ITAT Ahmedabad Allows Full Sales Promotion Expense – Rejects AO’s Restriction as Arbitrary

Dahyabhai Laljibhai Patel Vs ITO (ITAT Ahmedabad) Facts Assessee, engaged in pharmaceutical distribution, filed return for AY 2018-19. During scrutiny, AO noticed sales promotion/distribution expenses paid to Welable Pharma at 13.5% of sales, which he held excessive. AO restricted it to 5% of sales, disallowing ₹25,88,504/-, terming the excess “beyond market limits.” CIT(A)/NFAC confirmed the restriction, leading to the present appeal before ITAT. Assessee’s Submission Assessee furnished comparative data of sales, purchase values & credit-note compensations for preceding years (...