TaxTMI 
TaxTMI 
2025 (12) TMI 920
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....irst start with assessment year 2018-19 2. The brief facts of the case are that the assessee is a pharmaceutical manufacturing company and it filed its return of income for A.Y. 2018-19 declaring total income at Rs. "Nil". During assessment proceedings, the Assessing Officer invoked section 14A read with Rule 8D on the ground that the assessee held substantial investments that yielded exempt income and no separate accounts were maintained to demonstrate that no expenditure was incurred for earning such income. Though the assessee submitted that only Rs. 11,62,133/- would be disallowable even under Rule 8D(2)(ii), and that no expenditure had been incurred, the AO rejected these contentions on the basis that the amended Rule 8D mandates disallowance @1% of annual average of monthly averages, particularly when exempt income had increased sharply. Accordingly, Assessing Officer made a disallowance of Rs. 11,62,133/- to the income the assessee. The AO then examined allocation of employee benefit expenses to the Guwahati Unit, which was claiming deduction under section 80-IE of the Act. The AO observed that while the assessee allocated depreciation and other common expenses in the rat....
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....e claimed only through a revised return as per Goetze (India) Ltd. and CBDT Circular No. 549. Finally, the AO added the section 14A disallowance to book profit under section 115JB, relying on Explanation 1(f), and completed assessment by computing MAT income at Rs. 318.57 crore, which was higher than income under normal provisions. Penalty proceedings under section 270A for misreporting/underreporting were also initiated. 3. In appeal before CIT(Appeals), the assessee raised grounds challenging the 14A disallowance, the allocation of employee benefit expenses, the disallowances under section 37(1), the PF disallowance, the rejection of additional claims regarding MAT computation, and the computation of 80-IE deduction and MAT credit. 4. In the appellate order, the CIT(A) first dealt with the section 14A disallowance. After analyzing the assessee's contention that no expenditure had been incurred and that own funds were sufficient, the CIT(A) noted that the assessee failed to establish any nexus between own funds and investments and, more importantly, that the amended Rule 8D does not bifurcate interest and administrative expenditure. The CIT(A) also noted a dramatic 16-fold i....
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.... also could not establish that the AO's 7.5% estimation was excessive or arbitrary, the CIT(A) confirmed both disallowances in full. On the PF disallowance under section 36(1)(va), the CIT(A) held that the issue was now conclusively settled by the Supreme Court in Checkmate Services Pvt Ltd (2022), which held that employees' contribution deposited after the statutory due date is not allowable, even if paid before the due date for filing return. Accordingly, this ground was dismissed. A major issue concerned the assessee's additional claim regarding exclusion of excise duty/GST refund from book profit under section 115JB. After analyzing the law on admission of additional claims including Goetze (India), NTPC, Mitesh Impex and Symphony Comfort Systems the CIT(A) held that appellate authorities may entertain fresh legal claims if underlying facts are already on record. Since the assessee's audited accounts already disclosed the GST/excise refund, the CIT(A) admitted the claim and proceeded to examine its merits. On merits, the CIT(A) conducted a comprehensive review of the excise exemption and GST refund schemes, dictionary definitions of "subsidy" and "exemption", and judicial prece....
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....omputing the eligible profits for the purpose of deduction under section 80-IE of the Act. The undisputed facts emerging from the record indicate that during the assessment proceedings the assessee had, vide its reply dated 24.03.2022, furnished a detailed explanation supported by workings (refer pages 14-18 and page 16 of the assessment order), demonstrating that employee benefit expenses were allocated on the basis of division-wise sales of the Guwahati Division to total division-wise sales, which according to the assessee was a more specific, reliable and scientific method, considering that each division of the assessee maintained separate brands, separate heads of operations and identifiable manpower structure. The assessee had also placed on record the audited financial statements, certificates issued by statutory auditors certifying division-wise sales, sample copies of appointment letters evidencing division-specific deployment of employees, and the computation of eligible profits under section 80-IE prepared in accordance with Cost Accounting Standards (CAS-7). The Assessing Officer did not rebut the correctness of the underlying sales bifurcation, nor did he dispute the ve....
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....re the assessee's method is based on verifiable data and have been consistently applied, the Assessing Officer cannot impose a different method merely on presumption or suspicion. 11. In view of the above, we are of the view that the CIT(A) has taken a fair, reasonable and well-supported view and the Revenue has not brought any material to displace the factual findings recorded by the CIT(A). We therefore uphold the deletion of the disallowance of Rs. 9,35,31,350 made by the Assessing Officer on account of reallocation of employee benefit expenses to the Guwahati Unit. 12. Accordingly, Ground No. 1 raised by the Revenue is dismissed. Ground Number 2: The Ld.CIT(A) has erred in allowing the exclusion of Excise duty refund amounting Rs. 19,66,92,733/- received by the appellant in respect of the undertaking situated in the notified area, i.e. Guwahati, from the book profit U/s. 115JB of the Act 13. We have heard the rival contentions and perused the material on record. The limited controversy before us is whether the learned CIT(A) was justified in directing exclusion of Excise Duty Refund of Rs. 19,66,92,733/- received in respect of the assessee's Guwahati Unit from the c....
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....inciple expressio unius est exclusio alterius squarely applies, and anything not excluded must necessarily be included. The law is therefore unambiguous and incapable of any alternative interpretation. 16. It is also a well-settled proposition that when the language of a statute is plain and unambiguous, the court must give effect to it irrespective of any perceived hardship or inequity to the assessee. The Hon'ble Supreme Court in CIT v. Tara Agencies (2007) 292 ITR 444 (SC) held that no intendment or equity has any place in interpreting fiscal legislation. In this case, Hon'ble Supreme Court made the following observations: "This intention of the Legislature has to be gathered from the language used in the statute, which means that attention should be paid to what has been said as also to what has not been said. [Para 62] Therefore, the legal position seems to be clear and consistent that it is the bounden duty and obligation of the Court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute, which the Legislature in its wisdom has deliberately not incorporated. [Para 67] On a clear construction a....
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....sion cannot override the clear statutory mandate of section 2(24)(xviii) as amended with effect from 01.04.2016. It is trite that judicial interpretation cannot defeat explicit legislative language. The Hon'ble Supreme Court in Union of India v. Dharmendra Textile Processors (2008) 306 ITR 277 (SC) held that where the statute is clear, there is no scope for reading into it any intention other than what is expressed. Similarly, in B. Premanand v. Mohan Koikal (2011) 4 SCC 266, it was held that where the statutory language is plain, external aids such as precedents cannot be used to obscure or rewrite the legislative command. 20. We therefore hold that the learned CIT(A) erred in concluding that the excise duty refund constitutes a capital receipt or that it can be excluded from book profit on the basis of general accounting principles or pre-amendment decisions. The amendment to section 2(24)(xviii) is clear, exhaustive, and directly applicable, and the excise duty refund received by the assessee is squarely covered within the inclusive definition of income. There being no statutory exclusion provided either in section 2(24)(xviii) or in Explanation 1 to section 115JB for such re....
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....available on record. The issue for determination is whether the assessee is entitled to deduction of the disallowance confirmed by the learned CIT(A) in respect of channel partner/retail promotion expenses and conference related expenses, which the Assessing Officer had disallowed on an estimated basis @7.5%, holding that a portion of these expenses was in the nature of benefits, freebies or conference-related incentives to medical practitioners, prohibited under the Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, and consequently hit by Explanation 1 to section 37(1) of the Act. 24. The learned counsel for the assessee placed reliance on certain decisions to contend that these expenses were wholly incurred for business purposes and that no part of the expenditure was proved to have been incurred on doctors. However, we find that the matter now stands squarely and conclusively covered against the assessee by the judgment of the Hon'ble Supreme Court in Apex Laboratories (P.) Ltd. v. Deputy Commissioner of Income-tax, LTU [2022] 135 taxmann.com 286 (SC) / [2022] 286 Taxman 200 (SC) / [2022] 442 ITR 1 (SC), wherein the Hon'ble Court, after examining....
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....he assessee has not brought any cogent material to rebut the finding of the lower authorities that a component of these expenditures had the potential to relate to doctors, nor has it demonstrated that the estimation made by the Assessing Officer is excessive, arbitrary or unreasonable. In view of the consistent judicial position, the inability of the assessee to furnish evidences establishing that no part of the expenditure was incurred in violation of the MCI Regulations, and the fact that the Hon'ble Supreme Court in Apex Laboratories (supra) has conclusively settled the law against the assessee, we find no infirmity in the order of the learned CIT(A) in sustaining the disallowance made by the Assessing Officer. 28. Accordingly, respectfully following the binding ratio of the Hon'ble Supreme Court in Apex Laboratories (P.) Ltd. (supra) and the decisions of the coordinate benches in Sunflower Pharmacy (supra) and Stemade Biotech (P.) Ltd. (supra), we uphold the order of the learned CIT(A) and dismiss this ground of appeal raised by the assessee. Ground Number 3: Grant of indexation while computing book profit u/s 115JB: 29. We have heard the rival contentions and perused....
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....er than real income and that a general provision such as section 115JB cannot override the specific provisions governing computation of capital gains. The High Court accordingly allowed the benefit of indexation while computing book profit under section 115JB. 31. Similarly, the Bangalore Bench of the Tribunal in Karnataka State Industrial Infrastructure Development Corporation Ltd. v. DCIT [2016] 76 taxmann.com 360 (Bangalore - Trib.) / [2017] 54 ITR(T) 425 (Bangalore - Trib.) held that the expression "any income" appearing in section 10(38) (as then applicable) refers only to the amount of long-term capital gains computed in accordance with section 48, which mandates substitution of cost of acquisition with indexed cost of acquisition for long-term assets. The Tribunal accordingly held that such indexed long-term capital gains must form the basis of computation of book profits under section 115JB, and that the assessee is entitled to indexation for MAT purposes. 32. These authorities, which analyse the statutory scheme in detail, clearly establish that: (i) section 115JB(5) expressly preserves the applicability of all other provisions of the Act unless specifically....
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....e Department has raised the following Grounds of Appeal (ITA Number 848/Ahd/2025): "1. The Ld.CIT(A) has erred in deleting addition made of Rs. 7,53,65,000/- being provision for allocation of Employee expenses to Guwahati Unit done by the assessee, without appreciating the facts of the case. 2. The Ld.CIT(A) has erred in allowing the exclusion of Excise duty refund amounting Rs. 15,39,54,373/- received by the appellant in respect of the undertaking situated in the notified area, ie. Guwahati, from the book profit U/s. 115JB of the Act." 39. In view of our observations with respect to similar Grounds of Appeal raised by Department for assessment year 2018-19, Ground Number 1 of Department's appeal is dismissed and Ground Number 2 of Department's appeal is allowed. 40. In the result, for assessment year 2020-21, the appeal of the Department is partly allowed. 41. The assessee has raised the following Grounds of Appeal for assessment year 2020-21 (ITA Number 913/Ahd/2025): "1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have deleted the ad-hoc disallowance invoked by the Ld. AO u/s 37(1) of the Inco....
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....85/-being provision for allocation of Employee expenses to Guwahati Unit done by the assessee, without appreciating the facts of the case. 2. The Ld. CIT(A) has erred in allowing the exclusion of Excise duty refund amounting Rs. 18,97,60,917/- received by the appellant in respect of the undertaking situated in the notified area, i..e. Guwahati, from the book profit U/s. 115JB of the Act." 45. In view of our observations with respect to similar Grounds of Appeal raised by Department for assessment year 2018-19, Ground Number 1 of Department's appeal is dismissed and Ground Number 2 of Department's appeal is allowed. 46. In the result, for assessment year 2021-22, the appeal of the Department is partly allowed. 47. The assessee has raised the following Grounds of Appeal for assessment year 2021-22 (ITA Number 913/Ahd/2025): "1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have deleted the ad-hoc disallowance invoked by the Ld. AO u/s 37(1) of the Income Tax Act 1961 (Act) for Rs. 15,17,835/- out of Channel partner and Retail promotion Expense' and Rs. 3,58,734/- out of 'Conference related Expenses....
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....bers 1 and 2 for assessment year 2018-19. Accordingly, Ground Numbers 1 and 2 of the assessee's appeal are dismissed. Further, on identical facts and issues for consideration, we have allowed the assessee's appeal with respect to Ground Number 3 (Grant of indexation while computing book profit u/s 115JB). Accordingly, Ground Number 3 of the assessee's appeal is allowed. Ground Number 4: Additional Claim of deduction u/s 80JJA of the Act 49. The brief facts in relation to this issue are that during the assessment proceedings, the assessee raised an additional claim for deduction under section 80JJAA amounting to Rs. 1,80,59,548/- in respect of 234 employees who were initially hired in A.Y. 2020-21 but had not completed the minimum employment period of 240 days in that year. The assessee explained before the Assessing Officer that although the total incremental employees during A.Y. 2020-21 were 668, only 434 of them fulfilled the 240-day requirement in that year for which deduction had been claimed through Form 10DA. Since the balance 234 employees completed the 240-day condition during the year under consideration (A.Y. 2021-22), the assessee contended that under the deeming ....
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.... be allowed on merits. Accordingly, the ground of appeal relating to the claim of additional deduction of Rs. 1,80,59,548/- under section 80JJAA was dismissed. 52. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 53. We have heard the rival submissions and perused the material placed on record. The issue that arises for consideration is the assessee's claim for deduction of Rs. 1,80,59,548/- under section 80JJAA in respect of 234 employees who, though hired in A.Y. 2020-21, did not complete the minimum period of 240 days in that year but satisfied the statutory condition during the year under consideration. The Assessing Officer declined to entertain the claim on the ground that it was not made by way of a revised return, placing reliance on the judgment of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC). The CIT(Appeals) has also rejected the claim by holding that the additional deduction was not supported by a revised Form 10DA and that such omission was fatal. In our considered view, the action of the CIT(Appeals) in dismissing the claim solely on the technical ground of non-....
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....mpugned order of the CIT(Appeals) on this issue and restore the matter to the file of the CIT(Appeals) with a direction to examine the assessee's claim afresh strictly on merits, after verifying the factual position and granting adequate opportunity of hearing, and without dismissing the claim on the mere technical ground of non- filing of Form 10DA. The appeal of the assessee is allowed for statistical purposes. 57. In the result, Ground No. 4 of the appeal of the assessee is allowed for statistical purposes. 58. In the combined result, the appeal of the assessee is partly allowed for statistical purposes for Assessment Year 2021-22. Assessment year 2022-23: 59. The Department has raised the following Grounds of Appeal (ITA Number 850/Ahd/2025): "1. The Ld.CIT(A) has erred in deleting addition made of Rs. 7,51,16,038/- being provision for allocation of Employee expenses to Guwahati Unit done by the assessee, without appreciating the facts of the case. 2. The Ld.CIT(A) has erred in allowing the exclusion of Excise duty refund amounting Rs. 20,64,11,968/- received by the appellant in respect of the undertaking situated in the notified area, i.e. Guwahat....