IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE HONBLE SH. B. R. BASKARAN , A M & HONBLE SH. SANDEEP GOSAIN , JM ./ I.T.A. NO . 6483 /MUM/2016 ( / ASSESSMENT YEAR: 20 12 - 13 ) ACIT CIR 6 (3 ) (2 ), R. NO. 522, 5 TH FLOOR , AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. M/S KHANDELWAL LABORATARIES PVT. LTD. 79/78, DATTARAM LAD PATH, KALACHOWKI, NR. HAKOBA MILLS, MUMBAI - 400033 ./ ./ PAN NO. AA A CK4225E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RAJORE SATISHCHANDRA , DR / RESPONDENTBY : SHR I DHARMESH SHAH , AR / DATE OF HEARING : 16 .10 .2018 / DATE OF PRONOUNCEMENT : 10.01.2019 / O R D E R PER SANDEEP GOSAIN , J UDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 12, MUMBAI, DATED 10.08 .16 FOR AY 2012 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. 1. 'THE LEARNED CTT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.34,47,825/ - ON A/C OF EMPLOYEE'S CONTRIBUTION TO PROVIDENT FUND, ESIC AND FAMILY PENSION WHICH BARRING A FEW HAD BEEN PAID ONLY A SOME DAYS BEFORE DUE DATE OF FILING THE INCOME TAX RETURN'. 2. 'THE LEARNED CIT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OFRS.63,13,302/ - ON ACCOUNT OF CLINICAL SUPPORT EXPENSES'. 3. 'THE LEARNED CJT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.1,29,40,870/ - BEING DISALLOWANCE MADE BY THE A.O. @20% OF RS.6,47,04,350/ - FOR THE REASON THAT MOST EXPENSES HAD BEEN INCURRED IN CASH AND AS THE CLAIM REMAINED UNSUBSTANTIATED, ELEMENT OF PROFESSIONAL EXPENDITURE WAS IMPLIED'. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MAY BE NECESSARY.' 3 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. 2 . AS PER THE FACTS OF THE PRES ENT CASE, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICAL DRUGS AND MOLECULES. THE RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED ON 28.09.12 DECLARING TOTAL LOSS OF R.S 6,88,21,287/ - . SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF HEARING, ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT WAS PASSED ON 09.03.15 , THEREBY MAKING ADDITION S /DISALLOWANCE UNDER DIFFERENT HEADS. 3 . AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4 . AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE HAS FILED APPEAL BEFORE U S ON THE GROUNDS MENTIONED HEREIN ABOVE. GROUND NO. 1 . 5 . THIS GROUND RAISED BY THE REVENUE RELATES TO CHAL LENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OF RS.34,47,825/ - 4 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. ON A/C OF EMPLOYEE'S CONTRIBUTION TO PROVIDENT FUND, ESIC AND FAMILY PENSION WHICH BARRING A FEW HAD BEEN PAID ONLY A SOME DAYS BEFORE DUE DATE OF FILING THE INCOME TAX RETURN . 6 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 6.1 BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 7 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 7. GROUND OF APPEAL NO.2 A.O. IS DIRECTED TO ALLOW RS.34,47,825/ - AS DELAYED EMPLOYEE CONTRIBU TION TO PROVIDENT FUND AND ESIC AND FAMILY PENSION. IT IS SEEN THAT ALL THE PAYMENTS BARRING A FEW DAYS DELAY HAVE BEEN PAID ON OR BEFORE FILING OF THE RETURN OF INCOME AND THEREFORE RELYING ON THE JUDGEMENTS OF THE JURISDICTIONAL BOMBAY HIGH COURT IN TH E CASE OF GHATGI PATIL TRANSPORT LTD . (368 ITR 749) AND HINDUSTHAN ORGANIC CHEMICAL LTD.(366 5 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. ITR 1) THE SAME IS ALLOWED. THEREFORE, GROUND OF APPEA L NO.2 IS ALLOWED. 6.2 AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FIND THAT LD. CIT(A) WHILE APPRECIATING THE FACTS OF THE PRESENT CASE HAD RIGHTLY CONSIDERED THAT ALL THE PAYMENTS BARRING A FEW DAYS DELAY HAVE BEEN PAID ON OR BEFORE FILING OF THE RETURN OF INCOME AND THEREFORE RELYING ON THE JUDGEMENTS OF THE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF GHATGI PATIL TRANSPORT LTD. (368 ITR 749) AND HINDUSTHAN ORGANIC CHEMICAL LTD.(366 ITR 1) AND HAD RIGHTLY ALLOWED THIS GROUND OF APPEAL. 6.3 M OREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE 6 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND S RAISED BY THE REVENUE STANDS DISMISSED . GROUND NO. 2. 7 . THIS GROUND RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING T HE ADDITION OFRS.63,13,302/ - ON ACCOU NT OF CLINICAL SUPPORT EXPENSES . 8 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 8.1 BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSA RY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 8 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 8. GROUND OF APPEAL NO.3 DISALLOWANCE OF RS. 63,13,302/ - HAS BEEN MADE OF CLI NICAL SUPPORT EXPENSES. DURING THE COURSE OF HEARING ATTENTION WAS INVITED TO THE HON'BLE MUMBAI IT AT ORDER DT.23.6.2016 PASSED IN APPELLANT'S CASE IN 7 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. RELATION TO APPEAL AGAINST ORDER U/S.263OF THE I.T. ACT FOR A.Y. 2009 - 10 AND A.Y. 2010 - 11 IN ITA NO.2765 AND 2702/MUM/2014. IT IS SEEN THAT THE HON'BLE ITAT HAS DELETED THE DISALLOWANCE OF RS.31,36,884/ - AS DIRECTED BY CIT. IT IS SEEN THAT NO SUCH DISALLOWANCE WAS MADE UNDER THIS HEAD. GROUND OF APPEAL NO.3 IS ALLOWED. 8.2 AFTER HAVING GONE THROUGH THE FACT S OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FIND THAT LD. CIT(A) WHILE APPRECIATING THE FACTS OF THE PRE SENT CASE HAD RIGHTLY RELIED UPON THE DECISION OF COORDINATE BENCH OF ITAT IN ITA NO.2765 AND 2702/MUM/2014 FOR A.Y. 2009 - 10 AND A.Y. 2010 - 11 IN ASSESSEES OWN CASE, WHEREIN IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY ITAT BY DELETING THE DISALLOWANCE. 8.3 MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE 8 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. JUDI CIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED . GROUND NO. 3. 9 . THIS GROUND RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OFRS.1,29,40,870/ - BEING DISALLOWANCE MADE BY THE A.O. @20% OF RS.6,47,04,350/ - FOR THE REASON THAT MOST EXPENSES HAD BEEN INCURRED IN CASH AND AS THE CLAIM REMAINED UNSUBSTANTIATED, ELEMENT OF PERSONAL EXPENDITURE WAS IMPLIED . 10 . W E HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 10.1 BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSA RY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 9 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 9. GROUND OF APPEAL NO.4 9 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. IT IS SEEN THAT DISALLOWANCE HAS BEEN MADE AT 20% ON ADHOC BASIS WITHOUT BRINGING OUT ANYTHING ON RECORD IN THE ASSESSMENT ORDER. PERUSAL OF THE TAX AUDIT REPORT ALSO SHOWS THAT NO EXPENDITURE IS QUANTIFIED AS CASH EXPENDITURE. THUS IT IS HELD THAT NO DISA LLOWANCE CAN BE MADE ON PURE ESTIMATION WITHOUT ANY BASIS OR DOCUMENTARY PROOF ON MERE SURMISES AND PRESUMPTIONS. THUS, GROUND OF APPEAL NO.4 IS ALLOWED. 10.2 AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FI ND THAT AO HAD MADE ADDITIONS UNDER THIS HEAD BY SPECIFICALLY HOLDING THAT ASSESSEE HAD NOT PROVIDED ANY BILLS/VOUCHERS AND EXPLANATION TO SUBSTANTIATE THE TRAVELLING EXPE NSES INCURRED AND FURTHER HELD THAT MOST OF THE EXPENSES INCURRED WERE IN CASH AND HE NCE IN ABSENCE OF ANY DETAILS AND JUSTIFICATION 1/5 TH OF THE SAID EXPENDITURE WAS DISALLOWED. HOWEVER, LD. CIT(A) DELETED THE ADDITIONS BY MERE HOLDING THAT TAX AUDIT REPORT SHOWS THAT NO EXPENDITURE WAS QUANTIFIED AS CASH EXPENDITURE. LD. CIT(A) WAS TOTAL LY SILENT WITH REGARD TO THE NON - SUBMISSION OF BILLS/VOUCHERS AND EXPLANATION TO SUBSTANTIATE THE TRAVELLING EXPENSES. AT THE TIME OF HEARING, THE 10 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. LD A.R INVITED OUR ATTENTION TO PAGE 7 OF THE PAPER BOOK AND SUBMITTED THAT THE AO HAS MADE THE IMPUGNED DISALLOWANCE WITHOUT CRITICALLY ANALYSING THE TRAVELLING EXPENSES CLAIMED BY THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE, BEING A PHARMA COMPANY, HAS TO INCUR HUGE TRAVELLING EXPENSES ON TRAVELLING OF SALES PERSONNEL. HE SUBMITTED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.647.04 LAKHS AS TRAVELLING EXPENSES, OUT OF WHICH THE EXPENSES INCURRED BY SALES PERSONNEL ALONE WAS RS.525.29 CRORES. HE SUBMITTE D THAT THE EXPENSES INCURRED BY SALES PERSONNEL ARE EXCLUSIVELY FOR THE PURPOSES OF COMPANY AND HENCE THERE CANNOT BE ANY PERSONAL ELEMENT INVOLVED THEREIN. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED DETAILS OF THE REMAINING EXPENDITURE ALSO BY MENTIONING THE NAME OF PERSON WHO TRAVELLED, THE NAME OF PERSON TO WHOM PAYMENTS WERE MADE ETC. ACCORDINGLY HE SUBMITTED THAT THE ENTIRE TRAVELLING EXPENSES HAVE BEEN INCURRED FOR THE PURPOSES OF BUSINESS ONLY. 10.3 ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH THE DETAILS THAT WERE CALLED FOR BY THE AO. 10.4 THERE SHOULD NOT BE ANY DOUBT THAT THE QUESTION OF PERSONAL ELEMENT DOES NOT ARISE IN CASE OF EXPENSES INCURRED BY 11 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. THE EMPLOYEES OF THE ASSESSEE COMPANY. THERE IS ME RIT IN THE CONTENTIONS THAT THE ASSESSEE, BEING A PHARMA COMPANY, HAS TO NECESSARILY INCUR EXPENSES FOR SALES PROMOTION. HENCE, WE AGREE WITH THE SUBMISSION THAT THERE SHOULD NOT BE ANY ADHOC DISALLOWANCE OUT OF TRAVELLING EXPENSES INCURRED BY SALES PERSO NNEL AND OTHER EMPLOYEES. IN RESPECT OF OTHER EXPENSES, IT IS SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE DETAILS, BUT THE AO HAS NOT EXAMINED THE SAME. FROM THE PERUSAL OF ORDERS PASSED BY BOTH THE TAX AUTHORITIES, WE NOTICE THAT THE AD - HOC DISALLOWAN CE HAS BEEN MADE BY THE AO AND DELETED BY LD CIT(A), WITHOUT EXAMINING OR COMMENTING UPON THE DETAILS FURNISHED BY THE ASSESSEE. IN VIEW OF THE SAME, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. WHILE EXAMINING THE SAME, AS DISCUSSED ABOVE, THERE IS NO REQUIREMENT OF MAKING ANY DISALLOWANCE OUT OF EXPENSES INCURRED BY EMPLOYEES, UNLESS ANY SPECIFIC DEFICIENCY IS IDENTIFIED. IN RESPECT OF OTHER TRAVELLING EXPENSES, THE AO SHALL EXAMINE THE DETAILS FURNISHED BY THE AS SESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. THE ASSESSEE IS ALSO DIRECTED TO FURNISH 12 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. THE DETAILS THAT MAY BE CALLED FOR BY THE AO. ACCORDINGLY, THIS GROUND IS TREATED AS ALLOWED. GROUND NO. 4 & 5 11 . THESE GROUNDS RAISED BY THE RE VENUE ARE GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 12 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JAN, 2019 . SD/ - SD/ - ( B. R. BASKARAN ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 10 . 01 .201 9 SR.PS . DHANANJAY 13 I.T.A. NO. 6483 / MUM/201 6 M/S KHANDELWAL LABORATARIES PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI