M/s. Lincoln Pharmaceuticals Ltd., Ahmedabad V. The DCIT, Circle-2(1)(2), Ahmedabad

ITA 1458/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0674 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 14-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Business income; Corroborative evidences; Revenue expenditure; Capital expenditure; Set aside
• Section: 271(1)(c); 143(3); 142(1); 37(1); 37; 6

Judgement Text

, D - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER &SMT. MADHUMITA ROY, JUDICIAL MEMBER . ITA NO. 1458/AHD/2017 / ASSTT. YEAR: 2014-15 LINCOLN PHARMACEUTICALS LTD. LINCOLN HOUSE, B/H SATYAM COMPLEX, SCIENCE CITY ROAD, SOLA AHMEDABAD- 380060 PAN:AAA CL2 711 N VS. DCIT CIR-2(1)(2), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI VINOD TANWANI, SR. DR REVENUE BY : SHRI TUSHAR HEMANI, AR !'/ DATE OF HEARING : 20/03/2019 #$% !'/ DATE OF PRONOUNCEMENT: 27/03/2019 &'/ O R D E R PER MADHUMITA ROY- JM : THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 08.05.2017 PASSED BY THE CIT(A)-2 AHMEDABAD ARISING OUT OF THE ORDER DATED 13.10.2016 PASSED BY THE DCIT CIR.-2(1)(2) AHMEDABAD U/S. 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFER TO AS THE ACT) FOR ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE COMPANY ENGAGED IN MANUFACTURING OF DRUGS AND PHARMACEUTICAL PRODUCTS FILED ITS RETURN OF INCOME ON 29.11.2014 DECLARING TOTAL INCOME OF RS. 11,14,65,960/- WHICH WAS PROCESSED U/ S. 143(3) OF THE ACT. UPON SCRUTINY NOTICE U/S. 143(2) DATED. 28.08.2015 WAS I SSUED FOLLOWED BY A FURTHER NOTICE U/S. 143(2) R.W.S. 129 OF THE ACT DATED 14.0 6.2016 DUE TO CHANGE OF ITA NO. 1458/AHD/2017 A.Y. 2014-15 2 INCUMBENT. A FURTHER NOTICE U/S. 142(1) OF THE AC T DATED 16.06.2016 FOLLOWED BY QUESTIONNAIRE DATED 08.08.2016 WAS SERVED UPON THE ASSESSEE. 3. THE FIRST GROUND RELATES TO CONFIRMING OF DISALLO WANCE OF RS. 42,59,157/- U/S. 35(2AB) ON RESEARCH AND DEVELOPMENT EXPENDITUR E. THE DETAILS AS ASKED FOR WAS DULY SUBMITTED BY THE ASSESSEE DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS ALONG WITH THE SUPPORTING EVIDENCES INC LUDING THE CERTIFICATE ISSUED BY THE DSIR SUBSTANTIATING THE CLAIM OF DEDUCTION OF R S. 3,30,87,157. ACCORDING TO THE LD. AO IN TERMS OF THE DSIR CERTIFICATE THE ASS ESSEE WAS ELIGIBLE FOR DEDUCTION TO THE TUNE OF RS. 288.28 LAKHS ONLY AND THE EXCESS CLAIM OF R & D EXPENSES OF RS. 42.59,157 WAS DIRECTED TO BE EXPLAINED BY THE ASSES SEE BY THE LD. AO AS TO WHY THE SAME WOULD NOT BE ADDED TO THE INCOME OF THE AS SESSEE. ULTIMATELY SUCH EXCESS R & D EXPENSES OF RS. 42,59,157/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE WITH THE FOLLOWING OBSERVATION :- IN RESPONSE, THE ASSESSEE COULD NOT FURNISH ANY EXP LANATION IN THIS REGARD. THE DEDUCTION FOR THE PURPOSE OF R&D U/S. 35(2AB) O F THE INCOME TAX ACT IS TO BE GIVEN ONLY IF THE ASSESSEE IS IN RECEIPT OF 3 CL AND 3CM REPORT CERTIFIED BY THE DSIR. THE DSIR IN ITS CERTIFICATE FURNISHED HAS CATEGORICALLY SPECIFIED THE CLAIM OF DEDUCTION AT RS. 288.28 LACS FOR RESEA RCH AND DECELOPMENT. IT IS PERTINENT TO MENTION HERE THAT THE DEDUCTION SPECIF IED IN FORM NO. 3CL AND 3CM ISSUED BY THE DSIR TO BE TAKEN INTO CONSIDERATI ON AND BINDING ON THE DEPARTMENT. IN VIEW OF THE ABOVE THE EXCESS CLAIM OF DEDUCTION U/S. 35(2AB) OF THE INCOME TAX ACT AS WORKED OUT ABOVE CLAIMED B Y THE ASSESSEE IN ITS RETURN OF INCOME AMOUNTING TO RS. 42,59,157/- (RS. 3,30,87,157/- - RS. 2,88,28,000) IS DISALLOWED AND ADDED TO THE TOTAL I NCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCOME TA X ACT IS HEREBY INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALING PARTICULARS OF INCOME BY THE ASSESSEE. 4. IN APPEAL THE LD. CIT(A) CONFIRMED THE SAME CONSI DERING THE DECISION TAKEN BY HIS PREDECESSOR IN ASESSEES OWN CASE FOR ASSESS MENT YEAR 2014-15 WITH THE FOLLOWING OBSERVATION: DECISION: 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE AO HAS MADE THE DI SALLOWANCE OF THE WEIGHTED DEDUCTION CLAIMED BY THE APPELLANT U/S. 35 (2AB) OF THE I. T. ACT, 1961 AMOUNTING TO RS, 42,59,157/-. AS PER THE AO, T HE DSIR CERTIFICATE FOR DEDUCTION WAS AT RS.288.28 LACS, WHILE IN THE COMPU TATION OF INCOME, THE ITA NO. 1458/AHD/2017 A.Y. 2014-15 3 APPELLANT HAS CLAIMED THE WEIGHTED DEDUCTION OF RS. 3,30,87,157/-.THUS, THERE WAS SHORT APPROVAL OF THE DSIR CERTIFICATE, AND THE REFORE, THE EXCESS CLAIM OF DEDUCTION MADE BY THE APPELLANT WAS DISALLOWED. 3.4 ON GOING THROUGH THE FACTS OF THE CASE, IF IS N OTICED THAT IDENTICAL ISSUE ON SIMILAR FACTS HAS BEEN DECIDED BY THIS OFFICE IN AP PELLANT'S OWN CASE FOR IMMEDIATELY PRECEDING YEAR I.E. A. Y. 2013-14 VIDE APPELLATE ORDER NO. CIT(A)-2/329/AC. CIR. 2(1) (2)/2015-16 DATED 14/06/ 2016, WHEREBY THE GROUND HAS BEEN DECIDED AGAINST THE APPELLANT. THE RELEVANT FINDINGS GIVEN ARE REPRODUCED HEREUNDER:- 3-3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF THE WEIGHTED DEDUCTION CLAIMED BY THE APPELLANT U/S. 35(2AB] OF THE I. T. ACT, 1961 AMOUNTING TO RS.19 ,62,0007-. THE DISALLOWANCE WAS MADE FOR THE REASON THAT THE CERTI FICATE ISSUED, BY DSIR IN THE FORM OF 3CL AND 3CM, IT HAS CATEGORICALLY BEEN SPECIFIED THE DEDUCTION AT RS.36 8.93 LACS FOR RESEARCH AND DEVELOPMENT, WHILE THE CLAIM OF THE AP PELLANT WAS AT RS.388.55 LACS TOWARDS REVENUE AND CAPITAL EXPENDIT URE. IN OTHER WORDS, THE EXCESS CLAIM MADE BY THE APPELLANT AT RS . 19.62 LACS WAS DISALLOWED AS THE SAME WAS LESS CERTIFIED BY THE. DSIR IN THE CERTIFICATE ISSUED IN THIS REGARD. 3.4. ON THE OTHER SIDE, THE APPELLANT HAS CLAIMED T HAT THERE WAS NO DISPUTE WITH REGARD TO THE AMOUNT OF EXPENDITURE OR THE NAT URE OF EXPENDITURE. THE APPELLANT FURTHER SUBMITTED THAT THE AO HAS FAILED TO APPRECIATE THE FACT THAT EXPENDITURE ON CLINICAL TRIAL AND EXPENDITURE ON PR OFESSIONAL FEE FOR REGISTRATION UNDER THE PATENT ACT BE INCURRED IN AN IN-HOUSE FACILITY AND THEREFORE NEEDS TO BE INCURRED OUTSIDE. THE EXPENDITURE ON REPAIRS OF R & D BUILDING IS ALSO VERY MUCH ALLOWABLE AS THE SAME IS FOR THE PURPOSE OF MAINTAINING THE IN-HOUSE R & D FACILITY. IT HAS ALS O RELIED UPON THE VARIOUS JUDGMENTS. 3.5. HAVING CONSIDERED THE FACTS AND SUBMISSION, IT HAS BEEN NOTICED THAT THE APPELLANT HAS CLAIMED THE R & D EXPENDITURES AT RS. 388.55 LACS, BUT AFTER EXAMINATION OF THE DETAILS AND SUBMISSIONS, THE COM PETENT AUTHORITY I.E. DSIR HAS ONLY CERTIFIED THE EXPENDITURE FOR R & D AT RS. 368.93 LACS IN THE CERTIFICATE ISSUED BY IT. IT MEANS ON EXAMINATION, THE EXPENDIT URE TO THE TUNE OF RS.19.62 LACS WAS FOUND TO BE NOT RELATING TO THE R & D EXPE NDITURE, AS ENVISAGED U/S. 35(2AB) OF THE I. T. ACT. THUS, THE APPROVAL OF THE DSIR IN RESPECT OF THE EXPENDITURE AT RS.368.93 LACS IS ONLY ALLOWABLE EXP ENDITURE U/S. 35(2AB) OF THE I. T. ACT AS HAS BEEN COMMUNICATED BY THE DSIR TO THE DG / DL (EXEMPTION). THUS, THE QUALIFICATION OF THE AMOUNT IN THE DSIR CERTIFICATE HAS THE SANCTITY AND WOULD BE RELEVANT FOR GRANTING THE DEDUCTION U/S. 35(2AB) OF THE I. T. ACT, 1961 AS HAS BEEN HELD BY HON'BLE ITAT, B BENCH, HYDERABAD IN THE CASE OF ELECTRONICS CORPORATION OF INDIA LTD . VS. ACIT IN ITA NO. 1106/HYD/2011 DATED 25/09/2012. THE RELEVANT FINDINGS OF THE DECISION IS REPRODUCED AS UNDER:- ITA NO. 1458/AHD/2017 A.Y. 2014-15 4 '17. AS PER THE PROVISIONS OF SECTION 35(2AB) OF TH E ACT AS APPLICABLE TO THE RELEVANT ASSESSMENT YEAR, THE EXPENDITURE IN CURRED BY THE ASSESSES IN ANY APPROVED IN-HOUSE RESEARCH FACILITY , TO THE EXTENT OF APPROVED BY THE PRESCRIBED AUTHORITY, IS ENTITLED T O WEIGHTED DEDUCTION OF 150% OF SUCH APPROVED EXPENDITURE. THEREFORE; TH E EXPENDITURE AS APPROVED BY THE DSIR IN THE CERTIFICATE GIVEN BY TH EM IN FORM 3CL ALONE IS TO BE GRANTED WEIGHTED DEDUCTION. THE DSIR IN THEIR CERTIFICATE HAS CERTIFIED EXPENDITURE ELIGIBLE FOR WEIGHTED DEDUCTION AS RS.3,126.02 LAKHS. THEREFORE, IT IS NOT FOR EITHER THE ASSESSING AUTHORITY OR THE APPELLATE AUTHORITY TO DECIDED ON THE EXPEND ITURE WHICH WILL BE ENTITLED TO WEIGHT6ED DEDUCTION U/S. 35(2AB). IN FA CT, U/S. 35[2BA)(3J, IF ANY QUESTION ARISES U/S. 35 AS TO WHETHER AND IF SO, WHAT EXTENT ANY ACTIVITIES CONSTITUTES OR CONSTITUTED OR ANY ASSET WAS USED FOR SCIENTIFIC RESEARCH, THE MATTER SHOULD BE REFERRED TO THE APPR OPRIATE AUTHORITY WHOSE DECISION WILL BE FINAL. IN THIS CASE THE APPR OPRIATE AUTHORITY IS THE DSIR. THEREFORE ONCE THE DSIR HAS CERTIFIED THE QUANTUM OF ELIGIBLE R & D EXPENDITURE FOR THE PURPOSES OF WEIG HTED DEDUCTION U/S. 35(2AB) THE FIGURE CANNOT BE TAMPERED BY ITAT. EVEN IF THE ASSESSEE IS RIGHT IN THAT THE THERE IS A MISTAKE IN THE CERTIFI ED ISSUED BY THE DSIR, WHICH WE DON'T KNOW, THE SAME CAN ONLY BE RECTIFIED BY DSIR AND NOT THE ITAT IN-APPELLATE PROCEEDINGS. WE, THEREFORE, U PHOLD THE DECISION OF LOWER AUTHORITIES IN RESTRICTING THE WEIGHTED DE DUCTION U/S. 35(2AB) TO RS.46,89,03 LAKHS AND DISALLOWING SUM OF RS.1,69 ,73,987/- OUT OF THE CLAIM MADE BY THE ASSESSEE. WE, HOWEVER, DIRECT THA T IN CASE DSIR CORRECTS THE AMOUNT OF RESEARCH AND DEVELOPMENT EXP ENDITURE ON WHICH THE ASSESSEE IS ENTITLED WEIGHTED DEDUCTION F OR THE ASSESSMENT YEAR UNDER APPEAL, CORRESPONDING WEIGHED DEDUCTION U/S. 35(2AB) SHALL BE GRANTED ON RECEIPT OF THE CLARIFICATION FR OM DSIR. CONSEQUENTLY IF THE ASSESSEE IS ABLE TO PROVE THAT ANY AMOUNT OF EXPENDITURE IN THEIR IN-HOUSE RESEARCH AND DEVELOPM ENT FACILITIES WAS OMITTED TO BE CONSIDERED BY THE DSIR FOR WEIGHTED D EDUCTION THE SAME MAY BE ALLOWED AS A DEDUCTION U/S. 37 OF THE ACT. WITH THIS OBSERVATION WE DISMISS THE APPEAL OF THE ASSESSEE O N THIS ISSUE. 3.6 IT HAS BEEN NOTICED THAT THE CASE LAWS RELIED U PON BY THE APPELLANT ARE NOT APPLICABLE OVER THE FACTS OF THE CASE. IN VIEW OF THE AFORESAID DISCUSSION, THE DISALLOWANCE OF THE EXCESS CLAIM OF THE EXPENDITURE MADE BY THE AO IS FOUND CORRECT AND JUSTIFIED, AND HENCE, THE SAME IS CONFI RMED. THE GROUND OF APPEAL IS DISMISSED. 5. AT THE TIME OF HEARING OF THE INSTANT APPEAL THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT IN ITA NOS. 21 14/AHD/2016 AND 2294/AHD/2016 THE HONBLE TRIBUNAL WAS PLEASED TO SE T ASIDE THE IDENTICAL ISSUE FOR ASSESSMENT YEAR 2013-14 AS RELIED UPON BY THE LD . CIT(A) TO THE FILE OF THE LD. AO TO DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW . A COPY OF THE SAID ORDER ITA NO. 1458/AHD/2017 A.Y. 2014-15 5 WAS ALSO FILED BEFORE US. IN THAT VIEW OF THE MATT ER THE ORDER PASSED BY THE LD. CIT(A) IS OF NO CONSEQUENCE AND THUS THE MATTER BE S ENT TO THE LD. CIT(A) WITH THE SAME OBSERVATION AS MADE BY THE COORDINATE BENCH IN ITA NO. 2294/AHD/2016 AS ALSO SUBMITTED BY THE LD. AR. ON THE CONTRARY THE LD. DR FAILED TO REBUT THE CON TENTIONS MADE BY THE LD. AR. 6. WE HAVE HEARD THE LD. COUNSEL APPEARING FOR THE P ARTIES, WE HAVE ALSO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY CONSIDERED THE ORDER PASSED BY THE HONBLE TRIBUNAL IN ITA NO. 2114/AHD/2017 AND ITA NO. 2294/AHD/2016. WHILE DISPOSING OF THE M ATTER THE HONBLE TRIBUNAL OBSERVED AS FOLLOWS: 6. WHEN THIS ISSUE CAME UP FOR HEARING BEFORE US, WITHOUT PREJUDICE TO LEARNED COUNSEL'S ARGUMENTS ON MERITS OF ORIGINAL C LAIM, IT WAS SUBMITTED THAT THE EXPENSES BEING IN BONAFIDE FURTHERANCE OF ITS L EGITIMATE BUSINESS INTERESTS IS NOT IN DOUBT, AND, THEREFORE, THE ASSESSING OFFI CER SHOULD AT BEST RESTRICT THE DISALLOWANCE TO CAPITAL EXPENDITURE BUT ALLOW DEPRE CIATION THEREON NEVERTHELESS. IT WAS ALSO SUBMITTED THAT SO FAR AS REVENUE EXPENDITURE IS CONCERNED, THE ASSESSING OFFICER SHOULD CONSIDER IT S DEDUCIBILITY UNDER SECTION 37(1). LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT HE HAS NOT OBJECTION TO THE CLAIM OF THE ASSESSEE BEING RE-EXA MINED IN THIS LIGHT BUT PRAYED THAT THE MATTER SHOULD BE RESTORED TO THE FI LE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION SO THAT THE MATTER MAY BE PR OPERLY EXAMINED. LEARNED COUNSEL FOR THE ASSESSEE DOES NOT OPPOSE THIS SUBMI SSION. IN THE LIGHT OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CA SE, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OF FICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW, BY WAY OF A SPEAKING ORDER , IN THE LIGHT OF THE ABOVE OBSERVATIONS AND AFTER GIVING YET ANOTHER OPPORTUNI TY OF HEARING TO THE ASSESSEE. ORDERED ACCORDINGLY. 7. RESPECTFULLY FOLLOWING THE JUDGMENT PASSED BY TH E LD. TRIBUNAL WE SET ASIDE THE ISSUE TO THE FILE OF THE LD. AO FOR FRESH ADJUDI CATION OF THE SAME AS DIRECTED BY THE COORDINATE BENCH MENTIONED HEREIN ABOVE. 8. HENCE, ASSESSEES APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. ITA NO. 1458/AHD/2017 A.Y. 2014-15 6 9. THE SECOND GROUNDS OF APPEAL RELATES TO CONFIRMAT ION OF DISALLOWANCE OF RS. 7,12,464/- BEING 12.5% OUT OF TOTAL DISALLOWANCE OF RS. 56,99,710/- OF THE SALES PROMOTION EXPENSES. DURING THE COURSE OF ASSESSMEN T PROCEEDING THE ASSESSEE WAS ASKED SUBMIT EVIDENCES IN RESPECT OF HIS CLAIMS OF SALES PROMOTION AND MARKETING EXPENSES; THE EXPENSES TOWARDS GIFT ARTICLES TO CHE MIST, STOCKISTS AND RETAILERS ETC. THE DETAILS INCLUDING THE NAMES, ADDRESS AND THE GIF T ITEMS THOUGH DIRECTED TO BE FURNISHED BY THE LD. AO THE COMPLETE ADDRESS OF THE PARTIES AND THE DETAILS OF THE SCHEMES UNDER WHICH THOSE GIFTS WERE DISTRIBUTED DU RING THE YEAR INCLUDING THE DETAILS OF TARGETS AND THE ACHIEVEMENTS OF THE STOC KISTS, RETAILERS AND CHEMISTS WERE FAILED TO BE FURNISHED BY THE ASSESSEE. ULTIMATELY THE LD. AO RELIED UPON A CIRCULAR BEING NO. 5 OF 2012 ISSUED BY THE CBDT DISALLOWED RS . 56,99,710/- U/S. 37 (1) OF THE ACT TOWARDS GIFT ARTICLES CLAIMED TO HAVE BEEN DISTRIBUTED BY THE ASSESSEE TO THE STOCKISTS, RETAILERS AND DISTRIBUTORS TREATING THE SAME AS A GIFTS TO THE DOCTORS. IN APPEAL THE LD. CIT(A) RELYING UPON THE ORDER PASSED BY HIS PREDECESSOR FOR A.Y. 2013-14 RESTRICTED SUCH DISALLOWANCE OF SALES PROMO TION EXPENSES TO THE TUNE OF RS. 7,12,464/- BEING 12.5% OF THE TOTAL SALES PROMO TION EXPENSES OF RS. 56,99,710/-. HENCE, THE APPEAL BEFORE US. 10. AT THE TIME OF HEARING OF THE INSTANT APPEAL TH E LD. REPRESENTATIVE OF THE ASSESSEE SUBMITTED BEFORE US THAT THE ORDER PASSED BY THE LD. CIT(A) IN ASSESSEES OWN CASE FOR A.Y. 2013-14 WAS ALSO DELETED BY THE H ONBLE TRIBUNAL IN APPEAL PREFERRED BY THE ASSESSEE IN ITA NOS. 2114/AHD/2016 AND 2294/AHD/2016 FOR A.Y. 2013-14. HE, THEREFORE, PRAYED FOR SAME RELIEF BEF ORE US. ON THE CONTRARY THE LD. DR RELIED UPON THE ORDER P ASSED BY THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS MADE BY THE RESPECTIVE PARTIES, WE HAVE ALSO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RE CORD. WE HAVE FURTHER CAREFULLY CONSIDERED THE JUDGMENT PASSED IN ITA NOS. 2114/AHD/ 2016 AND 2294/AHD/2016 ITA NO. 1458/AHD/2017 A.Y. 2014-15 7 FOR A.Y. 2013-14. WHILE DISPOSING OF THE IDENTICAL ISSUE THE COORDINATE BENCH OBSERVED AS FOLLOWS:- 7. THE ONLY OTHER ISSUE IN THIS APPEAL, I.E. FIRST ADDITIONAL GROUND OF APPEAL BY THE ASSESSEE, IS AS FOLLOWS: THE LEARNED CIT(A) HAS ERRED, BOTH IN LAW AND ON FACTS, IN PARTLY CONFIRMING THE DISALLOWANCE OF THE SALES PROMOTION EXPENSES TO THE TUNE OF RS 10,57,363 BEING 12.5% OF TOTAL SALES PROMOTION EXPENSES OF RS 84,58,904. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ENTIRE DISALLOWANCE OUGHT TO HAVE BEEN DELETED. 8. IN A CONNECTED GRIEVANCE RAISED IN THE APPEAL FI LED BY THE ASSESSING OFFICER, WHICH WE MUST TAKE UP ALONGWITH THE ABOVE GROUND OF APPEAL, GRIEVANCE RAISED IS AS FOLLOWS: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE OF MADE UNDER SECTION 37(1) OF THE ACT TO RS 10,57,363 AS AGAINST RS 85,58,904, WITHOUT PROPERLY APPRECIAT ING THE FACTS OF THE CASE AND THE MATERIAL ON RECORD. 9. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS, AS PUT BY THE ASSESSING OFFICER HIMSELF IN THE ASSE SSMENT ORDER, 'THE ASSESSEE HAS SHOWN RS 84,58,904 AS GIFT ITEMS TO CHEMISTS, R ETAILERS AND RETAILERS'. AS THE ASSESSING OFFICER HIMSELF PUTS IT, 'THE ASSESSE E WAS ASKED, VIDE ORDER SHEET ENTRY DATED 27.01.2016, TO SUBMIT THE NAMES, ADDRES SES AND DETAILS OF THE GIFT ITEMS TO CHEMISTS, STOCKISTS AND RETAILERS AS CLAIM ED BY THE ASSESSEE AND THE VARIOUS SCHEMES UNDER WHICH THE SAME HAVE BEEN GIVE N AND THE DESCRIPTION OF GIFTS THAT HAVE BEEN GIVEN'. IT WAS NOTED THAT SOME OF THESE GIFTS WERE THINGS LIKE GOLD RINGS AND GOLD CHAINS AND THAT 'DESPITE S EVERAL OPPORTUNITIES, THE ASSESSEE HAS NOT SUBMITTED COMPLETE NAMES AND ADDRE SSES OF VARIOUS STOCKISTS, RETAILERS AND CHEMISTS TO WHOM THE GIFTS HAVE BEEN GIVEN DURING THE YEAR'. THE ASSESSING OFFICER THUS PROCEEDED ON THE PRESUMPTION THAT THESE GIFTS WERE ACTUALLY GIVEN TO THE DOCTORS AND WERE INADMISSIBLE AS DEDUCTION UNDER SECTION 37(1) BEING IN VIOLATION OF THE MEDICAL COU NCIL OF INDIA GUIDELINES. THE DISALLOWANCE OF RS 84,58,904 WAS ACCORDINGLY MA DE. IN APPEAL, LEARNED CIT(A) NOTED THAT COMPLETE DETAILS OF RECIPIENTS WE RE PLACED ON RECORD BY THE ASSESSEE, NO WERE DISCREPANCIES FOUND THEREIN AND T HE DISALLOWANCE WAS MADE ON THE BASIS OF A PRESUMPTION RATHER THAN FACTUAL F INDING. ON A RATHER CONTRADICTORY NOTE, HOWEVER, HE ALSO OBSERVED THAT 'FOR WANT OF VERIFICATION DUE TO IMPROPER MAINTENANCE OF ACCOUNTS IN SUPPLY O F GIFT ARTICLES, IT WOULD BE FAIR AND REASONABLE TO CONFIRM THE DISALLOWANCE @ 1 2.5% OF THE PURCHASE AND THE SAME IS CONFIRMED, WHICH COMES TO RS 1 0,57 ,363'. NONE OF THE PARTIES IS SATISFIED. WHILE ASSESSING OFFICER IS AGGRIEVED OF THE DISALLOWANCE BEING RESTRICTED TO RS 10,57,363, THE ASSESSEE IS AGGRIEV ED OF THE DISALLOWANCE OF RS 10,57,363. BOTH THE PARTIES ARE IN APPEAL BEFORE US . 10. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE ARE UNABLE TO FIND ANY JUSTIFICATION, SA VE AND EXCEPT FOR THE ITA NO. 1458/AHD/2017 A.Y. 2014-15 8 SUSPICION THAT THESE GIFTS MAY HAVE FOUND THEIR WAY TO THE DOCTORS, FOR THE IMPUGNED DISALLOWANCE. THE SCHEME UNDER WHICH THE G IFTS WERE GIVEN WERE PLACED ON RECORD EVEN BEFORE THE ASSESSING OFFICER AND NO DEFECTS WERE POINTED OUT THEREIN. WE HAVE ALSO NOTED THAT COMPLE TE DETAILS OF THE RECIPIENTS WERE ON RECORD BEFORE THE CIT(A) AND NO PERVERSITY IS EVEN ALLEGED IN THESE FACTUAL FINDINGS OF THE CIT(A). IN THESE CIRCUMSTA NCES, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE OF RS. 64,58, 904 OUGHT TO HAVE BEEN DELETED IN ENTIRETY. WE, THEREFORE, REJECT THE GRI EVANCE OF THE ASSESSING OFFICER AND ACCEPT THAT OF THE ASSESSEE. THE DISALLOWANCE STANDS DELETED IN ENTIRETY AND THE ASSESSEE WILL GET FURTHER RELIEF, BY WAY OF DEDUCTION OF RS. 10,57,363 ACCORDINGLY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED, AS ABOVE, AND THE APPEAL OF THE ASSESSING OFFICER IS DISMISSE D. PRONOUNCED IN THE OPEN COURT TODAY ON THE 4 TH DAY OF MARCH, 2019. 12. WE HAVE ALSO GONE THROUGH THE ORDER PASS ED BY THE LD. CIT(A) WHEREIN WE FIND THAT THE ENTIRE DETAILS INCLUDING THE SCHEME WERE P LACED BEFORE THE LD. CIT(A). PARTICULARS OF THE EXPENSES IN QUESTION WERE SUBMIT TED BEFORE THE AUTHORITIES BELOW ALONG WITH THE COPIES OF RELEVANT INVOICES; THE LIST AND CONFIRMATION OF STOCKISTS TO WHOM SUCH GIFTS WERE GIVEN WAS ALSO ON RECORD WHICH HAS NOT B EEN CONTROVERTED BY THE LD. CIT(A). IN THAT VIEW OF THE MATTER RESPECTFULLY FOLLOWING T HE JUDGMENT PASSED BY THE COORDINATE BENCH IN ITA NOS. 2114/AHD/2016 AND 2294/AHD/2016 F OR A.Y. 2013-14 WE DELETE THE DISALLOWANCE IN ENTIRETY. 13. IN THE RESULT, ASSESSEES THIS GROUND OF APPEAL IS ALLOWED. [ORDER PRONOUNCED IN THE COURT ON 27-03-2019.] SD/- SD/- ( AMARJIT SINGH ) ( MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 27/03/2019 TANMAY TRUE COPY &'!()*+&*%/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. , / THE RESPONDENT. 3. -- . / CONCERNED CIT 4. . ( ) / THE CIT(A) ITA NO. 1458/AHD/2017 A.Y. 2014-15 9 5. *12(( , / DR, ITAT, 6. 2456 / GUARD FILE. &' / BY ORDER, 7/ -8 (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION : 19-03-2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER. : 26-03-2019 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S : 26-03-2019 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT. : 26-03-2019 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER : 26-03-2019 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. : 26-03-2019 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. : 26-03-2019 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. : 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. : 10. DATE OF DESPATCH OF THE ORDER :