ACIT CIR 6(1), MUMBAI V. ANGLO GRENCH DRUGS & INDUSTRIES LTD, MUMBAI

ITA 1182/MUM/2009

• Counselvise Citation: 118219914 RSA 2009
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 20-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Opportunity of being heard; Commercial expediency

Judgement Text

1 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI A AA A BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R S SYAL, AM & R S SYAL, AM & R S SYAL, AM & R S SYAL, AM & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 1182/MUM/2009 1182/MUM/2009 1182/MUM/2009 1182/MUM/2009 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2005 2005 2005 2005- -- -06 0606 06) )) ) THE ASST COMMR OF INCOME TAX CIR 6(1), MUMBAI VS ANGLO GRENCH DRUGS & INDUSTRIES LTD RAJAN HOUSE 2 ND FLOOR A M MARG, PRABHADEVI MUMBAI 400 025 ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACA9756E AAACA9756E AAACA9756E AAACA9756E A SSESSEE BY NONE REVENUE BY SHRI P DAS/DR PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER 13.1.2009 OF THE CIT(A) VI, MUMBAI RELATING TO ASSESSMENT YEAR 2005-06. 2 THE REVENUE HAS RAISED THE FOLLOWING GROUND IN TH IS APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN ALLOWING SELLING AND PROMOTION EXPENSES TO THE T UNE OF RS. 2,24,12,000/- IN FULL EVEN THOUGH ASSESSEE FAILED TO FURNISH DETA ILS OF SUCH EXPENSES TO THE EXTENT OF RS. 76,49,216/-: 3 SINCE NOBODY HAS APPEARED ON BEHALF OF THE RESPON DENT ASSESSEE WHEN THE APPEAL WAS CALLED FOR HEARING; THEREFORE, WE PR OPOSE TO HEAR AND DISPOSE OF THE APPEAL EX-PARTE. 2 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) 4 THE ASSESSING OFFICER NOTICED FROM THE P&L ACCOUN T THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 22.41 CRORES UNDER THE HEA D SELLING AND PROMOTION EXPENSES THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY THE CLAIM. THE ASSESSEE MAINLY CONTENDED THAT THE EXPENSES INCURRE D FOR MANY YEARS AND HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE FOR THE EARLIE R YEARS. THE ASSESSEE FURTHER EXPLAINED THAT SINCE THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICALS PRODUCTS AND THE EXPENSES ARE INCUR RED FOR PRINTED MATERIALS, LITERATURES AND PHYSICIAN SAMPLES ITEMS WITH BRAND NAME OF THE ASSESSEE GIVEN TO THE MEDICAL PROFESSIONALS. THE ASSESSING OFFICE R FOUND THAT THE SAID EXPENSES ARE ON ACCOUNT OF PHOTO FRAME, 3 D PICTURE, LEATHER VALET, KEY CHAIN, UTILITY SET, PLASTIC CONTAINER, BED SHEETS, PENS ETC. AND OTHER ITEMS FOR WHICH THE DETAILS HAVE BEEN GIVEN BY THE ASSESSEE. THE ASSESSING OFF ICER HELD THAT THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO EXAMINE AND TO ARRIV E AT THE PROPER DECISION AS TO WHETHER THE EXPENDITURE WAS NECESSITATED OR JUSTIFI ED BY COMMERCIAL EXPEDIENCY. IN THE ABSENCE OF RELEVANT MATERIAL AND EVIDENCE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. 4.1 ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE IN CURRED FOR PROMOTION OF PRODUCTS. BEING IN THE PHARMACEUTICAL LINE, THE ASS ESSEE IS REQUIRED TO VISIT MEDICAL PROFESSIONALS IN THE FIELD AND LEAVE BEHIND SAMPLES OF PRINTED MATERIAL. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO A LLOW THE EXPENDITURE. 3 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) 5 WE HAVE HEARD THE SUBMISSION OF LD DR AND CONSIDE RED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS NOTED BY THE ASSE SSING OFFICER, THE ASSESSEE HAS GIVEN DETAILS REGARDING EXPENSES OF RS. 1,47,63 ,613/- AND NO DETAILS WERE GIVEN AS REGARDS THE EXPENSES OF RS. 76,49,216/-. FURTHER, THE ASSESSEE HAS NOT FILED THE EVIDENCES IN THE SHAPE OF BILLS/VOUCHERS TO SHOW THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS AND PERTAI N TO THE YEAR UNDER CONSIDERATION. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE JUSTIFIED AS IN THE LINE OF BUSINESS OF PHARMACEUTICALS. THE CIT(A) HAS ALSO NOT VERIFI ED AND EXAMINED THE RECORDS WHICH IS NECESSARY BEFORE ALLOWING THE CLAIM OF EXP ENDITURE. IF THE ASSESSEE HAS CLAIMED THE EXPENSES THEN IT IS INCUMBENT UPON THE ASSESSEE TO SUBSTANTIATE THE CLAIM BY FILING THE REQUIRED DETAILS AND PROPER EVI DENCES SHOWING THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. SINCE THE ASSESSEE HAS NOT FI LED THE RELEVANT EVIDENCES TO SHOW THAT THE SAID EXPENDITURE HAS BEEN INCURRED WH OLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND PARTICU LARLY THE EXPENDITURE TO THE EXTENT OF RS. 76 LACS, EVEN NO DETAILS WERE FILED B Y THE ASSESSEE. IN THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE MATT ER NEED FRESH ADJUDICATION BY THE CIT(A) AND PARTICULARLY ON THE POINT WHETHER THE ENTIRE EXPENSES PERTAIN TO THE YEAR UNDER CONSIDERATION AND FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF T HE CIT(A) AND REMAND THE ISSUE TO HIS FILE FOR FRESH ADJUDICATION IN ACCORDA NCE WITH LAW. THE CIT(A SHALL GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 4 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 ITA NO. 1182/MUM/2009 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) 6 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 27 TH DAY OF MAY 2011. SD/- SD/- ( (( ( R S SYAL R S SYAL R S SYAL R S SYAL ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH MAY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI