Increase in business income due to addition of concealed production not eligible for deduction u/s 80IB

Medley Pharmaceuticals Ltd Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that deduction u/s 80IB of the Income Tax Act, in respect of increased business income due to addition on account of concealed production, is not allowable.

Facts- The assessee is a company engaged in the business of manufacturing and selling of pharmaceutical products. For A.Y. 2010-11, the assessee filed the return of income declaring a taxable income at Rs.81,83,793/- after claiming deduction u/s. 80G and 80IB amounting to Rs.30,20,66,215/-. For A.Y. 2011-12, the assessee offered taxable income of Rs.24,38,48,900/- after claiming deduction u/s. 80G and 80IB amounting to Rs.11,96,35,535/-.

The case was selected for scrutiny and the statutory notices were duly served on the assessee. AO concluded the assessment by making a disallowance of Rs.19,73,90,622/- for AY 2010-11 towards concealed sales arising out of concealed production. AO made a similar disallowance for A.Y. 2011-12 for an amount of Rs.17,30,96,446/-.

Aggrieved, the assessee filed appeal before the CIT(A), who confirmed the above addition made by the AO. The Ld.CIT(A) also did not accept the submissions of the assessee that the addition made should be allowed as deduction u/s. 80IB for the reason that Form 10CCB was not filed for the enhanced income and, therefore, the addition made cannot be allowed as deduction u/s. 80IB of the Act.

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