2012 (3) TMI 565 - HC - Income Tax

Assessee wins key tax issues: share expenses, income exclusion, drug price deduction, write back taxation.

Commissioner of Income Tax Versus M/s. Glaxo SmithKline Pharmaceuticals Ltd.

The Tribunal upheld the decisions in favor of the assessee on various issues, including the treatment of share issue expenses as eligible for ... - Issues involved:The judgment addresses various legal questions including the treatment of share issue expenses, addition made by the Assessing Officer u/s. 40A(9), reduction of certain incomes from business profits for deduction u/s. 32AB, entitlement to deduction for enhanced liability under the Drug Price Control order, and taxation of write back amounts for specific assessment years.Issue A: Share issue expensesThe Revenue questioned the justification of the Tribunal in holding that share issue expenses are attributable to acquisition of assets and hence eligible for depreciation and investment allowance. The Tribunal's decision was based on the nexus between share issue expenses and investment in Plant & Machinery. The Revenue argued that the expenses were incurred to comply with FERA provisions, not for acquiring assets. The Tribunal's view was supported by legal precedent, and it was held that no substantial question of law would arise.Issue B: Addition u/s. 40A(9)The Assessing Officer added the entire reimbursement/payment made by the assessee company to Glaxo Sports Club under Section 40A(9). However, the Commissioner (Appeals) found that the expenses were routine staff welfare expenditure and not covered by the said section. The Tribunal agreed, noting that the payments were reimbursement for actual staff sports activities expenses, not fixed contributions. Citing legal precedent, the Tribunal upheld the Commissioner's decision, leading to the dismissal of the appeal.Issue C: Reduction of certain incomes for deduction u/s. 32ABThe Tribunal held that dividend, interest, rent, and profit on sale of assets should not be reduced from business profits for the purpose of deduction u/s. 32AB of the Income Tax Act. This decision was in line with a previous judgment, and it was stated that no substantial question of law would arise in this regard.Issue D: Deduction for enhanced liability under the Drug Price Control orderThe Tribunal ruled that the assessee was entitled to a deduction for an enhanced liability payment under the Drug Price Control order, despite non-compliance with section 43B provisions. The Tribunal's decision was final, and it was held that no substantial question of law would arise concerning this matter.Issue E: Taxation of write back amountsThe Tribunal accepted the Assessee's case regarding revised demands made by the Government of India, leading to upward revisions for the relevant assessment years. Consequently, the Tribunal confirmed the decision not to write back certain amounts for specific assessment years. This finding did not give rise to any substantial question of law, resulting in the dismissal of the appeal without costs.