CHIRAON PANACEA VACCINES P.LTD, MUMBAI V. ASST CIT (OSD) CIR 10(1), MUMBAI

ITA 6087/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3462 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 18-10-2013
• Court: TRIBUNAL
• Department Lawyers: SUDHA RAMACHANDRAN
• Assessee Lawyers: SRIRAM BAJAJ
• Keywords: Business expenditure; Revenue expenditure

Judgement Text

1 ITA 6087/MUM/2013 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C,MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.ITA 6087/MUM/2013 (ASSESSMENT YEAR : 2010-2011) CHIRON PANACEA VACCINES PVT LTD (IN LIUIDATION),7 TH FLOOR, A WING, SAGAR TECH PLAZA, SAKINAKA, ANDHERI (E) MUMBAI 400 072 VS ACIT (OSD)-CIR.10(1), MUMBAI PAN : AAACCC4381K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SRIRAM BAJAJ RESPONDENT BY MS. SUDHA RAMACHANDRAN DATE OF HEARING : 04-05-2016 DATE OF ORDER : 18-05-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-21, MUMBAI [HE REINAFTER REFERRED TO AS THE CIT(A)] DATED 11-03-2013 FOR THE ASSESSMENT YE AR 2010-11 ON THE FOLLOWING GROUNDS: BEING AGGRIEVED BY THE ORDER DATED 11.07.2013 PASS ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-21, MU MBAI. [CIT (A)'] U/ S 250 OF THE INCOME-TAX ACT, 1961(' ACT'), YOUR APPELLANT PREFERS THIS APPEAL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADH OC DISALLOWANCE 2 ITA 6087/MUM/2013 OF RS.11,46,592/ - MADE BY THE LEARNED ASSESSING OF FICER AT 30% OF THE EXPENDITURE INCURRED ON 'CUSTOMER RELATION MANA GEMENT' ('CRM') UNDER THE HEAD ADVERTISEMENT, MARKETING AND SALES PROMOTION. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE SAID CRM EXPENDITURE WAS CAPITAL IN NATURE. YOUR APPELLANT, THEREFORE, PRAYS THAT AFORESAID DISALLOWANCE BE DELETED. 2. THE ONLY EFFECTIVE ISSUE RAISED IN THIS APPEAL I S ABOUT DISALLOWANCE MADE BY THE LOWER AUTHORITIES @30% ON ADHOC BASIS OUT O F THE EXPENDITURE INCURRED ON CUSTOMER RELATIONS MANAGEMENT DEBITED BY THE ASS ESSEE UNDER THE HEAD ADVERTISEMENT, MARKETING & SALES PROMOTION. 3. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY THE LD.COUNSEL THAT COMPLETE DETAILS WERE SUBMITTED TO THE ASSESSING OF FICER. THE EXPENSES WERE INCURRED DURING THE COURSE OF BUSINESS. NOTHING WR ONG HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. RATHER, THE LD.CIT(A) HA S ALSO OBSERVED THAT THESE EXPENSES ARE BUSINESS EXPENSES AND SHOULD BE ALLOWE D. BUT HE SURPRISINGLY HELD THESE EXPENSES TO BE CAPITAL IN NATURE AND, TH EREFORE, UPHELD THE DISALLOWANCES MADE BY THE ASSESSING OFFICER. 4. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ERS OF THE LOWER AUTHORITIES. 5. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES AND SUBMISSION MADE BEFORE US. THE BRIEF FACTS ARE THA T THE ASSESSEE COMPANY WAS ENGAGED DURING THE YEAR IN THE BUSINESS OF PAEDIATR ICS VACCINES. BEING IN PHARMACEUTICAL INDUSTRY, THE ASSESSEE WAS REQUIRED TO MAINTAIN HIGH STANDARDS AND FOR THIS PURPOSE AND TO BOOST ITS SALES, IT HAD INCURRED CERTAIN EXPENSES ON TRAVEL AND PROVIDING WEIGHING MACHINES AND REFRIGER ATORS, ETC TO THE DOCTORS 3 ITA 6087/MUM/2013 FOR BETTER UPKEEP OF ITS MEDICINES. THESE EXPENSES HAVE BEEN FOUND TO BE BUSINESS EXPENSES BY THE LD.CIT(A). THE REVENUE HA S NOT FILED ANY APPEAL / CROSS OBJECTION AGAINST THE ORDER OF LD.CIT(A). TH US, UNDOUBTEDLY, THE EXPENSES ARE BUSINESS EXPENSES HAVING BEEN INCURRED BY THE A SSESSEE DURING THE COURSE OF ITS BUSINESS. BUT LD.CIT(A) HELD THESE EXPENSES TO BE CAPITAL IN NATURE. 6. WE HAVE EXAMINED THE DETAILS OF THESE EXPENSES A S PROVIDED BY THE ASSESSING OFFICER ON PAGE 2 OF THE ASSESSMENT ORDER AND NOTICED THAT THESE EXPENSES WERE ON TRAVEL, PROVIDING OF FRIDGES, WEIG HING MACHINE, OTOSCOPE, LCD & OTHER MEDICAL ITEMS TO THE DOCTORS. THE LD.C IT(A)HAS HELD THESE EXPENSES TO BE CAPITAL IN NATURE. FURTHER, LD.CIT( A) STATED THAT THAT THESE ITEMS HAVE ALREADY BEEN DISTRIBUTED BY THE ASSESSEE TO TH E DOCTORS AND THESE ARE NO MORE IN POSSESSION OR OWNERSHIP OF THE ASSESSEE. IN OUR VIEW, THESE ITEMS ARE CLEARLY ITEMS OF REVENUE EXPENDITURE AND BY NO STRE TCH OF IMAGINATION THESE CAN BE HELD TO BE CAPITAL EXPENSES, AS FAR AS THE A SSESSEES CASE IS CONCERNED. EVEN OTHERWISE, THE VALUES OF THESE ITEMS RANGE FRO M 5,000 TO RS.40,000 ON MAXIMUM. TAKING INTO ACCOUNT, ALL THE FACTS AND CI RCUMSTANCES OF THE CASE, WE DO NOT FIND ANY JUSTIFICATION TO DISALLOW THESE EXP ENSES AND, THEREFORE, DIRECT THE ASSESSING OFFICER TO ALLOW THESE EXPENSES IN TO TAL. DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 18 TH MAY, 2016. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, D T : 18 TH MAY, 2016 PK/- 4 ITA 6087/MUM/2013 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ,C BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES