PCIT Vs Maneesh Pharmaceuticals Pvt. Ltd. (Bombay High Court)
The Bombay High Court considered two appeals filed by the Revenue against a common order of the Income Tax Appellate Tribunal (ITAT) dated 17 June 2021 arising from assessment years 2011-12 and 2012-13. Both the Revenue and the assessee had filed cross-appeals before the ITAT, which allowed the assessee’s appeals and dismissed the Revenue’s appeals. Aggrieved by that decision, the Revenue approached the High Court.
The Revenue raised three questions of law in Income Tax Appeal No. 1050 of 2024 concerning the allowability of write-offs relating to inventories, bad debts and investments in wholly owned subsidiaries. In Income Tax Appeal No. 940 of 2024, the Revenue challenged the allowability of the investment write-off and the write-off of advances made to M/s. Lilac Medicine Private Limited (LMPL).
Regarding the inventory write-off of Rs.94,05,01,000/-, the ITAT had recorded that the assessee furnished complete item-wise details of the stock written off, including quantity, rate and value. The assessee claimed that expired goods had been written off in accordance with the norms of the Food & Drug Administration, Maharashtra, after taking back expired goods from stockists, C&F agents and other parties and destroying them. Although the Assessing Officer disallowed the claim for lack of documentary evidence, both the Commissioner of Income-tax (Appeals) and the ITAT held that the assessee had produced the requisite details. The ITAT also relied upon a report prepared by M/s. Grant Thornton evaluating debtors and inventories, including verification and assessment of saleable inventories, and noted that expired stocks had been identified during physical verification and written off accordingly.
