DCIT Vs Eris Lifesciences Ltd. (ITAT Ahmedabad)
ITAT Ahmedabad held that the assessee is entitled to the benefit of indexed cost of acquisition while computing book profit under section 115JB of the Income Tax Act. Accordingly, AO directed to recompute book profit after allowing indexation.
Facts- The assessee is a pharmaceutical manufacturing company. During assessment proceedings, AO 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. Accordingly, AO made a disallowance of ₹11,62,133/- to the income the assessee. Further, 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 un-verifiable division-wise sales bifurcation, and AO 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.
