RAVI PHARMACEUTICALS PVT. LTD.,,ANAND vs. THE INCOME TAX OFFICER, WARD-1(3)(2),, VADODARA

This appeal by the Assessee is directed against the order of the Ld. CIT(A)-1, Vadodara dated 20.10.2016 pertaining to A.Y. 2012-13 and solely ground in the

The facts of the case are that the assessee is engaged in the business of manufacturing, trading, processing of pharmaceuticals items.

On verification of the Profit & Loss Account, it was noticed that the assessee has debited an amount of Rs.13,60,065/- as against Rs.43,702/-. In view of the same, during the course of assessment proceedings, the assessee was asked to explain the reasons for such huge variation in the claim of expenses. In response, the A.R. of the assessee vide his submission dated 28.02.2015 stated that the company has reimbursed Rs.13,24,168/- to Vet Med Chemicals for travelling and Conveyance incurred on behalf of the assessee-company for work carried out by the Medical Representative on salaries within Maharashtra State. It was also stated that the Medical Representative were appointed for gathering, enquiring and procurement of Tenders to produce purchase orders from Maharashtra State Government departments and collection of payment after supplying the requisite quantities as per the requirements and orders in the name of the company. From the copies of vouchers produced it can be seen that each person was entitled to travelling expenses incurred along with allowance and its fixed salary as was agreed having been submitted by the Vet Med Chemicals and the payments have been effected through the said party as per the ledger account submitted.

In view of the above, a show cause notice dated 10.03.2015 issued to the assessee. In response to the show cause notice the assessee filed its reply vide

On perusal of the details furnished by the assessee, it was noticed that the assessee has not furnished any copy of agreement or appointment letter or the terms and conditions agreed upon by the company with Vet Med Chemicals though it has repeatedly stated that the payments were made as per the fixed terms and conditions. In support of its contention, the company has furnished a copy of Certificate dated 1.1th October, 2010, authorizing M/s. Vet Med Chemicals to quote and participate on behalf of the company in the Tender of the Chief Executive Officer, Maharashtra, Live Stock Development Board for the year 2010-12. No other details were furnished by the assessee to substantiate the nature of responsibility given to the said parry.

In view of the same, a notice under Sec. 133(6) of the Act was issued to M/s, Vet Med Chemicals on 10.03.2015 requiring it furnish copy of bank statements, ledger accounts, copy of agreement, nature of transactions entered with the assessee-company, etc. were called for. In response, the said party has furnished copy of bank statement, ledger account, etc. However, it was stated there was no written agreement and the terms and conditions were orally decide between us.

On perusal of the details furnished by the assessee and information gathered through issue of notice under Sec. 133(6) of the Act, it was noticed that the company is reimbursing the expenses claimed to have been incurred by Vet Med Chemicals. However, no details as to what number of M. Rs. were appointed, what are the terms and conditions of appointment, etc. were not

From the certificate issued by the company, it is noticed that the said party is working for the company since 2010. However, the expenses claimed under this head were very nominal in the financial year 2010-11. The assessee has also tried to explain the expenditure by bifurcating the same into different heads i.e. salary, conveyance and travelling. In the absence of any appointment letter or evidences, it is not possible to verify the claim of the assessee.

Moreover, as per the details furnished all the payments made to Vet Med Chemicals were in the nature of reimbursement to M.Rs. but no such payments were made to Vet Med Chemicals against the so called services provided by them.

In view of the same, the business expediency of the claim of expenditure is not ascertainable and genuineness of the claim of expenditure is also not explained with proper supporting evidences. Therefore, the expenses are not fully verifiable. In view of the above said reasons, the above expenses amounting to Rs. 13,24,168/- is disallowed & added back to the total income.

Against the disallowance of reimbursement expenses of Rs. 13,24,168/-, appellant preferred first statutory appeal before the ld. CIT(A) who dismissed the appeal of the assessee.

In this case, appellant had reimbursed an amount of Rs. 13,24,168/- to M/s. Vet Med Chemicals for travelling and conveyance incurred on behalf of the assessee company for work carried out by the Medical Representatives on salaries within Maharashtra State. It was claimed that the MRs were appointed for gathering, enquiring and procurement of tenders to produce purchase orders from Maharashtra State Government Department and collection of payment after supplying the requisite quantities as per the requirements and orders in the name of the appellant company.

In support of its contention, appellant submitted the ledger account of the party to whom payment was made and all payments were made through cheque and vouchers were also submitted to the lower authorities. We are of the considered opinion, that appellant has discharged his onus by submitting the above said details to the lower authorities and we do not find any reason to disallow such expenses.

In the result, appeal filed by the assessee is allowed.