TMI Blog2019 (1) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... rding in its books of accounts of the expenses, and the relationship of the expense with the business of the appellant, I find there is no need to make the said disallowance simply because in some other case, a disallowance made had been upheld. The case laws relied by the appellant also helps its case. The addition made is, therefore, deleted and the ground of appeal allowed. Disallowance of Sales promotion - busniss expenditure - Held that:- In the instant case, the expenditure incurred is not capital in nature or in the nature of personal expenses of the appellant. In fact, it has been incurred on account of commercial expediency and has facilitated the appellant in carrying on its business. A perusal of the accounts of the earlier years shows that the total turnover and net profit of the appellant company have been increasing over the years which shows that the sales promotion activities have led to higher sales and better financial results for the company. Considering the discussion the expenditure claimed by the appellant was entitled to deduction u/s. 37(1) Exemptions u/s. 54EC against deemed Short Term Capital allowability - Held that:- In CIT vs. Aditya Medisales [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-business expenditure. Ld. A.O. made the disallowance on account of that assessee is unable to produce the detail the difficult its claim for liability of the alleged expenses. 4. In appeal, assessee contention was accepted by the ld. CIT(A) holding that an identical addition is being made in the appellant case since assessment year 2008-09 and ITAT, Mumbai Bench in appellant s own case for assessment year 2008-09 has decided the issue in favour of assessee in ITA No. 843/Mum/2012 dated 31.03.2015. 5. Apart from the above said, assessee also submitted a copy of jurisdictional High Court in assessee s own case in Tax Appeal No. 478 of 2016 dated 21.06.2016 wherein assessee appeal was allowed and relevant order of the Hon ble High Court is reproduced: 1. The Revenue is in appeal against the judgment of Income Tax Appellate Tribunal raising following substantial question of law Whether the Appellate Tribunal was right in law and on facts, in deleting the disallowance of ₹ 44,61,400/- being 70% of the expenditure in respect of Physicians' Sample? 2. The issue pertains to disallowance of ₹ 44.61 lacs (rounded off) representing 70% of the expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. Now we come to ground relating to disallowance of ₹ 1,17,53,365/- on account of Sponsorship of Doctor s Overseas Tours. 8. Ld. A.O. has discussed the issue at page no. 4 to 10 and made the disallowance on the ground that in view of the CBDT Circular No. 5/2012 that any medical practitioner or their professional associates is prohibited from accepting any gift, travel facility, hospitality, cash or monetary grant from any pharmaceutical and allied health sector Industries as per the Medical Council regulations and such expenses are not allowable u/s 37(1) of the Income Tax Act. 9. In appeal, ld. CIT(A) granted the relief to the assessee with following observation: 5.2 I have considered the assessment order and the submissions made by the appellant. During the assessment proceedings, the appellant disallowed an amount of ₹ 1,17,53,365/-on account of the appellant sponsoring overseas tours of doctors. The AO, relying on CBDT Circular No.5 of 2012, disallowed this amount holding that the same was not incurred wholly and exclusively for the purpose of the appellant's business. A perusal of the submission made by the appellant shows that an identical iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 42,53,924/- for sponsoring doctors for overseas tour. On being asked to explain in this aspect, the assessee submitted the required details. The A.O. did not doubt the genuineness of the transactions, however, held that sponsoring overseas trip of the doctors was not an activity relating to the business of the assessee. In appeal, the ld. CIT(A) also upheld the findings of the A.O. The assessee has thus come in appeal before us. 7. The Id. Counsel for the assessee while inviting our attention to the impugned order, has submitted before us that the detailed reply was submitted to the lower authorities explaining that the assessee sponsors various events and seminars at various places to encourage product awareness programs. As a part of sales promotion and product awareness program, the foreign tours of the selected doctors were sponsored and this was combined with the product awareness campaign by the assessee. This was also done to create good relationship with the doctors. The assessee had also furnished a list of doctors who had been sponsored along with the visit photographs. The lower authorities had not doubted the incurring of expenses but were of view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- on the ground that there was no evidence indicating business expediency in giving such -free samples to physicians. He thereafter adopted his reasoning as in preceding assessment year 2009- 10. 3. The CIT(A) reverses Assessing Officer's findings as under:- 1.1 Briefly stated, material facts of the issue in dispute as revealing from the impugned order are that the A.O. observed that the appellant used to claim huge expenses on account of free samples distributed to Physicians every year under the pretext that it is the business requirement of the appellant. According to the A.O., similar type of expenses were disallowed in other cases of his charge and, therefore, he asked the appellant to explain as to why 70% of the expenditure incurred on free samples distributed to the physicians should not be disallowed and added back to its total income. In response, the appellant explained in detail, relying upon certain judicial pronouncements, which are reproduced in the impugned order itself. However, the A.O. did not accept the explanation of the appellant and disallowed 70% of the expenditure incurred on this count amounting to ₹ 70,00,000/-. The operative part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [page 9] Under the circumstances, 1 find as the appellant has been able to prove the genuineness of expense, proper recording in its books of accounts of the expenses, and the relationship of the expense with the business of the appellant, I find there is no need to make the said disallowance simply because in some other case, a disallowance made had been upheld. The case laws relied by the appellant also helps its case. The addition made is, therefore, deleted and the ground of appeal allowed. Moreover, the Id.CIT(A) has followed her decision taken in the appellate order for A.Y. 2008-09 in the appellants case for A.Y. 2009-10 vide order dated 08.11.2012. In view of the categorical findings of the ld. CIT(A)(s in the appellants case for A. Ys. 2008-09 2009-10, I find no reason to disagree with the same. Accordingly, the action of the A.O. of making adhoc disallowance on this count stands deleted and, thus, Ground No. 1 stands allowed. 4. Both the learned representatives reiterate their respective stands in support and against the impugned addition during the course of hearing. There is hardly any dispute that the CIT(A) has followed his order for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2.1 As regards the disallowance of ₹ 21,91,953/- incurred on dermatology books to doctors, a perusal of the submission made by the appellant shows that the books that have been distributed to doctors are medical notebooks which provide coverage of latest medication and procedures in respect of dermatology. The same are related to the business of the appellant and the expenditure incurred is not in the nature of cash or gifts given to medical practitioners which is covered by Circular No.5/2012 relied upon by the AO. It is seen from the details filed that the expenditure is purely for the purpose of education and guidance to the medical fraternity. Further, an identical disallowance on sales promotion expenses incurred on distribution of books to doctors has been decided in favour of the appellant for Asst. Year 2011-12 by my learned predecessor vide his order No. CIT(A)-VIII/DCIT(OSD)-l/Cir.4/455/13-14 dated 26.08.2014. In view of the facts of the case and the decision of Id. CIT(A) for Asst. Year 2011-12, the disallowance of ₹ 21,91,953/- Is deleted. 6.2.2 As regards the disallowance of ₹ 26,04,229/- in respect of expenditure on gift articles and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gain is not allowable. 18. In appeal before the ld.CIT(A) who allowed the claim of the assessee and he granted the relief to the assessee. 19. Before us, ld. A.R. Mukesh M. Patel cited an order of Jurisdictional High Court in the matter of CIT vs. Aditya Medisales [2013] 38 taxmann.com 244 (Guj.). Section 54EC, read with section 50, of the Income-tax Act, 1961 - Capital gains - Not to be charged on investment in certain bonds [Section 54EC v. Section 50] - Assessee-company sold automatic electric monitoring system - It invested gain amount in rural electrification bonds and claimed exemption under section 54EC - Assessing Officer found that short term capital gain was offered by assessee under section 50 and disallowed exemption under section 54EC claimed by assessee on ground that same was not available on shortterm capital gain - Whether since capital gain arose out of long term capital asset and same was invested in specified assets, exemption under section 54EC could not be denied on account of fact that deeming fiction of shortterm capital gain was created under section 50 - Held, yes [Para 7] [In favour of assessee] 20. In this case, assessee transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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