TaxTMI 
TaxTMI 
2026 (7) TMI 131
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....assessee is a pharmaceutical company engaged in the business of manufacturing homeopathic medicines and herbal/cosmetic products. The assessee has four manufacturing unit at Sahibabad, Jaipur and at Haridwar. The two units at Haridwar are also, admittedly, eligible for deduction u/s 80IC of the Act. During the course of assessment proceedings, the Ld. AO primarily added expenses on account of foreign travel for medical purposes by the Director and his spouse and also the medical expenses borne on behalf of the said Director; disallowance of claim u/s 80IC of the Act pertaining to one eligible unit of the assessee; and an addition on account of estimating net profit against the Sahibabad Unit (SBD) after rejecting the books of account pertai....
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....wholly and exclusively for purpose of business and thus allowable under section 37 of the Act. Rejection of books of accounts of Sahibabad (SBD) Unit 2. That the CIT(A) erred of facts and in law in upholding addition/ upward adjustment to the extent of Rs. 4,26,54,562 (applying estimated net profit @24% to the turnover) made by the assessing officer (AO) by rejecting books of accounts of the Sahibabad (SBD) unit. 2.1 That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in arbitrarily rejecting books of account of the appellant, without pointing out any discrepancy in the correctness/completeness of the accounts or method of accounting followed by the appellant, in clear viola....
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.... out from this document that Mr. Shreshtha was entitled for reimbursement of medical expenses on actuals. It was averred that the reimbursement of expenses to the tune of Rs. 88,34,935/- (cost of medical treatment and travel expenses) was booked by the company as a business expense on the basis the board resolution dated 21.04.2011. It was the submission that the assessee felt that it was commercially expedient to incur such expense and therefore it did so. For this proposition the Ld. AR relied on the case of SA Builders reported in 288 ITR 1 (SC) and also the case of Dhun Apartment Pvt. Limited reported in 2 taxmann.com 7 (Del). 2.1 Regarding the rejection of books of account of SBD, the Ld. AR assailed the action of Ld. AO and also of....
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....ng, loading/unloading, transportation etc. were borne by SBD without showing such expenses as recoverable from the Jaipur Unit. It was the further submission that the books of accounts have been maintained as per the relevant accounting standards and there is absolutely no change either from previous years or the method used to maintain accounts of the four units. It was mentioned that in the past years the method of accounting has always been accepted by the Department. It was pointed out that between FYs 2010-11 to 2013-14 the cases were dealt with under scrutiny assessment and the losses of the SBD Unit had always been accepted. The Ld. AR placed on record the assessment orders for these years. The Ld. AR dealt at some length about the h....
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.... Shreshtha. The Ld. DR read out from various portions of the Ld. CIT(A)'s order and specifically stated that on page 50 at para 8.7 it was mentioned in light of the board resolution dated 21.04.2011, that the reimbursement of medical expenses would be on actual basis and details of expenses could not be presented before the AO due to insufficient opportunity. 3.1. Regarding the rejection of book results for SBD Unit it was stated that there is considerable fact finding to show that all the reasons given by the assessee for showing a loss were not founded on facts since neither the claim of the plant and machinery being old nor the claim of higher wage bill for the SBD Unit could be shown as critical factors in lower profits/losses. 4.....
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....ts. We find that the Ld. AO has not similarly examined the books of accounts of the other three units to enable a reasonable assumption that some expenses were inflated and others shown at lessor values to obtain exaggerated profits for relief u/s 80IC of the Act. From a purely accounts point of view the exercise undertaken by the authorities below does not appear to be justified also on the ground that in the face of a claim by the assessee that the Jaipur and SBD Units are virtually taken as combined and some expenses are booked in the SBD against receipts which primarily belong to the Jaipur Unit, the authorities below have not considered the documentation filed by the assessee to show that such activities have been done under the assump....