2025 (11) TMI 641 - AT - Income Tax

Appeal allowed overturning 5% cap on sales promotion/distribution expenses; consistent methodology upheld and expenditures allowed

ITAT Ahmedabad allowed the assessee's appeal, overturning the AO's restriction of sales promotion/distribution expenses to 5% of sales. The AO had ... Disallowance of restriction of sales promotion/distribution expenses paid to Welable Pharma, from 13.5% to 5% of sales - AO disallowed the expenditure incurred by the assessee on the ground that the same was beyond the market limit - HELD THAT:- 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. Appeal against the order of the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi for Assessment Year 2018-19 challenged a disallowance of Rs. 25,88,504, effected by 'restriction of sales promotion/distribution expenses paid to Welable Pharma, from 13.5% to 5% of sales.' The Assessing Officer held the expenditure was beyond the market limit. The record showed yearly particulars of sales, purchases, gross margin and compensation by credit notes, with total compensation percentages of 28.55% (2014-15), 20.38% (2015-16), 23.97% (2016-17) and 28.39% (2017-18). Relying on the 'consistent method followed by the assessee,' the Tribunal found no reason to interfere with the profit declared and allowed the claim. The decision states: 'the appeal of the assessee is allowed.' Order pronounced on 08.10.2025.