DAHYABHAI LALJIBHAI PATEL,MEHSANA vs. THE ITO, WARD-1, MEHSANA

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ITA 1521/AHD/2025Status: DisposedITAT Ahmedabad08 October 2025AY 2018-19Bench: DR. B.R.R. KUMAR, VICE-PRESIDENT Ms SUCHITRA KAMBLE (Judicial Member)3 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal observed that the assessee consistently followed a specific method for its expenses and profit declaration. Finding no reason to interfere with the profit declared by the assessee, the Tribunal allowed the appeal.

What were the facts?

The assessee appealed against the order of the CIT(A) which sustained a disallowance of Rs. 25,88,504/-. This disallowance was made by restricting sales promotion/distribution expenses paid to Welable Pharma from 13.5% to 5% of sales, on the ground that these expenses were beyond the market limit.

What were the issues?

Whether the disallowance of sales promotion/distribution expenses by restricting a percentage of sales was justified, particularly when the assessee followed a consistent method of accounting.

Which sections of the Income-tax Act were involved?

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: DR. B.R.R. KUMAR, VICE-Ms SUCHITRA KAMBLE

For Appellant: Shri Rushin Patel, AR

For Respondent: Shri Sudhakar Verma, Sr. DR

Hearing: 06.10.2025Pronounced: 08.10.2025

O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, vide order dated 23.07.2025 relevant to the Assessment Year 2018-19. 2. The assessee has raised the following grounds of appeal:

The Ld. CIT(A) has erred in law and on facts of the case, in sustaining the disallowance of Rs.25,88,504/- made by way of restriction of sales promotion/distribution expenses paid to Welable Pharma, from 13.5% to 5% of sales. Asst. Year : 2018-19 - 2–

The appellant craves leave to add, amend alter or delete the grounds of appeal

at the time of hearing, if need arise.

3. The Assessing Officer disallowed the expenditure incurred by the assessee on the ground that the same was beyond the market limit. We have examined the details of the compensation paid to Welable Pharma, the particulars of which are as under:

Compensation given to Welable Pharma Financial Year Sales of Purchases of Gross Margin Gross Margin Compensation Total assesser's assessee's before credit before credit by way of Compensation products by products by notes (in Rs.) notes (in %) credit Sales after credit Welable Welable Promotion notes (in%) Pharma Pharma after credit notes Expense by assessee (in %) 2014-15 3,91,18,821 28.55% 0% 28.55% 2,79,49,780 1,11,69,041 2015-16 3,43,21,070 2,73,28,092 69,92,978 20.38% 0% 20.38% 2016-17 4,12.33,056 3,34,10,836 78,22,222 18.97% 5% 23.97% 2017-18 3,57,79,620 3,04,52,988 53,26,632 14.89% 13.50% 28.39%

Considering the consistent method followed by the assessee, we find no reason to interfere with the profit declared. Accordingly, the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.

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