ERIS LIFESCIENCES LIMITED,AHMEDABAD vs. NFAC, DEHI (PRESENT JURISDICTION- THE DY. CIT, CIRCLE-2(1)(1), AHMEDABAD

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 ₹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 ₹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 ratio of Guwahati sales to total sales, assessee adopted a different method division only for employee benefit expenses, resulting in lower allocation to the eligible unit and thereby inflating profits of the 80-IE unit. The AO rejected the assessee’s methodology as inconsistent, and being insufficiently supported and based on unverifiable division-wise sales bifurcation, and the Assessing Officer & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 3– reallocated such expenses in the ratio of overall unit-wise sales, resulting in an upward adjustment of ₹9,35,31,350/- to the Guwahati Unit and a corresponding reduction in 80-IE deduction. The AO then examined channel partner/retail promotion expenses and conference related expenses under section 37(1) of the Act. The AO held that documentary evidence furnished by the assessee was inadequate to substantiate that the entire expenditure pertained exclusively to business purposes. The AO further held that part of these expenditures could relate to doctors or medical professionals, which would be in contravention of MCI Regulations read with CBDT Circular No. 5/2012. Applying the same methodology followed in earlier years, the AO disallowed 7.5% of channel partner/retail promotion expenses amounting to ₹69,39,723/- and 7.5% of conference related expenses amounting to ₹33,59,890/-. The AO further disallowed employees’ contribution to provident fund amounting to ₹3,84,012/- under section 36(1)(va) of the Act since the same was deposited beyond the statutory due date, relying on the jurisdictional Gujarat High Court ruling in Gujarat State Road Transport Corporation and subsequent amendments brought by Finance Act 2021 which clarified that section 43B relief is not available for employees’ contribution deposited beyond due date. The AO also dealt with the assessee’s claim that long-term capital gains formed part of eligible profits for the purpose of deduction under section 80-IE of the Act. Relying on the Supreme Court judgment in CIT v. Reliance Energy Ltd (2021), the AO accepted that capital gains must be considered as part of eligible income and recomputed the deduction under section 80-IE accordingly. Further, the assessee made additional claims during assessment & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 4– proceedings namely exclusion of GST/excise refund from book profit and grant of indexation while computing book profit u/s 115JB. The AO rejected these claims on the ground that such relief could be claimed only through a revised return as per Goetze (India) Ltd. and CBDT Circular No.

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 ₹318.57 crore, which was higher than income under normal provisions. Penalty proceedings under section 270A for misreporting/underreporting were also initiated.

& 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 5– However, with respect to MAT computation, the CIT(A) relied on Gujarat High Court in Gujarat Fluorochemicals Ltd (2023), Bombay High Court in Bengal Finance & Investment Pvt Ltd, and ITAT Mumbai decisions to hold that notional disallowances under section 14A cannot be added to book profits, and accordingly deleted the 14A adjustment to section 115JB. Regarding the issue of allocation of employee benefit expenses, the CIT(A) examined the assessee’s division-based allocation methodology in detail. The CIT(A) noted that the assessee had established that each division had separate identifiable workforce and separate brands, that division-wise sales were supported by auditor certificates, and that the allocation was consistent with Cost Accounting Standard CAS-7. The CIT(A) observed that the AO accepted specificity of certain expenses yet rejected the more refined division-based allocation without pointing out any factual defect or inconsistency in the methodology adopted by the assessee. The CIT(Appeals) held that more scientific allocation methods should prevail over generalised ones, and therefore the AO could not arbitrarily impose unit-wise sales ratio merely because that method was used for other expenses. The CIT(A) found the assessee’s methodology to be consistent, rational, and in line with principles for computing correct eligible profits under section 80-IE. Accordingly, the addition of ₹9,35,31,350 was deleted in full. With respect to the disallowance of channel partner/retail promotion expenses and conference expenses, the CIT(A) observed that although the assessee furnished invoices and supporting documents, the AO had reason to conclude that a part of the expenditure may have benefitted medical practitioners. The CIT(A) placed reliance on the Supreme Court judgment in Apex Laboratories & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 6– Pvt Ltd (2022), holding that pharmaceutical companies cannot claim deduction for freebies, benefits, or expenses provided to doctors which are prohibited under MCI regulations. As the assessee failed to demonstrate that no part of the expenditure related to such prohibited payments, and 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 precedents including Ponni Sugars, Chaphalkar Brothers, Shree Balaji Alloys, and Gravita Metal Inc (J&K High Court, 2024). The CIT(A) held that such refunds were capital receipts, not covered by the definition of “income” under section 2(24)(xviii), and including them in MAT computation would distort true working results. The CIT(Appeals) relied & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 7– on ITAT Nagpur in Economic Explosives Ltd (2024), and accordingly directed exclusion of ₹19,66,92,733 from book profit. On the assessee’s further additional claim regarding reduction of indexed cost of acquisition in computation of MAT, the CIT(A) held that MAT computation under section 115JB must follow the Companies Act framework and Part II/III of Schedule VI, which contain no concept of indexation. The CIT(A) distinguished the Karnataka High Court decision in Best Trading & Agencies Ltd, holding that it dealt with computation under normal provisions and the same was inapplicable for MAT. Following ITAT Kolkata in Splendour Villa Makers Pvt Ltd, the CIT(A) rejected this claim of the assessee. Thus, CIT(Appeals) partly allowed the appeal filed by the assessee.

Both the Department and the assessee are in appeal before us against the order passed by CIT(Appeals).

The Department have raised in the following Grounds of Appeal for Assessment Year 2018-19 (ITA 847/Ahd/2025):

In the present case, the assessee has demonstrated with ample evidence that each division of the assessee is functionally and operationally distinct & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 10– with specific brands, manpower and revenue streams, thereby justifying a division-wise allocation mechanism. The Assessing Officer has neither controverted the correctness of such bifurcation nor brought any material to demonstrate that the method employed by the assessee leads to inflation of eligible profits or that it is inconsistent with section 80-IE.

We also observe that the findings of the CIT(A) are fully consistent with judicial principles holding that where 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.

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 ₹9,35,31,350 made by the Assessing Officer on account of reallocation of employee benefit expenses to the Guwahati Unit.

Accordingly, Ground No. 1 raised by the Revenue is dismissed.

We have heard the rival contentions and perused the material on record. The limited controversy before us is whether the learned CIT(A) was & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 11– 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 computation of book profit under section 115JB of the Act. The learned CIT(A) proceeded on the footing that such refund constituted a capital receipt and, following various judicial decisions including that of the Nagpur Bench of the Tribunal in Economic Explosives Ltd. v. ACIT [2024] 167 taxmann.com 9 (Nagpur - Trib.) / [2025] 124 ITR(T) 443 (Nagpur - Trib.), directed its exclusion from the ambit of book profit, holding that its inclusion would distort the working results. The Revenue has disputed this finding and has contended that post the amendment to section 2(24)(xviii) by Finance Act, 2015, with effect from 01.04.2016, the statutory position is absolutely clear that assistance in the nature of a subsidy, grant, reimbursement or concession by whatever name called constitutes “income” unless it falls within the limited exclusions provided in the provision, which the present excise refund admittedly does not.

At this stage, it is necessary to reproduce the relevant statutory provision. Section 2(24)(xviii), as amended by the Finance Act, 2015 with effect from 01.04.2016, reads as under:

A plain reading of the above provision leaves no scope for any interpretational leeway. The Legislature has expressly provided that any subsidy, grant, duty drawback, waiver, concession or reimbursement “by whatever name called” constitutes income, and has simultaneously carved out only two narrowly defined exclusions. It is an admitted position on record that the excise duty refund received by the assessee does not fall under either clause (a) or clause (b) of the exclusion. When the statute expressly lays down what is to be excluded, the principle 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.

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 & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 13– legislation. In this case, Hon’ble Supreme Court made the following observations:

In A.V. Fernandez v. State of Kerala (1957) 8 STC 561 (SC), the Supreme Court held that taxing statutes must be construed strictly and where the language is clear, there is no scope for any inference or equity. Further, in Orissa State Warehousing Corporation v. CIT (1999) 237 ITR 589 (SC), it was held that exemptions and exclusions must be strictly construed and cannot be extended by interpretation. The principle was reiterated in Novopan India Ltd. v. CCE 1994 Supp (3) SCC 606 that exemption provisions must be construed strictly and the burden is on the assessee to show that they fall within the exemption clause; otherwise the normal rule of taxability applies.

In the light of the above settled legal position, we find considerable merit in the Revenue’s contention that once section 2(24)(xviii) expressly treats all forms of Government assistance including duty refund or concession as income unless falling within the specific exclusions, the learned & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 14– CIT(A) erred in applying pre-amendment jurisprudence and general principles of capital subsidy to exclude such receipts from book profit. The amendment introduced by the Finance Act, 2015 is substantive, unambiguous and applicable to the impugned assessment year. Once the excise refund constitutes “income” as per section 2(24)(xviii) of the Act, it forms part of “net profit” as per the profit and loss account prepared in accordance with Schedule III of the Companies Act, and consequently becomes part of book profit under section 115JB unless specifically excluded under Explanation 1 to section 115JB—an exclusion which the statute does not provide for such refund.

As regards the assessee’s reliance on the decision of the Nagpur Bench of the Tribunal in Economic Explosives Ltd. (supra), we find that the said decision was rendered on its own peculiar facts, particularly in the context of the nature of the industrial policy, the manner of accounting adopted, and the fact situation relating to the years prior to the statutory amendment. The decision 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.

In view of the above discussion, we reverse the finding of the learned CIT(A) and restore the adjustment made by the Assessing Officer. Accordingly, Ground No. 2 raised by the Revenue is allowed.

The assessee has raised the following Grounds of Appeal:

We have heard the rival contentions and perused the material 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.

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 & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 17– 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 Regulation 6.8 of the MCI Regulations, 2002 and Circular No. 5/2012 dated 01.08.2012, has held that any expenditure incurred by pharmaceutical companies in providing freebies, gifts, travel facilities, hospitality or any other benefit to medical practitioners being prohibited by law falls within the mischief of Explanation 1 to section 37(1) and is not allowable as business expenditure. The Hon’ble Supreme Court categorically held that where acceptance of such benefits is punishable for the recipient doctor under MCI Regulations, the payer-pharmaceutical company cannot be permitted to claim deduction for the very same prohibited expenditure, as doing so would defeat the object of the law. The ratio laid down therein is binding and directly applies to the present facts.

Further, the Hon’ble Ahmedabad Bench of the Tribunal in Sunflower Pharmacy v. ITO [2023] 156 taxmann.com 215 (Ahmedabad – Trib.) / [2023] 203 ITD 623 (Ahmedabad – Trib.) has reiterated that payments or benefits extended to medical practitioners, even when described as “commission” or “incentive”, are squarely hit by Explanation 1 to section 37(1) read with CBDT Circular No. 5/2012, and cannot be allowed as deduction, especially when the assessee fails to demonstrate that the payments were made for legitimate professional services. The Tribunal specifically held that the principle of tax-neutrality has no application where expenditure itself is prohibited by law.

Likewise, in Stemade Biotech (P.) Ltd. v. DCIT [2022] 138 taxmann.com 368 (Mumbai – Trib.) / [2022] 195 ITD 346 (Mumbai & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 18– – Trib.), it has been held that referral fees paid by companies to doctors for referring clients are squarely prohibited under Regulation 6.8.1(d) of the MCI Regulations and therefore hit by Explanation 1 to section 37(1), and accordingly no deduction can be allowed. The Tribunal emphasized that any financial inducement either in monetary or non-monetary form which has the potential to compromise the fiduciary obligation of a medical practitioner is forbidden by law, and once the underlying activity is prohibited, deduction is impermissible.

In the present case, although the assessee has furnished bills and vouchers, it has failed to establish that the entire expenditure was incurred solely for channel partners or retailers and that no part of it benefited medical practitioners. Even before us, the 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.

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 & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 19– (P.) Ltd. (supra), we uphold the order of the learned CIT(A) and dismiss this ground of appeal raised by the assessee.

We have heard the rival contentions and perused the material on record. The issue for adjudication is whether the assessee is entitled to the benefit of indexed cost of acquisition while computing book profit under section 115JB of the Act in respect of long-term capital gains arising from transfer of capital assets. The assessee had raised this claim as an additional ground before the Assessing Officer during assessment proceedings, which the Assessing Officer rejected on the technical ground that such a claim could only be made through a revised return. The learned CIT(A) rightly admitted the claim following the ratio of NTPC Ltd. v. CIT (1998) 229 ITR 383 (SC), CIT v. Pruthvi Brokers & Shareholders (2012) 349 ITR 336 (Bom), and Mitesh Impex (Gujarat HC), holding that a pure legal claim arising from facts already on record can be entertained. However, on merits, the CIT(A) rejected the assessee’s claim by observing that section 115JB contains no specific clause allowing indexation and by placing reliance on the Kolkata ITAT decision in Splendour Villa Makers Pvt. Ltd., ITA No. 734/Kol/2023. With utmost respect, we find that this conclusion of the CIT(A) overlooks binding and directly applicable judicial precedents which have categorically held that the benefit of indexed cost of acquisition must be allowed while computing book profit where long-term capital gains form part of such book profit.

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- & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 21– 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.

These authorities, which analyse the statutory scheme in detail, clearly establish that:

We also note that the decision relied upon by the CIT(A), namely Splendour Villa Makers Pvt. Ltd. (Kol-ITAT), does not consider the binding ratio of the Hon’ble Karnataka High Court in Best Trading and Agencies Ltd. (supra) and therefore cannot be preferred over a High Court judgment directly on the point. In absence of any contrary judgment of the & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 22– jurisdictional High Court, the decision of the Karnataka High Court being the only High Court judgment directly on the issue deserves to be respectfully followed in terms of judicial discipline.

In the present case, the long-term capital gains have been credited to the profit and loss account prepared in accordance with the Companies Act. Once such gains form part of net profit, the computation of their quantum must necessarily follow the computation mechanism contained in section 48, which statutorily mandates indexation. Denial of indexation would artificially inflate book profit and result in MAT being levied on amounts that are not real income.

In view of the above discussion, respectfully following the binding judgment of the Hon’ble Karnataka High Court in Best Trading and Agencies Ltd. (supra) and the decision of the Bangalore Tribunal in Karnataka State Industrial Infrastructure Development Corporation Ltd. (supra), we hold that the assessee is entitled to the benefit of indexed cost of acquisition while computing book profit under section 115JB. The order of the CIT(A) on this issue is therefore reversed and the Assessing Officer is directed to recompute book profit after allowing indexation in accordance with law.

Accordingly, Ground No. 3 raised by the assessee is allowed.

In the combined result, for Assessment Year 2018-19, the appeal of the Department is partly allowed and the appeal of the assessee is also partly allowed.

The Department has raised the following Grounds of Appeal (ITA Number 848/Ahd/2025):

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.

In the result, for assessment year 2020-21, the appeal of the Department is partly allowed.

The assessee has raised the following Grounds of Appeal for assessment year 2020-21 (ITA Number 913/Ahd/2025):

In the result, for Assessment Year 2020-21, the appeal of the assessee is partly allowed.

The Department has raised the following Grounds of Appeal (ITA Number 849/Ahd/2025):

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.

In the result, for assessment year 2021-22, the appeal of the Department is partly allowed.

The assessee has raised the following Grounds of Appeal for assessment year 2021-22 (ITA Number 913/Ahd/2025):

In law and in the facts and circumstances of the appellant's case, Ld. C1T(A) ought to have appreciated that the Ld. AO has erred in not excluding the reduction for indexation cost on sale of Long term Asset by Rs. 4,20,45,455/- from the book profit u/s. 115JB of the Act. The lower authorities has erred in not computing the correct book profit u/s 115JB.

Before the CIT(Appeals), the assessee reiterated that the 234 employees had completed the required 240 days of employment during the relevant year and therefore qualified for deduction under section 80JJAA in A.Y. 2021-22. It was submitted that the assessee had claimed deduction for 434 employees in A.Y. 2020-21 because the remaining employees had not yet satisfied the statutory condition, but once the condition was fulfilled during the year under consideration, the deduction became legally allowable. The assessee emphasized that the purpose of section 80JJAA is to incentivize employment and that the deeming fiction specifically allows deduction in the subsequent year when the 240-day criterion is met. It was also argued that appellate authorities are competent to consider legal claims even if not & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 28– supported by a revised return and that the objective of assessment is to determine correct taxable income.

The CIT(Appeals), after considering the material on record, noted that the assessee had already claimed deduction under section 80JJAA of the Act amounting to ₹3,66,17,808/- for the year as supported by Form 10DA filed along with the return. However, the CIT(A) found that the additional claim relating to the 234 employees was not supported by Form 10DA as required under section 80JJAA read with the prescribed rules. Since the prescribed form did not reflect such claim and the statutory requirement of filing Form 10DA is mandatory for allowing the deduction, the CIT(A) held that the additional deduction could not be allowed on merits. Accordingly, the ground of appeal relating to the claim of additional deduction of ₹1,80,59,548/- under section 80JJAA was dismissed.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

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 ₹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 & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 29– 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-filing of the revised Form 10DA is legally unsustainable. The Hon’ble Supreme Court in Goetze (India) Ltd. (supra) has categorically held that the restriction therein applies only to the Assessing Officer and does not apply to appellate authorities. This legal position has been consistently affirmed in various cases which have uniformly held that appellate authorities have plenary powers to entertain legal claims and that the duty of the tax administration is to compute the correct tax liability.

It is equally well settled that technical procedural requirements cannot override substantive entitlement to deduction, as held by the Hon’ble Gujarat High Court in Sarvodaya Charitable Trust vs. Income Tax Officer. (Exemption) [2021] 125 taxmann.com 75 (Gujarat)/[2021] 278 Taxman 148 (Gujarat)[09-12-2020], wherein it was held that where assessee, a public charitable trust registered under section 12A, had substantially satisfied condition for availing benefit of exemption as a trust, it could not be denied exemption merely on bar of limitation in furnishing audit report in Form no. 10B. In Navbharat Charitable Trust vs. Income- tax Officer [2023] 150 taxmann.com 311 (Surat-Trib.)/[2023] 200 ITD 812 (Surat-Trib.)[28-02-2023], ITAT held that where assessee-trust had substantially satisfied all conditions for availing benefit of exemption under section 11/12, exemption could not have been denied due to belated filing of & 912to915/Ahd/2025 DCIT vs. Eris Lifesciences Ltd. Eris Lifesciences Ltd. vs. DCIT Asst. Years–2018-19 & 2020-21 to 2022-23 - 30– audit report in Form No. 10B. In Trust For Reaching The Unreached Through Trustee vs. Commissioner of Income Tax (Exemptions), Ahmedabad [2021] 126 taxmann.com 77 (Gujarat)/[2021] 279 Taxman 229 (Gujarat)[22-12-2020], the Gujarat High Court held that Assessee, a public charitable trust for past 30 years, who substantially satisfied condition for availing benefit of exemption as a trust could not be denied exemption merely on bar of limitation in furnishing audit report in Form No. 10.

In light of the above judicial guidance, we are of the considered view that the CIT(Appeals) ought to have examined the merits of the assessee’s claim under section 80JJAA, especially when it involves the application of a statutory deeming provision and the fulfilment of the 240-day condition in the subsequent year. The CIT(A) was not justified in rejecting the claim merely because a revised Form 10DA was not furnished.

Accordingly, we set aside the impugned 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.

In the result, Ground No. 4 of the appeal of the assessee is allowed for statistical purposes.

The Department has raised the following Grounds of Appeal (ITA Number 850/Ahd/2025):

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. Guwahati, from the book profit U/s. 115JB of the Act.”

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.

In the result, for assessment year 2022-23, the appeal of the Department is partly allowed.

The assessee has raised the following Grounds of Appeal for assessment year 2022-23 (ITA Number 915/Ahd/2025):

The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal

In the result, for assessment year 2022-23, the appeal of the Department is partly allowed for statistical purposes.

In the combined result for all the years under consideration before us, the appeals filed by the Department are partly allowed and the appeal filed by the Assessee are partly allowed for statistical purposes. This Order pronounced in Open Court on 09/12/2025