2023 (5) TMI 1054 - AT - Income Tax

Deduction u/s 80IB - Concealed Sales arising out of concealed production - difference is arising due to various factors such as wastage of raw material, overages vitamins, enzymes etc., additional material input for potencies and moisture consumption, salt form and wastage during production - AO was of the view that the excessive consumption of raw materials revealed that the assessee has not correctly reported the production of finished goods and accordingly concluded that the assessee had not reported the production to carry out sales outside its books - HELD THAT:- We notice that for the years under consideration the basis on which the disallowance is made by the Assessing Officer and the decision of the CIT(A) modifying the addition is similar to A.Y. 2012-13 [2020 (7) TMI 568 - ITAT MUMBAI] and, therefore, respectfully following the above decision of the co-ordinate bench, we modify the order of the CIT(A) wherein the A.O is directed to restrict the disallowance in respect of the excess raw material wastage in terms of the aforesaid observations of the Hon’ble Tribunal.

Allowing 80IB Deduction in respect of increased income due to addition on account of alleged concealed production - CIT(A) did not allow this claim of the assessee for the reason that the additional income is not supported by the amount mentioned in Form 10CCB basis which the deduction u/s.80IB is allowed - HELD THAT:- Respectfully following the said decision of the co-ordinate bench, we see no reason to interfere with the decision of the CIT(A) in rejecting the claim of the assessee that 80IB deduction be allowed in respect of increase in the business income due to addition on account of concealed production. This ground is dismissed.

Sales promotion expenses - For the year under consideration there is no critical evaluation of the expenses and post the Hon’ble Supreme Court judgment, the dictum laid down, same needs to be followed and each of the expenditure needs to be evaluated to see if the disallowance is justified. In the present case, the A.O. had primarily made disallowance by referring the CBDT Circular No.5/2012 dated 01.08.2012. The A.O. has not critically examined the nature of expenditure incurred by the assessee.

In the larger interest of justice, in view of the latest judgment of the Hon’ble Apex Court, which has examined the very same issue, it becomes necessary to examine the exact nature of expenses incurred by the assessee for Doctors from all angles. Therefore, for substantial question and cause, necessarily, the matter needs fresh verification by the A.O, especially in the light of the recent judgment in the case of M/s.Apex Laboratories Pvt. Ltd. [2022 (2) TMI 1114 - SUPREME COURT] - The issues for both AYs is remitted back to the AO with a direction to examine the details of expenses submitted from MCI guidelines perspective in the light of the decision of the Apex Court after giving an opportunity of being heard to the assessee.

Allowing of deduction u/s 80IB in respect of the sale promotion expenses disallowed - HELD THAT:- In view of the CBDT circular No.37/2016 dated 2nd November 2016, we direct the AO to consider enhanced profits due to the disallowance if any of sales promotion while computing the revised deduction u/s.80IB for AY 2010-11 and 2011-12. Needless to say that the assessee be given a reasonable opportunity of being heard.