ITAT Mumbai Partly Allows Revenue Appeals in Thyrocare Case; Section 14A Recomputed, Sales Incentive Issue Remanded
Court / Authority
Income Tax Tribunal
Update / Judgement Date
29 Aug 2026
Source
WCP News Bulletin
Author
Manas Yadav — WCP Legal Desk
Reading Time
2 min read
View Count
Key Facts and Tribunal Findings
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, partly allowed a batch of appeals filed by the Revenue against Thyrocare Technologies Ltd. across Assessment Years 2018–19, 2020–21, 2021–22, 2022–23, and 2023–24, directing recomputation of disallowance under Section 14A and remanding issues relating to sales incentive expenditure.
The primary dispute for Assessment Year 2020–21 related to disallowance under Section 14A read with Rule 8D. The Assessing Officer had enhanced the disallowance to ₹2.14 crore as against the assessee’s suo motu disallowance of ₹7.58 lakh. The CIT(A) deleted the addition. The Tribunal, however, held that for the purpose of computing disallowance under Rule 8D, only those investments which yielded exempt income during the year should be considered, following the Special Bench ruling in Vireet Investment Pvt. Ltd. Accordingly, the issue was restored to the Assessing Officer for recomputation on this limited principle.
On the issue of ESOP expenditure, the Tribunal upheld the CIT(A)’s deletion of disallowance of ₹2 crore, relying on the Karnataka High Court ruling in CIT v. Biocon Ltd., holding that ESOP discount constitutes allowable business expenditure under Section 37(1).
With respect to sales incentive expenditure, the Assessing Officer had disallowed 10% of ₹17.49 crore invoking Explanation 1 to Section 37(1), alleging that such payments were in the nature of prohibited benefits to medical practitioners. The CIT(A) deleted the disallowance. The Tribunal noted that the factual matrix regarding the nature of recipients—whether they were genuine service providers or medical practitioners—had not been adequately examined. In light of the Supreme Court’s ruling in Apex Laboratories Pvt. Ltd., the Tribunal remanded the issue to the Assessing Officer for fresh adjudication after detailed verification of each recipient and supporting agreements.
For Assessment Year 2018–19, similar directions were issued regarding Section 14A disallowance. For Assessment Years 2021–22, 2022–23, and 2023–24, the Tribunal restored the sales incentive issue to the Assessing Officer on identical lines.
Accordingly, the Revenue’s appeals were partly allowed for statistical purposes, with key issues remanded for fresh examination.
Full Judgement / Attachment
Full Judgement
Frequently asked questions about Income Tax Tribunal
- What is the Income Tax Appellate Tribunal (ITAT)?
- The ITAT, set up in 1941, is the second appellate authority in direct tax matters and the final fact-finding body. It hears appeals against orders of the Commissioner (Appeals) and certain other authorities, through benches across India.
- What is the time limit to file an appeal before the ITAT?
- An appeal must be filed within two months from the end of the month in which the order is communicated. This rule has applied since 1 October 2024 and continues under the Income-tax Act, 2025. The Tribunal can condone delay for sufficient cause.
- Can the ITAT stay a tax demand?
- Yes. The Tribunal can stay recovery of a disputed demand while an appeal is pending, usually on deposit of a part of the demand or furnishing security. Stays are granted for a limited period, and the appeal is expected to be decided within it.
- Where does an appeal go after the ITAT?
- An appeal against an ITAT order lies to the High Court, but only on a substantial question of law. A further appeal lies to the Supreme Court.
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- Post your requirement on White Collar Professional to receive proposals from verified Chartered Accountants and tax Advocates, compare them, and pay securely through the platform. This page also tracks the latest ITAT ITAT orders as they are reported.
