Cipla share price on Tuesday hit a fresh 52-week low of Rs 858.15 apiece, down by 2.5 per cent after reports of the income tax department investigating the company over potential tax violation and tax avoidance.
The share recovered but at 3:01 they were trading at Rs 873.35, down by 0.17 per cent.
According to a report by CNBC-TV18 the tax department is going to probe into the wrong claims made by the company under Section 80-IA and some wrongful deductions amounting to Rs 1,300 crore for the Research and Development.
What is Section 80-IA?
The Section 80-IA of the income tax act allows companies to deduct 100 per cent of profit and gains from specific businesses for 10 consecutive assessment years in a block for 15 years whereas Section 35 permits deduction on expenditure for scientific research and development and ranges between 100-150 per cent of a specific basis.
These exceptions were given as benefits for doctors and medical practitioners, claimed sources talking to CNBC. However, the company claims that there is no claim or demand made on them.
In response to CNBC a spokesperson from Cipla said that the company had fully cooperated with the IT department earlier and will continue to do so. On January 31, the IT department had carried out a survey against the drug major and also conducted surprise action to check balance sheets for alleged tax evasion.
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