Cipla is under investigation for tax avoidance and potential tax violations following its survey action against the pharmaceutical company on January 31.
Details of the investigation
The I-T Act’s Section 80-IA allows the deduction of 100% of profits and gains derived from particular businesses for ten consecutive assessment years in a block of 15 years, but only up to a specific period. The tax department is investigating whether Cipla made suspicious claims totaling Rs 400 crore under that section.
Under appropriate circumstances, Section 35 of the I-T Act allows for a deduction of between 100 and 150 percent of expenses for scientific research and development.
Recent reports from CNBC18 reveal the Income Tax department has accused Cipla of illegal deductions of Rs 1,300 crore made for Research and Development.
According to reports, the Income Tax department has suspected doctors and other medical professionals of receiving profits from tax evasion.
But so far in the investigation, no tax demand has been raised.
What do we know about Cipla?
Cipla is one of India’s leading pharmaceutical companies. With over 50 dosage forms, it offers over 1,500 medications across 65 therapeutic areas. The firm recorded total operating revenue of Rs 5,810 crore for the third quarter that ended on December 31, 2022, up from Rs 5,479 crore in the same quarter the previous year.
As part of an alleged tax evasion inquiry, the Income Tax department took the unexpected measure to investigate the corporation’s balance sheets and other financial records at its headquarters in Mumbai in January.
Shares of Cipla are currently trading at Rs 858.15, a new 52-week low, down 1.9 percent.
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