STRIDES PHARMA SCIENCE LIMITED,MUMBAI vs. INCOME TAX OFFICER, 15(3)(2),, MUMBAI

ITA 5721/MUM/2024Status: DisposedITAT Mumbai20 March 2025AY 2020-2125 pages
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What did the Tribunal hold?

The Tribunal decided on several grounds. Regarding Ground No. 7 (Section 80G deduction), the Tribunal held that the authorities below erred in denying the claim. It reasoned that while CSR payments might be part of the profit and loss account for business income computation, denying the benefit under Chapter VI-A for computing total taxable income would lead to double disallowance, which is not the legislative intent. The issue was restored to the AO for verification of other prescribed conditions for allowing the deduction. Regarding Ground No. 8 (Section 35DD claim) and Ground No. 9 (inventory write-down claim), since these claims were made for the first time before the Tribunal, the Tribunal restored these issues to the file of the AO for verification and allowance if admissible. For Ground No. 10 (TDS credit), the AO was directed to verify and allow the claim. Ground No. 11 (initiation of penalty proceedings) was dismissed as premature. The Tribunal did not explicitly decide on Grounds 1, 2, 3, 4, 5, and 6, which were listed in the grounds of appeal but not detailed in the provided excerpt of the judgment. The operative direction was to allow the appeal partly.

What were the facts?

The assessee, Strides Pharma Science Limited, filed an appeal against the order of the Commissioner of Income-tax (Appeals) [CIT(A)] dated September 6, 2024, for Assessment Year 2020-21. The appeal challenges various disallowances made by the Assessing Officer (AO) and upheld by the CIT(A). These include disallowances related to Employee Stock Option Plan (ESOP) expenses, weighted deduction under Section 35(2AB), expenses in relation to exempt income under Section 14A, business promotion expenditure, deduction under Section 80G, and a claim under Section 35DD. The assessee also contested the addition to book profits under Minimum Alternate Tax (MAT) provisions and the non-grant of Tax Deducted at Source (TDS) credit. The appeal was heard on January 16, 2025, and pronounced on March 20, 2025.

What were the issues?

The Income Tax Appellate Tribunal (ITAT) had to decide on several issues: 1. Whether the disallowance of ESOP expenses of Rs. 1,58,74,888 under Section 37(1) of the Income-tax Act, 1961 (the Act) was justified, considering the assessee's argument that it is an ascertained revenue expenditure and notional, and whether the CIT(A) erred in disregarding judicial precedents like *Biocon Ltd. v. Dy. CIT* and *PCIT v. Lemon Tree Hotels Pvt Ltd*. 2. Whether the disallowance of weighted deduction of Rs. 10,90,49,268 under Section 35(2AB) was correct, given the assessee's contention that the section requires approval of the facility, not the expenditure, and that clinical trials conducted outside R&D premises, if disclosed, do not lead to disallowance. 3. Whether the disallowance of Rs. 1,73,37,851 under Section 14A read with Rule 8D was erroneous, especially since the assessee suo-moto disallowed Rs. 77,90,758 and argued that Section 14A is not applicable in the absence of other expenditures related to exempt income, and that investments were made from interest-free funds. 4. Whether the addition of Rs. 1,73,37,851 to book profits under MAT provisions was justified, with the assessee arguing it was an inadvertent mistake and citing ITAT decisions in its own case and *ACIT v. Vireet Investment Pvt. Ltd.*. 5. Whether the disallowance of Rs. 1,36,18,930 on account of business promotion expenditure under Section 37(1) was valid, considering the assessee's claim that such expenses are not prohibited and citing various ITAT decisions. 6. Whether the disallowance of deduction claimed under Section 80G amounting to Rs. 1,01,00,000 was correct, with the assessee arguing that Corporate Social Responsibility (CSR) activities qualify for deduction if made to eligible entities and within the limits prescribed. 7. Whether the claim of Rs. 30,00,000 under Section 35DD, made for the first time before the Tribunal, is admissible, relying on the Supreme Court decision in *Wipro Finance Ltd. v. CIT*. 8. Whether the claim of 1/5th of the write-down value of inventory and other assets disallowed in AY 2018-19, amounting to Rs. 2,23,73,789, made for the first time before the Tribunal, is admissible. 9. Whether the non-grant of TDS credit of Rs. 14,512 to a merged entity is rectifiable. The Revenue, through the learned Departmental Representative (DR), argued that certain claims made for the first time before the Tribunal do not arise out of the assessment order and were therefore rightly dismissed by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 37(1),Section 35(2AB),Section 14A,Section 115JB,Section 80G,Section 35DD,Section 143(3),Section 250

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Before: SHRI AMIT SHUKLA & SMT. RENU JAUHRI

For Appellant: Shri Nishit Gandhi, Mr. R. A. Dhyani
For Respondent: Mr. R. A. Dhyani
Hearing: 16.01.2025

PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 06.09.2024 passed u/s.250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2020-21. 2. The assessee has raised the following grounds of appeal: Page 2 Α.Υ. 2020-21 Strides Pharma Science Limited “Ground 1: The NFAC has erred in pass

The order continues below.

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