The Bombay High Court has quashed an income tax reassessment notice issued against pharmaceutical giant Lupin Limited for the assessment year 2016-2017. The company had initially declared an income of Rs 2,636 crore and underwent a thorough scrutiny process, which accepted its claimed deductions. However, the Income Tax Department sought to reopen the case, arguing that Lupin had improperly claimed corporate social responsibility (CSR) expenses, amounting to Rs 14.89 crore, under sections 35AC and 80G.
The High Court rejected the department’s attempt to reopen the assessment, stating that the reasons for doing so were insufficient. The court emphasized that there was no new, tangible material to justify the reassessment, and that the original assessment had already involved a detailed scrutiny of the same deductions. The court also noted that the department’s attempt to reopen the case appeared to be based on a “change of opinion” rather than new evidence.
The court further highlighted that the Income Tax Department’s arguments were based on a re-evaluation of previously examined material, rather than new evidence. The court referenced the legislative intent behind the 2014 amendments to the Finance Act and a CBDT circular, which supported the allowance of CSR expenditures under relevant sections. Ultimately, the court concluded that the reassessment notice was unwarranted and allowed the petition, stating that there was no tangible fresh material to justify reopening the assessment.
This ruling is a significant relief to Lupin Limited, as it effectively bars the Income Tax Department from re-examining the company’s CSR expenses. The decision also sets an important precedent for companies that have undergone scrutiny assessments and are facing similar challenges from the tax authorities.