The ACIT, Circle-6, Ahmedabad V. Shri Ramanlal Prahladbhai Patel, Ahmedabad

ITA 2199/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8917 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-09-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 13-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 11/09/09 DRAFTED ON: 23/09/09 ITA NO.2199/AHD/2009 ASSESSMENT YEAR : 2006-07 THE ACIT CIRCLE-6 AHMEDABAD VS. SHRI RAMANLAL PRAHLADBHAI PATEL 26, ROYAL ENCLAVE NR.ASOPALAV BUNGALOW THALTEJ, AHMEDABAD PAN/GIR NO. : AABHP 6322 D (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI GOVIND SINGHAL, DR RESPONDENT BY: SHRI ASHWIN SHAH, C.A. O R D E R PER D.C.AGRAWAL , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS)-XI, AHMEDABAD DATED 01/04/200 9 PASSED FOR ASSESSMENT YEAR 2006-07, WHEREIN THE LEARNED CIT(A PPEALS) HAS DELETED AN ADDITION OF RS.9,99,412/- MADE BY THE AS SESSING OFFICER BY DISALLOWING INCENTIVE EXPENSES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF TRADING IN PHARMACEUTICALS. THE ASSESS EE IS A WHOLE-SALE DISTRIBUTOR OF PARAS PHARMACEUTICALS LTD. FROM WHOM ASSESSEE MADE ITA NO.2199/AHD /2009 ACIT VS. SHRI RAMANLAL PRAHLADBHAI PATEL ASST.YEAR 2006-07 - 2 - PURCHASES. SALES WERE MADE TO VARIOUS DEALERS. TH E PURCHASES IN WHICH THE ASSESSEE DEALS INCLUDING COSMETIC PRODUCTS ALSO . IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE CLAIMED A SUM OF RS.9,99,412/ - AS NET INCENTIVE EXPENDITURE. WHEN ASKED TO EXPLAIN THE CLAIM, THE ASSESSEE SUBMITTED THAT THE INCENTIVE IS GIVEN IN THE INVOICE ITSELF B UT FOR ACCOUNTING PURPOSE GROSS SALE IS SHOWN AND INCENTIVE IS SEPARATELY ACC OUNTED FOR. ON CERTAIN PRODUCTS, THE MANUFACTURER DOES NOT GIVE INCENTIVE SEPARATELY, BUT THE SAME IS ADJUSTED IN THE SELLING PRICE. THE ASSESS EE ADMITTED THAT THERE IS NO AGREEMENT BETWEEN PARAS PHARMACEUTICALS LTD. AN D ASSESSEE AND ALSO THERE IS NO AGREEMENT BETWEEN THE RETAILERS AND AS SESSEE. THE ASSESSING OFFICER REJECTED THE EXPLANATION ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED ANY ACCOUNT OR DOCUMENT OR AGREEMENT JUSTI FYING ITS CONTENTIONS. ACCORDING TO THE ASSESSING OFFICER, IF THE MANUFACTURER IN LIEU OF INCENTIVE EXPENSE REDUCES THE SELLING PRICE , THEN THE ASSESSEE SHOULD HAVE DONE THE SAME. THEREFORE, THE CLA IM OF THE ASSESSEE THAT IT HAS INCURRED INCENTIVE EXPENSES SEPARATELY WAS NOT ACCEPTED BY THE ASSESSING OFFICER. 3. THE LEARNED CIT(APPEALS) CONSIDERED THE EXPLANAT ION OF THE ASSESSEE THAT IN PLACE OF REDUCING THE INCENTIVE FR OM THE SALE PRICE, IT IS ITA NO.2199/AHD /2009 ACIT VS. SHRI RAMANLAL PRAHLADBHAI PATEL ASST.YEAR 2006-07 - 3 - ACCOUNTING FOR GROSS SALES INCLUSIVE OF INCENTIVE I NTO THE TRADING ACCOUNT BUT SEPARATELY ACCOUNTING FOR INCENTIVE BY DEBITING IT IN PROFIT & LOSS ACCOUNT AND CREDITING IT TO PARTIES ACCOUNT. TH US, INCENTIVE IS NOTHING BUT TRADE DISCOUNT IN THE FORM OF REDUCED SALE PRIC E. FURTHER, GROSS PROFIT SHOWN BY THE ASSESSEE THIS YEAR IS THE SAME BEING 4.64% AS SHOWN IN THE PRECEDING YEAR. IN COSMETIC ALSO, GROSS PROFIT DE CLARED THIS YEAR IS 2.64% AS AGAINST 2.66% LAST YEAR. CONSIDERING THES E SUBMISSIONS, THE LEARNED CIT(APPEALS) DELETED THE ADDITION. 4. THE LEARNED DR RELIED ON THE ORDER OF THE ASSESS ING OFFICER, WHEREAS LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT ALL THE SALES ARE MADE ON CREDITS AND, THEREFO RE, DETAILS OF INCENTIVE OFFERED IS AVAILABLE IN THE ACCOUNTS. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DECL INED TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(APPEALS). THE R EASONS GIVEN BY THE ASSESSING OFFICER ARE NOT LOGICAL. HE HAS NOT VERI FIED WHETHER THE INCENTIVE GIVEN BY THE ASSESSEE TO ITS RETAILERS I S ACCOUNTED FOR BY THEM. ALL THE SALES ARE MADE THROUGH CREDIT. THEREFORE, GROSS SALE PRICE AND THE INCENTIVES ARE BOTH PART OF THE RECORD. THERE IS NO MATERIAL ON RECORD TO INDICATE THAT THE ASSESSEE HAS RECEIVED MORE MONEY THAN THE NET SALE PRICE ITA NO.2199/AHD /2009 ACIT VS. SHRI RAMANLAL PRAHLADBHAI PATEL ASST.YEAR 2006-07 - 4 - (GROSS PRICE LESS INCENTIVE). ACCORDINGLY, ORDER OF THE LEARNED CIT(APPEALS) IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 25/09/2009. SD/- SD/- ( T.K.SHARMA ) ( D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 25 / 09 /2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XI, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD