Icy Foods Limited (IFL) is a company trading in FMCG goods, with its headquarters in Lucknow, Uttar Pradesh. The company was incorporated on 1st…

Icy Foods Limited (IFL) is a company trading in FMCG goods, with its headquarters in Lucknow, Uttar Pradesh. The company was incorporated on 1st April 2021. The product portfolio comprises of three items (i) packaged frozen foods (ii) ice creams and (iii) chips and crisps. The company purchases these goods from various manufacturers and sells them through their retail stores. In addition to Lucknow, IFL has its presence in Kanpur, Ayodhya, Agra and Mathura. In each of these cities it has a large store from where it distributes its products directly to the customers. In all, the company operates 5 large stores across Uttar Pradesh. Business Operations IFL has a centralized warehouse in Lucknow, from where it replenishes stock in the stores as per the requisition raised by each of them. Frozen foods and ice cream need to be refrigerated at all times, whether they are stored in the warehouse, retail stores or during transport. Chips and crisps are stored at room temperature. Therefore, there are two types of vans for transport of goods, normal for chips and crisps and refrigerated for frozen foods and ice creams. The company has a simple pricing policy. Frozen foods sell for 90 per unit, Chips and crisps for 50 per unit and ice creams for 90 per unit. The purchase cost per unit for frozen foods is 80 per unit, chips and crisps is 40 per unit and ice creams is 80 per unit. IFL's management has been satisfied with this pricing since the overall profits of the company have always met expectations. For FY 2024-25, the company earned an overall profit of 45 crores. Kailash Bhandari is the Chief Executive Officer (CEO) of the company. Although the target profit margin is being achieved, he would like a proper analysis of the profit per unit of the product sold. He requests his finance analyst Devang Mehta to look into it. Devang Mehta collates information based on the company's information systems (Refer to Annexure 1 for the relevant information). However, given the available information, he is puzzled about how to arrive at the profit per unit of the product sold. Discount vouchers and seasonal promotions The customer base of IFL includes hotels and restaurants that purchase products in bulk. As part of its summer sales promotion campaign, IFL plans to offer a 10% discount on all sales made over the next 30 days. This discount cannot be clubbed with the special discount vouchers that IFL occasionally provides to customers on bulk purchases. These vouchers are valid for a limited period and allow customers to make future purchases at discounted prices. On May 1, 2025, Hotel Paradise (Lucknow) placed a bulk order for 100 cartons of frozen foods. The contract value amounted to 45,000 (5 units per carton × 100 cartons × 90 per unit). Under this contract, IFL issued a special discount voucher — Code XWUVB17243 - to Hotel Paradise. Based on past trends, IFL estimates an 80% probability that Hotel Paradise will make an additional single purchase of goods worth - 37,500 by May 30, 2025. (Refer to Annexure 2 for details of the invoice issued on May 1, 2025.) Dilip Sarkar, Assistant Manager – Accounts at IFL's Lucknow office, has been asked to examine whether the bulk sale to Hotel Paradise has been recognised appropriately in accordance with the applicable Indian Accounting Standards. Management of IFL has not undertaken the physical verification of inventories at regular intervals. Inventories constitute 40% of the total assets of the company. Due to non-maintenance of adequate inventory records at the factory, the audit team of M/s Ford & Rodes could not undertake the physical verification of inventory. As a result, the value of inventory as on 31st March 2025 could not be verified. Responding to threat from quick-commerce business In recent years, the quick-commerce sector has significantly reshaped India's retail ecosystem. Customers place orders online through quick-commerce platforms and make upfront payments. Depending on their location, they may also pay delivery fees for doorstep delivery. These companies operate “dark warehouses” across multiple city locations—typically in densely populated urban areas where order volumes remain high throughout the day. Once an order is placed, the warehouse initiates the fulfilment cycle, including order acceptance, picking, packing, and rapid delivery—often within 15 to 20 minutes from the time of order. Following the COVID-19 pandemic, the accelerated adoption of digital technologies and the growing customer preference for quick delivery have strengthened the shift toward quick commerce and away from traditional in-store shopping. This trend has begun to challenge companies like IFL. Given that its profit margins are under pressure, IFL can offer deep discounts only on large bulk orders, not on frequent small-value orders. Meanwhile, recent reports have highlighted concerns over the quality of goods delivered through quick-commerce platforms. (Refer to Annexure 3 for details of a recent food safety raid conducted at dark stores operated by Zing Zong Limited.) After reviewing the news report, Kailash Bhandari resolved to enhance the in-store shopping experience for IFL's customers, with the aim of countering the competitive threat posed by quick-commerce companies. He has invited suggestions from employees on how this initiative can be implemented. Kailash Bhandari recognizes that quick-commerce and e-commerce business models are here to stay. Over the long term, IFL cannot continue as a trading company offering a limited product range. However, until a viable strategic path for business expansion is identified, he believes it is prudent to continue running IFL's existing operations, which still generate reasonable, though gradually declining profit margins. Political contributions Kailash Bhandari had intended to donate to a reputed political party on April 10, 2021, to honor the party's 50th anniversary. He believed that such a contribution could help build connections beneficial for the company's business growth. At that time, however, Miss Niraja Rai, the Company Secretary, informed him that political contributions were not permitted for the company. On October 15, 2025, Kailash Bhandari convened a meeting of the company's senior management. During the discussion, he casually remarked that IFL could benefit by making a donation to the same political party in the coming months, especially since elections were approaching. The party had promised initiatives such as decongesting roads and improving traffic management, thereby enhancing ease of commute for the public. In light of the Business Pulse news report (Annexure 3), Kailash believed that these improvements could increase footfalls at IFL's outlets. Customers would be more inclined to visit stores offering good-quality products and a personalized shopping experience. Therefore, he expressed that making a contribution to the party would be advantageous for the company. This time, Niraja Rai informed him that such contributions were now permissible for the company. Kailash was annoyed at her, as she had previously stated in April 2021 that similar contributions were not allowed, and he felt she was contradicting her earlier stance. In response, Niraja clarified that both opinions - then and now – were fully in compliance with the Companies Act, 2013. Hearing this, Kailash turned to Devang Mehta, also a Chartered Accountant, and asked whether there would be any tax implications under the Income Tax Act, 1961 regarding such payments. The plan was for IFL to pay - 5,00,000 on January 30, 2026, for an advertisement published in a souvenir issued by the political party, through an account payee cheque, to be recorded as advertisement expenses. A second payment of 1,00,000 was proposed on March 10, 2026, in cash for a similar advertisement, also to be recorded as advertisement expenses. Devang gave his professional opinion on the tax implications of these payments. Based on his inputs, Kailash Bhandari revised the proposed contributions to ensure that IFL obtained the maximum permissible benefits under the Income Tax Act, 1961. Annexure 1: Information collated from IFL's information systems Cost per month ₹ Total ₹ Warehouse related costs Labour and staff costs 7,50,000 Refrigeration costs 22,50,000 34,50,000 Material handling costs 4,50,000 Head office related costs Salaries and wages of head office staff 9,00,000 25,00,000 Office administration costs 16,00,000 Cost incurred at retail store location Labour related costs 5,00,000 Refrigeration costs 17,50,000 25,00,000 Other costs 2,50,000 Average transportation cost of IFL per trip to any retail store ₹ Normal van 1,20,000 Refrigerated van 1,50,000 Additional Information (average for any retail store) Meter cube (m³) Total volume of all goods sold per month 5,00,000 Total volume of refrigerated goods sold per month 4,00,000 Carrying volume of each van 1,000 Retail store information Frozen food Chips & crisps Ice cream No. of cartons per cubic meter (m³) 10 30 50 No. of items per carton (units) 5 10 20 Time in warehouse (in months) 1 1.5 0.1 Time in retail stores (in months) 1 2 0.1 Selling price per unit (₹) 90 50 90 Purchase price per unit (₹) 80 40 80 Annexure 2: Invoice details of sale to Hotel Paradise on May 1, 2025 Icy Foods Limited Date: May 1, 2025 Seller: Icy Foods Limited 234 A, 2nd Floor, Shopping Towers, Indra Nagar, Lucknow-100100 GSTIN: 12ABCDE3456E7FG Customer support: 0522-12345678 email: [email protected] Recipient: Hotel Paradise 4 th Floor, Dreams Shopping Mall, Gomti Nagar, Lucknow – 100101 GSTIN: 98ZYXWV76543U2TS Mobile: 1234567890 Order Number: 2025051002 Sr. No. Item Details HSN Code Item Quantity Unit Price ₹ Discount Net Price ₹ Tax amount ₹ Total ₹ 1 Frozen Foods 030 X72200 100 cartons 450 per carton NIL 45,000 2,250 47,250 Total 47,250 Tax Summary: HSN Code CGST Rate CGST SGST Rate SGST Total Tax ₹ 030 X72200 2.5% 1,125 2.5% 1,125 2,250 Total tax 2,250 Use Voucher Code XWUVB17243 to avail of 40% on all purchases upto 45,000 within 30 days from date of sale. Thank you for shopping with us. For Icy Foods Limited Anant Mahant Authorized Signatory Note that the invoice is representational, actual invoice format and details could differ to meet tax and other regulatory requirements as applicable. Annexure 3: Dark truth about "dark warehouses" Business Pluse Zing Zong's Dark Stores Raided: Food Safety Officials Suspend License Over Unhygienic Conditions Lucknow, 15th July 2025 – For several months now, customers have repeatedly raised concerns regarding the inferior quality of goods supplied by the popular quick-commerce company, Zing Zong Limited. Complaints include frequent errors in order fulfilment as well as delivery of substandard and even expired products. These issues are especially alarming when they involve consumables such as food items, where compromised quality can have serious health implications. Acting on these concerns, food safety officials conducted surprise inspections across multiple dark warehouses that function as Zing Zong's order-fulfilment centres throughout the city. The officials were appalled by the unhygienic and unsafe storage conditions observed during the raids. Shockingly, similar poor conditions were found across numerous facilities. In response, authorities have suspended Zing Zong's business license with immediate effect. The suspension will remain in place until the company implements and complies with the prescribed food-safety standards. Consumers are cautioned not to be enticed by the deep discounts often offered by such platforms, as these can come at the cost of health and safety. A quick online poll conducted among our readers - many of whom are frequent users of quick-commerce services - revealed an insightful trend. While customers appreciate the unmatched convenience of quick delivery, a significant number expressed a preference for in-store purchases on most days. Physical shopping allows customers to inspect products firsthand and benefit from personalized interaction, which still holds substantial value in today's digital age. Moreover, many quick-commerce platforms promote bulk buying through heavy discounts, while smaller quantities are often sold at MRP or are unavailable. This pushes customers into buying more than they require, leading to wastage and higher overall costs. In contrast, in-store shopping enables buyers to purchase only what they need, thereby reducing waste and saving money. However, the city's road and traffic conditions continue to deter many from visiting physical stores, forcing them to rely on quick-commerce and e-commerce services. While views may vary on which mode of shopping poses the greater challenge, one principle remains clear: health must never be compromised for convenience.