Cipla is under investigation for tax avoidance and possible tax violations following his January 31 census action against the pharmaceutical company.
Details of the investigation
Section 80-IA of the IT Act allows for the deduction of 100% of profits and gains from certain companies for ten consecutive tax years in a block of 15 years, but only up to a specified period. The Tax Department is investigating whether Cipla has made suspicious claims totaling Rs 400 crore in this section.
Section 35 of the IT Act allows a deduction of 100 to 150 percent of the expenses for scientific research and development under suitable conditions.
Recent reports from CNBC18 show that the Income Tax Authority has accused Cipla of making illegal deductions of Rs 1,300 crore for research and development.
The Income Tax Agency has reportedly suspected doctors and other medical professionals of making profits from tax evasion.
So far, however, no tax claim has been raised in the investigation.
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 drugs in 65 therapeutic areas. The company recorded total operating revenue of Rs.5,810 crore for the third quarter ended 31 December 2022 compared to Rs.5,479 crore in the same quarter last year.
In January, the Income Tax Authority took the unexpected step of examining the company’s balance sheets and other financial records at its Mumbai headquarters as part of an alleged tax evasion investigation.
Cipla’s shares are currently trading at Rs 858.15, a new 52-week low, down 1.9 percent.