LIVA HEALTHCARE LTD, MUMBAI V. ASST CIT CIR 6(3), MUMBAI

ITA 4791/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3283 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN
• Assessee Lawyers: B V JHAVERI
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI G.S.PANNU (AM) AND SHRI RAM LAL NEGI (J M) ITA NO.4791/MUM/2014 ASSESSMENT YEAR: 2010-11 LIVA HEALTHCARE LIMITED. SHIVSAGAR ESTATE, A BLOCK, DR. ANNIE BESANT ROAD, WORLI, MUMBAI- 400 018. PAN:- AAACL0709Q VS. THE ACIT CIR 6(3), AAYAKAR BHAVAN, ROOM NO. 522, M.K.ROAD, MUMBAI- 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. B.V.JHAVERI RESPONDENT BY : SHRI. A. RAMCHANDRAN DATE OF HEARING: 06 /0 9 /201 6 DATE OF PRONOUNCEMENT: 09/09/2016 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE APPELLAN T/ASSESSEE AGAINST ORDER DATED 29/05/2014 PASSED BY CIT (APPEALS)-12 FOR THE ASST. YEAR 2010-11, WHEREBY THE LD. CIT(A) PARTLY ALLOWED THE APPEAL FI LED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATED 04/01/2013 PASSED UNDER SECT ION 143(3) OF THE INCOME TAX ACT,1961 ( HEREINAFTER REFERRED TO AS T HE ACT.) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF PHARMACE UTICAL FORMULATION, FILED ITS RETURN OF INCOME FOR THE A.Y. UNDER CONSIDERATI ON ON 01/09/2010 DECLARING TOTAL INCOME OF RS. 9,85,80,200/-. WHILE COMPLETING THE ASSESSMENT, THE A.O DISALLOWED EXPENSES OF RS. 87,13,002/- INCURRED ON SEMINAR AND CONFERENCE OF 2 ITA NO.4791/MUM/2014 ASSESSMENT YEAR: 2010-11 THE DOCTORS HELD OUTSIDE INDIA, DURING WHICH THE AS SESSEE COMPANY MADE AWARE ABOUT ITS PRODUCTS. THE A.O MADE THE SAID DIS ALLOWANCES ON THE GROUND THAT THE EXPENDITURE WAS NOT INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN FIRST APPEAL CIT(A) FO LLOWING THE ORDER OF HIS PREDECESSOR, PASSED IN ASSESSEES OWN CASE FOR THE A.YS 2008-09 AND 2009-10, CONFIRMED THE DISALLOWANCE. 3. STILL AGGRIEVED, THE ASSESSEE/APPELLANT IS IN A PPEAL BEFORE THE TRIBUNAL, RAISING THE FOLLOWING EFFECTIVE GROUNDS O F APPEAL:- 1) THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN CON FIRMING THE DISALLOWANCE OF RS. 87,13,002/- MADE UNDER SEC. 37 OF THE INCOME TAX ACT, 1961. 2) THE LEARNED CIT(APPEALS) WHILE DISALLOWING THE C LAIM OF EXPENDITURE INCURRED BY THE APPELLANT ON OVERSEAS T RAVEL OF DOCTORS HAS OVERLOOKED THE FACT OF COMMERCIAL EXPE DIENCY AND BUSINESS NECESSITY OF SUCH EXPENDITURE AND THAT THE EXPENDITURE WAS INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF THE BUSINESS. 4. THE LD. AUTHORISED REPRESENTATIVE (AR) AT THE O UTSET POINTED OUT THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL HAS BEEN DECID ED BY THE MUMBAI BENCH OF ITAT IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CA SE IN ITA NO. 847/MUM/2012 FOR THE A.Y. 2008-09 AND CROSS APPEAL, ITA NO. 388/MUM/2012 FILED BY THE DEPARTMENT. 5. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENT ATIVE (DR) RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW, SUBMI TTED THAT SINCE THE 3 ITA NO.4791/MUM/2014 ASSESSMENT YEAR: 2010-11 EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, THE LD. CIT(A) HAS RIGHTLY CONFIRM ED THE DISALLOWANCE MADE BY THE A.O. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE DOCUMENTS ON RECORD INCLUDING THE DECISION RENDERED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE A.Y. 2008-09 AND CROSS APPEAL FILED BY THE REVENUE. WE NOTICE THAT IN ITA NO. 388/MUM/2012 THE SOLE GROUND RAISED BY T HE ASSESSEE WAS IN RELATION TO THE DISALLOWANCES OF RS. 42,53,924/- ON ACCOUNT OF CLAIM OF EXPENDITURE INCURRED BY THE ASSESSEE ON OVERSEAS TR AVEL OF DOCTORS FOR ATTENDING SEMINAR ETC. TO ENCOURAGE PRODUCT AWARENESS AND SAL ES PROMOTION OF THE PRODUCTS MANUFACTURED BY THE ASSESSEE. 7. THE CO-ORDINATE BENCH OF MUMBAI TRIBUNAL DECIDED THE SAID GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER:- 6. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN THE MANU FACTURING OF DRUGS AND PHARMACEUTICALS. THE A.O. NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 42,53,924/- FOR SPONSORING DOC TORS FOR OVERSEAS TOUR. ON BEING ASKED TO EXPLAIN IN THIS AS PECT, THE ASSESSEE SUBMITTED THE REQUIRED DETAILS. THE A.O. D ID NOT DOUBT THE GENUINENESS OF THE TRANSACTIONS, HOWEVER, HELD THAT SPONSORING OVERSEAS TRIP OF THE DOCTORS WAS NOT AN ACTIVITY RE LATING TO THE BUSINESS OF THE ASSESSEE. IN APPEAL, THE LD. CIT(A) ALSO UPHELD THE FINDINGS OF THE A.O. THE ASSESSEE HAS THUS COME IN APPEAL BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE WHILE INVITING OUR ATTENTION TO THE IMPUGNED ORDER, HAS SUBMITTED BEFORE US THAT THE DE TAILED REPLY WAS SUBMITTED TO THE LOWER AUTHORITIES EXPLAINING THAT THE ASSESSEE 4 ITA NO.4791/MUM/2014 ASSESSMENT YEAR: 2010-11 SPONSORS VARIOUS EVENTS AND SEMINARS AT VARIOUS PLA CES TO ENCOURAGE PRODUCT AWARENESS PROGRAMS. AS A PART OF SALES PROMOTION AND PRODUCT AWARENESS PROGRAM, THE FOREIG N TOURS OF THE SELECTED DOCTORS WERE SPONSORED AND THIS WAS COMBIN ED WITH THE PRODUCT AWARENESS CAMPAIGN BY THE ASSESSEE. THIS WA S ALSO DONE TO CREATE GOOD RELATIONSHIP WITH THE DOCTORS. THE A SSESSEE HAD ALSO FURNISHED A LIST OF DOCTORS WHO HAD BEEN SPONSORED ALONG WITH THE VISIT PHOTOGRAPHS. THE LOWER AUTHORITIES HAD NOT DO UBTED THE INCURRING OF EXPENSES BUT WERE OF THE VIEW THAT THE SAID EXPENDITURE WAS NOT DIRECTLY RELATING TO THE BUSINESS ACTIVITY OF THE ASSESSEE. IN OUR VIEW, THE SAID OPINION OF THE LOWER AUTHORITIES IS MISPLACED. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND MA RKETING OF MEDICINES AND SKIN CARE PRODUCTS. THERE IS A STIFF COMPETITION IN THE MARKET FOR THE SALE OF THE IDENTICAL PRODUCTS MANUF ACTURED BY OTHER COMPANIES. IT IS COMMONLY KNOWN THAT THE MEDICINE C OMPANIES SPONSOR THE TRIPS OF THE DOCTORS TO OVERSEAS SO AS TO INFLUENCE THEM TO PRESCRIBE THE MEDICINES MANUFACTURED BY THEIR CO MPANY. THE ASSESSEE HAD PRODUCED A SET OF PHOTOGRAPHS TO SHOW THAT BY SPONSORING OF THE FOREIGN TRIPS, THE PRODUCT AWAREN ESS EXERCISE WAS ALSO DONE. IT IS NOT THE CASE OF THE REVENUE THAT T HE PERSONS/DOCTORS WHOSE OVERSEAS TRIP WAS SPONSORED WERE OTHERWISE IN ANY MANNER RELATED TO THE ASSESSEE COMPANY. THE ONLY PURPOSE O F THE ASSESSEE COMPANY TO SPONSOR THE FOREIGN TRIP OF THE DOCTORS WAS FOR THE PURPOSE OF PROMOTION AND SALE OF THE PRODUCTS OF TH E ASSESSEE COMPANY. IT MAY BE UNETHICAL PRACTICE FOR THE DOCTO RS TO ACCEPT SUCH TYPE OF INCENTIVES, HOWEVER, SO FAR AS THE ASSESSEE IS CONCERNED, SPONSORSHIP WAS PURELY ON ACCOUNT OF BUSINESS ANGLE OF THE ASSESSEE COMPANY. WE, THEREFORE, DO NOT FIND ANY JU STIFICATION ON THE PART OF LOWER AUTHORITIES IN DISALLOWING THE SA ID EXPENDITURE. 5 ITA NO.4791/MUM/2014 ASSESSMENT YEAR: 2010-11 ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS SET ASI DE THE ADDITION MADE ON THIS ISSUE IS DELETED AND THE APPEAL OF THE ASSE SSEE IS ALLOWED. 8. SINCE THE IDENTICAL ISSUE HAS ALREADY BEEN DECID ED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2008-09. WE DO NOT FIND ANY REASON TO DEVIATE FROM THE VIEW TAKEN BY T HE CO-ORDINATE BENCH. HENCE, RESPECTFULLY FOLLOWING THE DECISION AFORESAID, WE S ET ASIDE THE IMPUGNED ORDER PASSED BY THE LD.CIT(A) AND DELETE THE ADDITION MAD E ON THIS ISSUE AND ACCORDINGLY ALLOW THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT APPEAL FILED BY THE ASSESSEE FOR T HE ASST. YEAR 2010-11 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER, 2016 SD/- S D/- ( G.S.PANNU ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 09/09/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA