ld. counsel thus harped that the additional evidences would merely demonstrate the basic tenet that the transaction between the eligible units, vis-a-vis its AEs are comparable and at Arms' Length and has not resulted in any clandestine ....
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....d to and relied upon by the assessee. A reference was also made to CIT vs. Smt. Kamal C. Mehboobani, (1995) 214 ITR 15 (Bom); Kanniappan Muriugadoss vs. ITO, (2017) 79 taxmann.com 244 (Chennai Tribunal) in this regard. 22. In rejoinder, the Ld. Counsel submitted that Rule 29 permits the Tribunal to admit the additional evidences where the test of 'substantial cause' is found to exist. In the present case, the TPO as well as AO proceeded against the assessee without showing existence of 'arrangement'. Such point goes to the root of the matter. The whole addition is a complete non-starter in the absence of fulfillment of such paramount condition. The additional evidences, on the contrary, positively proves absence of 'arrangement'. Notwithstanding, the onus which lay upon the revenue was not discharged, assessee on its part proactively seeks to demonstrate otherwise. The additional evidences provide enunciation of bonafides in the action of Assessee and absence of any arrangement per se and non admission thereof may possibly provide misleading results would in turn, led to substantial miscarriage of justice. This is more so where the TPO has made bald allegation of arrangement giv....
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....o be produced or any witness to be examined or any affidavit to be filed for any other substantial cause or (iii) when the Income Tax Authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidences either on points specified by them or not specified by them. 25.2 In this backdrop, we take note of the plea raised on behalf of the assessee that additional evidences filed primarily demonstrate that the transactions between the eligible units and non eligible units / AEs are at arms length and at ordinary market price and therefore, no cause of action arises for invocation of 80IA(10) to allege the existence of any kind of 'arrangement' fetching more than ordinary profits to the assessee. 25.3 Para 2 page 9 of the order of TPO gathers significance for adjudication of controversy towards Transfer pricing adjustments under challenge as per Ground No. 3 of the Grounds of appeal. The operative para of the order of TPO would be relevant for this purpose. "In the present case, the point to be noted is that the Assessee is showing excessive profits to claim higher deduction under section 80-1C/80IE of the Act. When two relate....
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.... computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. ...] (10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in clause (ii) of section 92F." [Emphasis Added] 25.6 The nature of documentary evidenc....
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....TPO/AO/DRP is abstract in nature and has been made solely for the reason that the profits of eligible units are higher than that of non eligible unit as can be seen from para 25.3 and 25.4 extracted above. Adverse inference based on such bald allegation of TPO, endorsed by DRP in a mechanical manner has compelled the assessee to assimilate the data to rebut such bald allegation and discharge the purported onus which was never shifted to Assessee by the revenue while alleging arrangement. The ld. counsel draws a fine distinction and submits that arrangement is a 'cause' and the higher profit is the effect. The high profit must necessarily be the consequence of such arrangement. The onus to establish arrangement is upon the one who alleges so. The ld. counsel submits that on examination of additional evidences filed by Assessee as a proactive measure, it will be apparent that the findings of the TPO which resulted in the impugned additions are contrary to the elementary facts available in the matter. The additional evidences filed are in the form of comparative charts and Invoices showing value of purchases / sales made by the eligible units qua comparative transactions carried out b....
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....existence of 'arrangement' before taking any rational view in matter. It is further plea of the assessee that the additional evidence goes to prove conspicuous absence of any arrangement and the whole basis of reference to TPO and consequent addition by way of TP adjustment is vitiated and unsustainable in law. It is thus the plea of the assessee that to render substantial cause of justice, the Tribunal is not only entitled in law but also under a sacrosanct duty to admit the additional evidences, more so, where the lower authorities have omitted to examine the factual aspect on comparable market value of goods/services on the date of transfer expected of them in law. 28. The ld. counsel contends that it is judicially settled that the presence of comparably higher profit yield attributable to eligible units, would not ipso facto lead to a presumption that there inevitably exists an arrangement per se. For such proposition, a reference was made to the judgment delivered in the case of CIT vs. Schmetz India Pvt. Ltd., (2012) 26 taxmann.com 336 (Bom) wherein it was held that where the AO has not been able to prove any arrangement between parties which resulted in extraordinary prof....
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....0) read with proviso thereto. (vi) If the assessee has demonstrated that the transactions between the eligible unit and AE were carried out at market price, the burden placed on the assessee stands discharged and the burden shifts upon the Assessing Officer to rebut the same. (vii) The AO has to discharge the burden by proving that the transactions were not at market price, before satisfying the condition of arrangement while making reference to TPO for computation of ALP. 30. On a nuanced consideration of the plea raised on behalf of assessee and counter plea of the revenue, we find force in the stance of the assessee that the TPO/AO has made adjustment under Section 80IA(10) r.w.s 92BA by supposition of existence of 'arrangement' merely on the grounds of comparably higher profits reported by the eligible units vis-avis non eligible party. No other basis is discernible. The TPO/AO has compared the profits, unit wise instead of entity level comparison i.e. Single Unified business entity vis-à-vis uncontrolled comparables. The Assessee unequivocally claims non existence of any arrangement which, as observed earlier, is the bedrock for any plausible TP adj....
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.... evidences, the assessee is seeking to make out a new case of benchmarking from TNMM to CUP method which allegedly runs contrary to TP Study Report in which the assessee has itself taken stance for non applicability of CUP method. Statedly, the assessee, in the instant case, did not specifically benchmark its STDs through any specific method in the TP Study Report and therefore, it would be erroneous to conclude that the assessee is seeking to make out a new case by changing the method of benchmarking from TNMM to CUP method for the first time before the Tribunal. The internal CUP available in the instant case is the most direct and realistic method to evaluate market price of transactions carried with close connections. The additional evidences filed would throw light on the bonafides of such transactions. 34. The Hon'ble Supreme Court in the matter of Tek Ram vs. CIT (2014) 44 taxmann.com 367 (SC) has held that documents which are relevant to the case should be looked into by the appellate body. The Hon'ble Delhi High Court in the case of CIT vs. Text Hundred India Pvt. Ltd., 351 ITR 57 (Del) and CIT vs. Virgin Securities and Credits (P.) Ltd. (2012) 20 taxmann.com 681 (Del) r....
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....22577293 11933125 Poant Unit II N.S. Industries- Poanta Purchase of product 6961986 - 6961986 Poant Unit II N.S. Industries - Unit-II Purchase of product 28655811 - 28655811 Sub Total Poanta Unit-II 223114568 22577293 200537275 Poanta Unit III A To Z Packers Purchase of product 4205460 - 4205460 Poanta Unit III A.S. Packers Purchase of product 376776 - 376776 Poanta Unit III Medipack Innovation Private Limited Purchase of product 26484648 - 26484648 Poanta Unit III Mediforce Health Care Pvt. Ltd. Purchase of product 160300 - 160300 Poanta Unit III Pharma Force Lab- Unit II Purchase of product- 34810 - 34810 Poanta Unit III Print Man Purchase of product 421418 - 421418 Poanta Unit III ANM Pharma Pvt. Ltd. Purchase of product 63956 - 63956 Poanta Unit III J.K. Print Packs Purchase of product 140185 - 140185 Poanta Unit III JPR Labs Private Limited Purchase of product 4011250 - 4011250 Sub Total Po....
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....p; 10000376 Alpha Lipoic Acid USP 0000102706 ANM Pharma Pvt. Ltd. Yes KG 1000.00 4175805.60 4176 4105 4275 10000376 Alpha Lipoic Acid USP 0000102126 Nischem International Pvt. Ltd. (blank) KG 500.00 2095501.93 4191 4030 4275 10000572 Ofloxacin IP 0000102706 ANM Pharma Pvt. Ltd. Yes KG 13175.00 25869960.00 1964 1836 2345 10000572 Ofloxacin IP 0000100094 Archit Chemicals Pvt. Ltd. (blank) KG 1500.00 2962500.00 1975 1975 1975 10000813 Calcium Carbonate (Fine Powder) IP 0000100046 Pharma Force Lab- Unit II Yes KG 455.65 13669.50 30 30 30 10000813 Calcium Carbonate (Fine Powder) IP 0000100097 Clarion Pharmaceuticals Co. (blank) KG 33875.00 926175.00 27 27 28 ....
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.... 218.02 73036.70 335 335 335 11000268 Plain Alu Alu Foil 0.13x202Mm 0000102316 Medipack Innovations Pvt. Ltd. Yes KG 1875.25 618832.50 330 330 330 11000268 Plain Alu Alu Foil 0.13x202Mm 0000102198 ICM Plastics Ltd. Pvt. (blank) KG 309.66 103736.10 335 335 335 11000395 Bl. Foil Ptd. REheptin Tab 210x0.025PS 0000100759 Print Man Yes KG 179.09 71909.66 402 400 405 11000395 Bl. Foil Ptd. REheptin Tab 210x0.025PS 0000102316 Medipack Innovations Ltd. Pvt. (blank) KG 199.63 83644.97 419 419 419 11000420 Plain Alu Alu Foil 0.13x222Mm 0000102316 Medipack Innovations Ltd. Pvt. Yes KG 8903.56 2938174.80 330 330 330 11000420 Plain Alu Alu Foil 0.13x222Mm 0000102198 ICM Plastics Pvt.....
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....ible units have derived higher percentage of profit in comparison to non eligible units. As culled out in the preceding paragraph, in the absence of any material to establish shifting of profit and existence of arrangement, the higher profit derived by eligible unit vis-à-vis unit by itself cannot give rise to any adverse inference of existence of arrangement. The assessee in the instant case has attempted to demonstrate that the transaction between eligible unit and AEs were carried out on market price by producing the bills and tabulations in the shape of additional evidences. As noted in the preceding paragraphs, the primary onus was on the AO to call for such documents as may be considered necessary to scrutinize whether higher profits in eligible units are on account of any arrangement per se. The AO has not discharged such onus but has made bald allegation on the grounds of relatively higher profits earned by the eligible units vis-à-vis non eligible units. 39. In the course of hearing, we have been greatly assisted on behalf of the assessee to gather understanding that the transaction with connected entities are at market price. When seen in totality, we are....
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.... 80G of the Act amounting to Rs. 6,38,13,601/-. 45. The AO observed that the assessee has claimed deduction to the extent of Rs. 6,38,13,601/- under Section 80G of the Act. The AO noted that the assessee has filed the list of mostly private institutions/trust/university to whom the assessee has made contribution during the year under consideration aggregating to Rs. 12,76,27,202/- in the computation of income while carrying out the total contribution of Rs. 12,87,88,979/- towards Corporate Social Responsibility (CSR) in terms of Explanation-2 to Section 37(1) of the Act. The AO thus observed that the assessee has wrongly claimed deduction of 50% of CSR expenses Rs. 12,87,82,979/- under Section 80G of the Act towards outgo/expenses which are otherwise not eligible for business expenses deduction. The AO accordingly denied the claim of deduction under Section 80G of the Act connected to expenses incurred on account of CSR. The DRP endorsed the action of the AO while issuing directions under Section 144C of the Act. 46. The assessee before us submitted that during the financial year under consideration, the assessee has incurred an expenditure of Rs. 12,87,83,000/- in aggregate ....
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....be allowed as deduction under s. 80G too. The relevant position of section 80G(2)(a) of the Act is reproduced hereunder: "(iiihk) the Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013 (18 of 2013); or (iiihl) the Clean Ganga Fund, set up by the Central Government, where such assessee is a resident and such sum is other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under subsection (5) of section 135 of the Companies Act, 2013 (18 of 2013); or" 46.4 The learned counsel thus submitted that as corollary to the legislative fiat, save and except cases falling in exceptions under 80G(2)(a)(iiihk) & (iiihl), the assessee is duly eligible for deduction under s. 80G subject to fulfilment of conditions, unhindered by ineligibility under s. 37 of the Act. 46.5 The assessee referred to the decisions rendered by the Co-ordinate Bench in the case of National Seeds Corporation Limited vs. ACIT, ITA No. 6794/Del/2014; First American (India) Private Limited [ITA No. 1762/Bang/2019; So....
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....y to delineations made in the preceeding paragraphs, s. 37 and S. 80G, appear mutually exclusive subject to exceptions provided in sub-clause (2)(a)(iiihk) & (iiihl) of S. 80G of the Act. 48.2 Hence, the exception carved out by way of Explanation 2 to s. 37 (1) prohibiting claim of CSR expenses as business expenditure, by itself, will not serve as any kind of impediment for the purposes of claim of deduction under s. 80G of the Act. 49. The Co-ordinate benches have affirmatively adjudicated the issue as quoted on behalf of the assessee (supra). In consonance with the view taken by the Co-ordinate Benches referred to on behalf of the assessee, we are inclined to accept the plea raised on behalf of the assessee. The contribution made in question are not shown to be falling in exclusions provided in (iiihk) or (iiihl) of sub-section 2 clause (a) of S. S. 80G of the Act. The action of the Revenue Authorities is thus not sustainable in law. The claim of deduction on CSR expenses on the touchstone of Section 80G is thus allowed. 50. Ground No.4 of the appeal of the assessee is allowed. 51. Ground No.5 and sub-grounds thereto concerns eligibility towards weighted deductions un....
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....,00,95,000 5. Weighted deduction @ 50% u/s. 35(2AB) 37,64,03,500 33,63,56,000 4,00,47,500 6. Total: 112,92,10,500 100,90,68,000 12,01,42,500 56. With reference to such tabulations, the ld. counsel submitted that the aggregate expenditure incurred by the assessee on the scientific research stands at Rs. 75,28,07,000/-. The DSIR has however approved the expenditure incurred at Rs. 67,27,12,000/- only. Based on approval at a curtailed figure, the AO, in turn, has recomputed the weighted deduction Rs. 100,90,68,000/- being 150% of the approved expenditure. 56.1 In this regard, the ld. Counsel made two fold submissions. 56.1.1 Firstly, in terms of Section 35(1)(i) r.w. Section 35(1)(iv), expenditure on scientific research being related to the business of the assessee is eligible for business deduction in entirety without any further rider qua approval of expenses by DSIR insofar as Section 35(1) is concerned. Whether the expenditure incurred is capital or revenue in nature is also of no consequence. The requirement of approval of expenses by DSIR, if any, is not applicable insofar as aforesaid provisions of Section 35(1)(i)/(iv) is concerned. Hence....
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.... Act and have been fully met to assert claim under s. 35 (1) of the Act. The AO has not tested the claim of expenditure under Section 35(1) and has disallowed the expenditure solely for the reason that such expenditure to the extent of Rs. 800,95,000/- has not been approved by the DSIR. As repeatedly echoed in the judicial precedents, the quantification and approval of DSIR is not the condition precedent for the purposes of amount eligible for deduction under s. 35(1) of the Act. We thus see rationale in the plea of the assessee on this score. The disallowance of claim of deduction of Rs. 8,00,95,000 is not justified on the counters of s. 35(1) merely owing to lesser quantification of eligible expenditure by DSIR. 58. We now advert to the second limb of the argument for eligibility of weighted deduction thereon amounting to Rs. 4,00,47,500/- under the shelter of Section 35(2AB) of the Act. In a sequel to plea towards claim of deduction under Section 35(1), the ld. counsel for the assessee submitted that the assessee is also eligible for weighted deduction of additional 50% on expenditure incurred at Rs. 8,00,95,000/-. The ld. counsel referred to the provision of Section 35(2AB) ....
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....ontrol, testing, commercial production, style changes, routine data collection or activities of a like nature; (b) The prescribed authority shall furnish electronically its report, - (i) in relation to the approval of in-house research and development facility in Part A of Form No.3CL; (ii) quantifying the expenditure incurred on in-house research and development facility by the company during the previous year and eligible for weighted deduction under sub-section (2AB) of section 35 of the Act in Part B of Form no. 3CL;" 58.3 With reference to substituted Rule which seeks to insert condition of approval of expenditure incurred on in-house research and development facility, the ld. counsel submitted that such amendment is subservient to main provision and thus cannot override and broaden the bandwidth of the substantive provisions of Section 35(2AB) of the Act. The ld. counsel submitted that the underlying Rules being sub-ordinate to the main provisions, cannot burden the assessee with additional fetters on the substantive conditions enacted in the main statute, i.e., Section 35(2AB) for the present purpose. The ld. counsel submitted that as interprete....
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....ture by DSIR in terms of amended Rule and therefore, the provisions of Section 35(2AB) would prevail over amended Rules. 61. We have carefully considered the rival submissions on the eligibility of weighted deduction under Section 35(2AB) of the Act in the context of the case. 62. Section 35(2AB), in a plain language, states that where a company engaged in prescribed business incurs any expenditure (excluding expenditure on certain specified capital asset), on in-house research and development facility as approved by the prescribed authority, then such company shall be entitled to weighted deduction of expenditure so incurred. Rule 6(7A) lays down procedure and conditions for eligibility of deduction under Section 35(2AB). One of the conditions prescribed is towards quantification of expenditure by the prescribed authority. The substituted provisions of Rule 6(7A) inter alia provides for approval of in-house research and development facility in Part-A of form 3CL prescribed for this purpose. Besides, in terms of substituted Rule 6(7A) inserted w.e.f 1-6-2016, the prescribed authority shall also quantify the expenditure incurred on in-house research and development facility by....