RANBAXY LABORATORIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The present appeal filed under Section 260A of the Income Tax Act, 1961 (hereinafter, for short the Act?) is directed against the order of the Income Tax Appellate Tribunal (hereinafter, for short Tribunal?) dated May, 2007 whereby the Tribunal upheld the validity of reassessment proceedings initiated under Section 147 of the Act. The Tribunal also confirmed the order of the lower authorities in denying deduction under Section 80-IA of the Act in respect of duty drawback, profit on sale of REP licences and cash assistance.

(2.) The assessee, being aggrieved of the said order, is in appeal before us. The appeal was admitted on the following substantial question of law:-

(3.) The appellant company is engaged in the business of manufacturing and trading of pharmaceuticals products. It filed return of income on 31 st October, 1994 which was processed under Section 143(1)(a) of the Act at the returned income. Vide notice dated 23 rd January, 1998 issued under Section 148 of the Act, reassessment proceedings were initiated by the Assessing Officer under Section 147 of the Act. The Assessing Officer intimated the assessee that the items viz. club fees, gifts and presents and provision for leave encashment having escaped assessment and therefore initiated reassessment proceedings under Section 147. The assessee vide its letter dated 15 th December, 1998 explained that there was no escape of income on account of these items. This persuaded the Assessing Officer not to make any disallowance in respect of these items. However, during the course of assessment proceedings, the Assessing Officer found that deduction under Section 80HH and 80-I was claimed on certain export incentives also like duty drawback, profit on sale of REP licences and cash assistance, etc. The Assessing Officer held that since the assessment has been validly reopened under Section 147 and though no disallowance was made in respect of the items for which it was initiated, the deductions made under Section 80HH and 80-I being not allowable and the income having escaped assessment on these accounts, proceeded to bring them to tax. He accordingly, reduced the claim of deduction under Section 80HHC and 80-I in respect of some medical equipments of the assessee.