The Income Tax Appellate Tribunal (ITAT) has ruled in favor of Mankind Pharma, allowing the company to claim a total travelling and conveyance expenditure of Rs. 18,73,43,027 for the year. The company, engaged in trading pharmaceutical products, had claimed this expense as part of its business operations, primarily for door-to-door marketing and sales activities. The Assessing Officer (AO) had initially disallowed approximately 80% of the total expenses, citing a lack of supporting documentation.
However, the Commissioner of Income Tax (Appeals) [CIT(A)] reduced the disallowance to 20% after reviewing the company’s submissions and policy framework for reimbursements. The CIT(A) observed that the company’s policy was based on commercial expediency and aimed to simplify the process of reimbursing employees for legitimate business expenses.
The ITAT, comprising S. Rifaur Rahman and Shri Anubhav Sharma, examined the company’s business model and noted that the medical representatives (MRs) travel extensively to procure orders and make product presentations. The tribunal highlighted the company’s policy, which reimbursed travel at Rs. 2.80 per km and provided daily allowances depending on designation and travel location. The reimbursement claims underwent multiple levels of verification by the management before payment.
The ITAT relied on precedents, including CIT vs. Larsen & Toubro Ltd. and Hero MotoCorp Ltd. vs. ACIT, which held that expenses reimbursed on the basis of company policy and employee certification could not be disallowed solely for lack of vouchers. The tribunal observed that even if employees were reimbursed higher than the actual expenditure, the higher reimbursement on a bonafide basis constituted an expenditure incurred for the purpose of business and could not be considered personal or non-business expenditure.
The ITAT concluded that the AO’s ad-hoc disallowance of 80% of travelling and conveyance expenses was unjustified and allowed the assessee’s appeal while dismissing the Revenue’s appeal. The order was pronounced in open court on 27th August 2025, holding that the expenses of Rs. 18,73,43,027 were eligible as business deductions. This ruling reinforces the principle of consistent treatment, as similar reimbursement policies had been accepted in prior assessment years without dispute.