Bombay High Court Cancels Income Tax Reassessment Notice Against Lupin Ltd

The Bombay High Court has cancelled the notice of an income tax reassessment that was sent to pharmaceutical company Lupin Limited for the financial year 2016-17. This is good news for the company because, according to the court, there is no reason to reopen the case.

This issue began when the Income Tax Department sent a notice under Section 148 of the Income Tax Act. The tax department wanted to recheck Lupin Limited’s income for the year 2016-17 again. The company said that they earned Rs.2,636 crore that year and had filed their tax return. The tax department carefully reviewed it, keeping an eye on the tax benefits claimed for CSR expenses under Sections 35AC and 80G.

After reviewing all the details, the claimed deductions in 2018 under Section 143(3) were approved by the tax department. But in 2021, the department decided to recheck the case; according to the department, the company had wrongly claimed Rs 14.89 crore as CSR expenses under both Sections 35AC and 80G, which resulted in lower tax payments.

No valid reason was found by the High Court to reopen the assessment of the case. The department could not look for any new evidence to support the reassessment. As the original assessment had already been carefully checked, the court said that reopening the case would only be a “change of opinion” and not based on any new facts.

The tax authority argued that the Finance Act No. 2 (2014) prohibited CSR expenses to be claimed twice under two sections. However, the court noted that the company did not claim any benefit under Section 37 and the current tax law did not specify that no deduction under Section 35AC is permitted.

The court also referred to the intent behind the 2014 tax amendments and the circular from the Central Board of Direct Taxes (CBDT), which supported CSR-related deductions under specific sections. Since reassessment is based on a review of the same old details rather than new findings, the court said that the notice is invalid.

In its last judgment, the High Court declared that there was no new evidence to establish that any income had been concealed from taxation. The company had already replied to all the questions posed by the tax authority in the initial assessment, and therefore reopening the case was not required.