Bombay High Court Quashes Income Tax Reassessment Notice for Lupin Limited
Mumbai: In a significant verdict for pharmaceutical giant Lupin Limited, the Bombay High Court has quashed an income tax reassessment notice pertaining to the assessment year 2016-2017.
A bench comprising Justices MS Sonak and Jitendra Jain ruled in favor of Lupin, dismissing the Income Tax Department’s attempts to reopen the company’s previously scrutinized assessment. The crux of the matter stemmed from a notice issued under Section 148 of the Income Tax Act, which sought to reassess Lupin’s income for 2016-2017, when it had declared an income of Rs 2636 crore.
Initially, Lupin filed its return declaring significant income and underwent an extensive scrutiny process by the Income Tax Department, with an emphasis on deductions claimed under Sections 35AC and 80G related to CSR expenses. Following this scrutiny, an assessment order under Section 143(3) was released in 2018, accepting Lupin’s claimed deductions.
However, in 2021, the department sought to reopen the case, contending that the company had improperly claimed CSR expenses of Rs 14.89 crore under both Sections 35AC and 80G, which led to underassessment.
The High Court found the reasons presented by the department for reopening the assessment to be inadequate. The court stressed the absence of “fresh tangible material” to substantiate the reassessment, noting that the original assessment had already undergone detailed scrutiny concerning the same deductions.
Furthermore, the court pointed out that the Income Tax Department’s effort to reopen the case seemed to hinge on a “change of opinion” rather than new evidence. The department argued that amendments in the Finance Act No.2 (2014) prohibited the dual claiming of CSR expenses. However, the court clarified that Lupin had not claimed benefits under Section 37, and existing provisions did not explicitly disallow the claimed deductions under Section 35AC.
Additionally, the court referenced the legislative intent behind the 2014 amendments and a CBDT circular that supported the allowance of CSR expenditures under the pertinent sections. Ultimately, the court concluded that the reassessment notice was unmerited, as it was predicated on a re-evaluation of previously examined material instead of new evidence.
By allowing the petition, the High Court noted: “This Petition must be allowed because there was no tangible fresh material based upon which the assessing officer could have reason to believe that any income had escaped assessment.” It also acknowledged that Lupin had satisfactorily addressed all the queries raised, which formed the basis for the earlier assessment order.