NIVEDITA CHEMICALS PVT. LTD., MUMBAI V. DCIT 10(3)(1), MUMBAI

ITA 6404/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4103 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 06-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Transfer pricing; Business expenditure; Assessment record
• Section: 13

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI S . RIFAUR RAHMAN, AM & SHRI RAM LAL NEGI, JM ./ I.T.A. NO . 6404 / MUM/ 2018 ( / ASSESSMENT YEAR: 2014 - 15 ) M/S NIVEDITA CHEMICALS PVT. LTD. A - 14, MIDC, CROSS ROAD NO. 5, ANDHERI (E), MUMBAI - 400 093 / VS. A CIT 1 0 (3) (1) , AAYAKAR BHAVAN, MUMBAI - 400020 ./ ./ PAN NO. AA ACN 7199 L ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHR I KIRAN MEHTA , AR / RESPONDENTBY : MS. KAVITA KAUSHIK , DR / DATE OF HEARING : 1 4.11 .201 9 / DATE OF PRONOUNCEMENT : 08.01.2020 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX - 57 IN SHORT REFERRED AS LD. CIT (A) , MUMBAI, DATED 13.08 .18 FOR 2 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. A SSESSMENT YEAR (IN SHORT A Y ) 2014 - 15 ON THE FOLLOWING GROUNDS: - 1. IN THE FACTS AND CIRCUM STANCES OF THE CASE LEARNED CIT (A) ERRED IN CONFIRMING ADDITION OF RS.1, 89.480/ - ON ACCOUNT OF AT ARM'S LENGTH PRICE IN RESPECT OF DOMESTIC TRANSFER PRICING QUA TRANSACTION WITH AN ASSOCIATE ENTERPRISE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE OF SALES PROMOTIONEXPENSES OF RS. 1,73,901/ - . 3. THE APPELLANT CRAVES YOUR HONOUR'S LEAVE TO ADD TO, MODIFY OR WITHDRAW ANY OF THE ABOVE GROUNDS AT OR BEFORE THE FINAL HEARING. 2 . T HE BRIEF FACTS OF THE C ASE ARE, ASSE SSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICAL PRODUCTS. DURING THE ASSESSMENT PROCEEDINGS, AO OBSERVED FROM THE AUDIT REPORT IN FORM NO. 3CEB, ASSESSEE HAD ENTERED INTO SPECIFIED DOMESTIC 3 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. TRANSACTIONS WITH THE ASSOCIATED ENTERPRISES TO THE EXTENT OF RS. 15 CRORES. A CCORDINGLY, HE REFERRED THE MATTER TO THE TPO TO DETERMINE THE ARMS LENGTH PRICE. ACCORDINGLY, REFERENCE WERE MADE U/S 92CA(1). THE TPO PROPOSED AN ADDITION OF RS. 1,89,480/ - TO THE INCOME OF ASSESSEE. ACCORDINGLY, A DRAFT ASSESSMENT ORDER WAS PASSED AND SERVED UPON THE ASSESSEE. IN RESPONSE, ASSESSEE SUBMITTED TO THE AO THAT IT IS CONTESTING THE ABOVE ISSUE IN THE APPEAL. FURTHER CONSIDERING THAT ASSESSEE IS IN APPEAL BEFORE APPELLATE AUTHORITY, ASSESSMENT ORDER U/S 144C(3) OF THE ACT WAS PASSED BY MAKING ADDITION U/S 92CA(4) OF THE ACT. 3. FURTHER AO OBSERVED THAT ASSESSEE HAS ADOPTED AN AMOUNT OF RS. 27,73,969/ - ON ACCOUNT OF SALE PROMOTION EXPENSES. ON VERIFICATION OF THE COPY OF THE LEDGER ACCOUNT ALONGWITH COPY OF THE BILLS / EVIDENCES SUBMITTED BY TH E ASSESSEE, AO OBSERVED THAT THERE WERE CERTAIN EXPENSES INCURRED THROUGH CREDIT CARD, THE CREDIT CARD WAS IN THE NAME OF ONE OF THE DIRECTOR OF THE COMPANY TO THE EXTENT OF RS. 1,73,901/ - . ACCORDING TO AO, THE SAME ARE IN 4 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. THE NATURE OF PERSONAL EXPENDITUR E. ACCORDINGLY, HE DISALLOWED THE ABOVE EXPENDITURE. 4 . AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND FILED BEFORE HIM A DETAIL SUBMISSION, WHICH IS REPRODUCED BELOW: - 4. APPELLANT'S SUBMISSIONS; ADDITION OF RS. 189, 480 MADE ON ACCOUNT OF ADJUSTMENT OF ALP IN RESPECT OF DOMESTIC TRANSFER PRICING QUA TRANSACTIONS WITH AN AE 1. IN THE YEAR UNDER REFERENCE, THE APPELLANT HAD TRANSACTIONS WITH M/S ANEK PRAYOG PVT LTD., WHICH IS AN ASSOCIATED ENTERPRISE (AE). 2. SINCE TH E VALUE OF TRANSACTIONS WITH AE EXCEEDED RS. 15.0 CRORES THE MATTER WAS REFERRED TO TPO U/S. 92CA(1). 3. THE LEARNED TPO SUGGESTED AN UPWARD ADJUSTMENT IN RESPECT OF TRANSACTIONS FOR PURCHASE OF ONE PRODUCT, VIZ. NICORANDIL, WITH THE SAID AE. 5 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. 4. IN VIE W OF THE LEARNED TPO, THE APPELLANT HAD PURCHASED THE SAID PRODUCT FROM THE AE @ RS. 20,000 PER UNIT, WHILE THE AE SOLD SAME PRODUCT TO THIRD PARTY @ RD. 17,000 PER UNIT. 5. THE APPELLANT DID EXPLAIN THE REASONS FOR THE PRICE CHARGED BY THE AE (TO BE DET AILED HEREUNDER). HOWEVER, THE LEARNED TPO WAS OF THE VIEW THAT THERE WAS NO DIFFERENCE IN THE QUALITY OF PRODUCT SOLD BY THE AE TO THE APPELLANT AND THE THIRD PARTY AND HENCE THERE WAS NO JUSTIFICATION FOR SUCH PRICE VARIATION 6. THE LEARNED TPO COMPUTE D THE ALP AT RS. 17,000 PER UNIT AND THEREBY SUGGESTED AN UPWARD ADJUSTMENT OF RS. 189,480 BASED ON SUCH ALP. 7. THUS, THE LEARNED AO PROCEEDED TO MAKE THE IMPUGNED ADDITI ON OF RS. 189,480 BASED ON THE O RDER OF LEARNED TPO U/S 92CA(3). 8. IT IS R ESPECTFULLY SUBMITTED THAT IN THE FACTS OF THE APPELLANT'S CASE, THE IMPUGNED ADDITION OF RS. 1, 89,480 IS NOT TENABLE IN THAT: A. IN THE COURSE OF ASSESSMENT AS ALSO THE DTP PROCEEDINGS, DETAILED REASONS WERE GIVEN FOR THE HIGHER PRICE PAID BY THE APPELLANT FOR THE PRODUCT IN REFERENCE. (COPY OF EXPLANATION GIVEN IS ENCLOSED). 6 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. B. IT WAS INTER - ALIA, EXPLAINED THAT THE SAID PRODUCT WAS MEANT FOR EXPORT AND THERE WERE MORE STRINGENT SPECIFICATIONS WHICH REQUIRED (A) MORE PURIFICATION STAGES (B)IT REQUI RED PARTICLE ANALYSIS WHICH REQUIRED USE OF A SPECIAL SOLVENT ISOPAR - G WHICH HAD TO BE IMPORTED (C) ANALYSIS EXPENSES WERE HIGHER FOR AE (D) TESTING ALSO REQUIRED TESTING BY OUTSIDE LABORATORY (E) SPECIAL AND EXPENSIVE PACKING OF PRODUCT WAS REQUIRED (F) R EFRIGERATED VEHICLE WAS REQUIRED TO TRANSPORT THE PRODUCT FROM FACTORY TO AIRPORT (G) FREIGHT CHARGES ARE HIGH. C. IT WAS ALSO EXPLAINED THAT THE PRICE OF THIRD PARTY COMPARED WAS IN RELATION TO A LOCAL SALE MADE BY AE AND HENCE PRICE WAS A BIT LOWER AS AL L THE ABOVE FACTORS WERE ABSENT IN THE LOCAL SALE. D. THUS, THE INSTANCE RELIED ON BY THE LEARNED TPO WAS STRICTLY NOT A COMPARABLE INSTANCE FOR CUP METHOD. E. IN THE PREMISES SET OUT ABOVE, IT IS SUBMITTED THAT THE PRICE CHARGED BY AE WAS MORE THAN FAIR AND ALP AND HENCE NO SUCH ADDITION BY WAY OF UPWARD ADJUSTMENT IS CALLED FOR. F. YOUR HONOUR MAY ALSO NOTE THAT THE APPELLANT HAD TRANSACTIONS OF OVER RS. 15.0 CRORES WITH THE AE AND ALL THE OTHER TRANSACTIONS ARE FOUND TO BE FAIR AND AT 7 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. ALP. THUS, THERE WAS NO REASON OR RATIONALE FOR THE APPELLANT TO DO A TRANSACTION WORTH ONLY RS. 1 1,53,200 (I.E LESS THAN 1.5% OF THE TOTAL) AT A HIGHER COST WITH THE AE, MORE SO, AS BOTH THE COMPANIES PAID TAX AT THE SAME RATE. THE PREMISES SET OUT ABOVE, IT IS PRAYED TH AT THE IMPUGNED ADDITION MAY KINDLY BE DELETED. 7. APPELLANT'S SUBMISSIONS; II DISALLOWANCE OUT OF SALES PROMOTION EXPENSES - RS. 173,901 1. THE DETAILS OF EXPENSES DISALLOWED ARE AT PAGE 4 OF THE ASSESSMENT ORDER. 2. THE LEARNED AO DISALLOWED THE SAID EXPENSES ON THE FOOTING THAT (A) SINCE THE EXPENSES WERE INCURRED VIA CREDIT CARD IN THE NAME OF DIRECTOR, THE SAID EXPENSES WERE PERSONAL IN NATURE (B) THERE WAS NO NEXUS SHOWN BETWEEN THE EXPENSES INCURRED AND THE BUSINESS OF THE APPELLANT. 3. IT IS RESPECTFULLY SUBMITTED THAT THE IMPUGNED DISALLOWANCE IS GROSSLY UNTENABLE IN THAT: 8 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. A. THE APPELLANT IS ENGAGED IN THE BUSINESS OF PHARMACEUTICALS WERE 96% OF HIS SALES ARE EXPORT SALES. B. THE EXPENSE OF RS. 109,500 WAS INCURRED ON PURCHASE OF READY MADE SUITS FROM CANALI INDIA FOR PRESENT/GIFT TO IMPORTANT FOREIGN CLIENT WHILE ON VISIT TO INDIA. C. EXPENSE OF RS. 20,751 IS OF YAUTCHA, A HOTEL/RESTAURANT WERE THE APPELLANT HAD HOSTED A FOREIGN BUYER. D. SIMILARLY BILL OF RS. 35,990 OF PAUL & SHARK IS A HO TEL BILL TO HOST A FOREIGN CLIENT AND E. EXPENSE OF RS. 7,660 IS OF MANHAREKAR WINES O GIVE PRESENT OF WINE, ETC TO A FOREIGN CLIENT. F. THUS, ALL THE EXPENSES WERE INCURRED FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT. G. SINCE, COMPANY CANNOT HAV E A CREDIT CARD; THE DIRECTOR HAS USED HIS CREDIT CARD FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT. THIS, PER - SE' WOULD NOT MAKE THE EXPENSE INCURRED PERSONAL EXPENSE OF THE APPELLANT COMPANY. 9 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. H. THE APPELLANT BEING A COMPANY, CAN AS SUCH, HAVE NO PERSONAL EXPENSES. I. IN THE PREMISES SET OUT ABOVE, IT IS PRAYED THAT YOUR HONOUR MAY KINDLY DELETE THE IMPUGNED DISALLOWANCE. 5 . AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, LD. CIT(A) MADE THE FOLLOWING OBSERVATIONS AS UNDER: - DECISION FOR GROUND NO. 1 ; I HAVE GONE THROUGH THE TPO'S ORDER AND ALSO SUBMISSION MADE BY THE ASSESSEE DURING THE COURSE OF TRANSFER PRICING PROCEEDING BEFORE THE TPO AND ALSO WRITTEN SUBMISSION MADE DURING THE COURSE OF APPELLANT PROCEEDINGS. I FIND THAT WHATEVER WAS SAID BEFORE THE AO HAS BEEN PRODUCED BEFORE ME. I FIND THE TPO HAS DISCUSSED IN DETAIL WHY ASSESSEE' S CONTENTION IS NOT ACCEPTED. THE APPELLANT HAS SUBMITTED THAT IT HAS PURCHASED THE CHEMICAL NICORANDIL AT HIGHER PRICE BECAUSE IT IS OF SUPERIOR QUALITY COMPARED TO WHAT IS SOLD TO THIRD PARTY. THE AO HAS OPINED THAT THE APPELLANT HAS SUBMITTED INVOICES WHICH HAVE BEEN SEEN AND IT IS FOUND THE THERE IS NO DIFFERENCE IN THE DESCRIPTION OF THE PRODUCT SOLD BY RELATED PARTY TO ASSESSEE AND TO THIRD PARTY. I H AVE ALSO PURSUED THE 10 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. INVOICES AND I AM IN AGREEMENT WITH THE TPO THAT THE INVOICES DO NOT SHOW ANYTHING NEW WHICH SUBSTANTIATES APPELLANTS CLAIMED THAT PRODUCT WAS OF SUPERIOR QUALITY. MOREOVER THE APPELLANT HAS SUBMITTED THAT AS THE PRODUCT WAS MEANT FOR EXPORT IT NEEDED MORE STRINGENT SPECIFICATION. I DO NOT AGREE WITH THE APPELLANT CONTENTION WHATEVER HAS BEEN SUBMITTED BEFORE ME CLEARLY SHOWS THAT PRODUCT WAS SAME BUT APPELLANT HAD TO DO VALUE ADDITION TO IT FOR EXPORT. SO THIS WILL NOT INCREASE THE PUR CHASE PRICE OF THE PRODUCT. THIS WILL MAKE ITS SELLING PRICE MORE. SO I DO NOT ACCEPT APPELLANT'S SUBMISSION AND SO ADJUSTMENT MADE BY TPO IS HEREBY CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 8. DECISION FOR GROUND NO.2 &3: GROUND NO. 2 AND 3 IS REG ARDING DISALLOWANCE OF SALES PROMOTION EXPENSE OF RS. 173901/ - . I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLANT. THE ASSESSING OFFICER NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT RS. 27,73,469 / - HAS BEEN DEBITED IN P/L ACCOUNT ON ACCOUNT O F SALES PROMOTION EXPENSES. WHILE GOING THROUGH THE SUBMISSIONS THE ASSESSING OFFICER NOTICED THAT OUT OF THE EXPENSE INCURRED THROUGH THE CREDIT CARD BOTH EXPENSES WERE PERSONAL IN NATURE. 11 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. SR.NO NAME OF THE BILL ISSUER PARTY AMOUNT (IN RS.) I CANALI INDIA PVT. LTD. 1,09,500 II YAUATCHA 20,751 III PAUL & SHARK 35,990 IV MANHAREKAR WINES 7,660 TOTAL 1,73,901 THE AR OF THE ASSESSEE DID NOT EXPLAIN FURTHER BEFORE THE AO THE EXACT NATURE OF EXPENSES. THEREFORE THE AO DISALLOWED THE ABOVE EXPENSE. DURING THE COURSE OF APPELLATE PROCEEDING THE APPELLANT SUBMITTED THAT IT IS ENGAGED IN BUSINESS OF PHARMACEUTICAL AND 96% OF HIS SALES ARE EXPORT SALES. IT WAS SUBMITTED THAT THESE EXPENSES WERE INCURRED IN GIFTS AND HOTEL/ RESTAURANT BILLS FOR FOREIGN CLIENTS. THESE WERE INCURRED FOR BUSINESS AND SINCE THE COMPANY CANNOT HAVE A CREDIT CARD THE DIRECTOR HAS USED HIS CREDIT CARD FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT COMPANY. FROM THE PERUSAL OF ABOVE SUBMISSION I FIND THAT THE EXPE NSES CAN NOT BE CATEGORISED AS BUSINESS EXPENSES BUT ARE PURELY PERSONAL IN NATURE AND HENCE DISALLOWABLE. THE AO WAS RIGHT IN TREATING THESE E XPENSES FOR PERSONAL USE 12 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. AND DISALLOWING IT. SO THIS GROUND OF APPEAL IS DISMISSED. 6 . AGGRIEVED BY THE ORDER OF LD. CIT (A) , ASSESSEE PREFERRED THE APPEAL BEFORE US ON THE GROUND MENTIONED ABOVE. 7. BEFORE US, LD. A R BROUGHT TO OUR NOTICE SIMILAR SUBMISSIONS WHICH WERE MADE BEFORE LD. CIT(A) AND FURTHER BROUGHT TO OUR NOTICE SAMPLE COPIES O F PURCHASE INVOICES AND SALES INVOICES THAT ASSESSEE HAS EXPORTED NICORANDIL CHEMICAL FROM ITS ASSOCIATE CONCERN AT HIGHER PRICE THAN THE REGULAR DOMESTIC PRICE CONSIDERING THE FACT THE ASSOCIATE COMPANY HAS TO SUPPLY MATERIAL WITH STRINGENT QUALITY CONTRO L AND BETTER SPECIFICATION FOR THE PURPOSE OF EXPORT. IN RESPECT OF HIS ARGUMENTS, HE BROUGHT TO OUR NOTICE THE PURCHASE LIST FROM THE BUYER AND HE SUBMITTED THAT ASSESSEE HAS PURCHASED THE CHEMICAL @ 20,000 PER KG AND EXPORT THE SAME @ USD 775 PER KG. HE SUBMITTED THAT THE PURCHASE MADE FOR THE PURPOSE OF EXPORT QUALITY CANNOT BE EQUATED WITH THE DOMESTIC QUALITY, EVEN THOUGH THE PRODUCT IS SAME , BUT THE EXPORT QUALITY REQUIRES SPECIFIC 13 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. REQUIREMENT OF TEST AND QUALITY. ACCORDINGLY, HE PRAYED THAT THE ARMS LENGTH ADJUSTMENT PROPOSED BY THE TPO MAY BE DISMISSED. 8. WITH REGARD TO SALES PROMOTION EXPENSES DISALLOWANCE, HE SUBMITTED THAT ASSESSEE INCURS THIS EXPENSES IN ORDER TO ENTERT AIN THE BUYERS WHO VISITS INDIA AND IN SEVERAL OCCASIONS, THE DIRECTOR OF T HE COMPANY HAS TO ACCOMPANY THEM IN ORDER TO ENTERTAIN THEM AND THE PAYMENT FOR THE ABOVE SAID ENTERTAINMENT EXPENDITURE ARE MADE BY THE DIRECTORS BY WAY OF USING THEIR CREDIT CARD AND THE SAME WAS REIMBURSED BY THE ASSESSEE. THIS IS GENUINE EXPENDITURE IN CURRED FOR THE PURPOSE OF BUSINESS ONLY AND HE PRAYED THAT THE DISALLOWANCE MADE BY THE AO MAY BE DELETED. 9. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY THE LOWER AUTHORITIES. 10 . CONSIDERING THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD, WE NOTICE FROM THE RECORDS THAT ASSESSEE HAS PURCHASED NICORANDIL CHEMICAL FROM ITS ASSOCIATE ENTERPRISES @ 20,000 PER KG, WHEREAS THE SAME CHEMICAL ARE SOLD IN THE DOMESTIC MARKET FOR LESSER VALUE. WE OBSERVED FROM THE 14 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. SUBMISSION MADE BY LD. AR THAT THE ASSESSEE HAS PURCHASED CHEMICAL FROM THE ASSOCIATE ENTERPRISES IN ORDER TO EXPORT THE SAME AND ASSESSEE HAS INSTRUCTED THE ASSOCIATE ENTERPRISES TO SUPPLY THE QUALITY AS PER THE SPECIFICATION O F THE BUYERS AND ACCORDINGLY ASSOCIATE ENTERPRISES HAS S UPPLIED THE CHEMICAL FOLLOWING THE ABOVE SAID SPECIFICATION. WE ARE IN AGREEMENT WITH THE LD. AR OF THE ASSESSEE THAT THE QUALITY OF THE PRODUCT FOR EXPORT HAS TO BE AS PER THE SPECIFICATION OF THE BUYERS AND SHOULD GO THROUGH STRICT QUAL ITY CHECK AND THE PARAMETERS OF THE CHEMICAL ARE AS PER THE SPECIFICATION AND NAME OF THE PRODUCT MAY BE SIMILAR WHAT IS BEING SOLD IN THE DOMESTIC MARKET. HOWEVER, THE QUALITY SPECIFICATION MAY VARY ACC ORDING TO THE SPECIFICATIONS REQUIRED BY THE BUYERS. WE CANNOT GO WITH THE NAME OF THE PRODUCT RATHER WE HAVE TO VERIFY THE NAME OF THE PRODUCTS WITH SPECIFICATIONS WHICH ARE SOLD IN THE DOMESTIC AS WELL AS INTERNATIONAL MARKET. THERE MAY BE SPECIFIC REQUIREMENT OF PARTICULAR QUALITY FOR EXP ORT WITH PROPER TESTING. F ROM THE ASSESSMENT RECORDS, IT IS NOT 15 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. C LEAR WHETHER THE AO/TPO HAS VERIFIED IN THE ABOVE SAID SPECIFICATIONS AND WE NOTICE THAT AO HAS MERELY VER IFIED THE NAME OF THE CHEMICAL IN THE DOCUMENTS SUBMITTED BEFORE HIM. 11. IN OUR CONSIDERED VIEW, ADDITION PROPOSED BY THE TPO ARE NEGLIGIBLE COMPARED TO THE VALUE OF EXPORTS MADE BY THE ASSESSEE, THEREFORE WE ARE INCLINED TO DELETE THE ABOVE SAID ADDITION IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 1 IS ALLOWED . 12. WITH REGARD TO DISALLOWANCE OF SALES PROMOTION EXPENSES, WE OBSERVED THAT IT IS COMMON PRACTICE THAT WHENEVER CUSTOMERS ARE ENTERTAIN ED AND THEY ARE ACCOMPANIED BY THE EXECUTIVE OF THE COMPANY AND THE PAYMENT MADE INVARIABLY THROUGH PLASTIC MONEY AND THE PAYMENT VOUCHERS ARE BEING REIMBURSED BY THE COMPANY, THEREFORE IN THIS CASE ALS O, DIRECTORS OF THE COMPANY HAS INCURRED THIS EXPENDITURE AND WE MAY HAVE TO ACCEPT THE GENERAL PRACTICE OF THE INDUSTRY. THEREFORE, CONSIDERING THE 16 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. FACT THAT ASSESSEE IS IN EXPORT BUSINESS AND IT HAS TO ENTERTAIN THE VISITORS. W E CAN CONSIDER THIS EXPENDI TURE INCURRED ONLY FOR THE PURPOSE OF BUSINESS. THEREFORE, THIS EXPENDITURE IS ALLOWED AS BUSINESS EXPENDITURE. WE DO NOT AGREE WITH THE AO THAT THE PAYMENT MADE THROUGH CREDIT CARD OWNED BY THE DIRECTOR ARE ONLY FOR PERSONAL EXPENDITURE. ACCORDINGLY, GROU ND NO. 2 IS ALLOWED . 1 3 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JAN 2020 . SD/ - SD/ - ( R. L. NEGI ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 08/01/2020 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, 17 I.T.A. NO. 6404 /MUM/201 8 M/S NIVEDITA CHEMICALS PVT. LTD. MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI