TMI Blog2021 (4) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. In the case of Max Hospital Vs MCI [ 2014 (1) TMI 1829 - DELHI HIGH COURT] has held that regulations issued by MCI are applicable to medical professional and not to the pharmaceutical companies. Hon ble Apex Court in the case of Eskayel Pharmaceutical's India Ltd [ 2000 (7) TMI 1 - SUPREME COURT] has held that physician samples are must in order to ascertain the efficiency and efficacy of the medicine and introduce the same in the market for circulation. We are in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. Accordingly, we uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue. - ITA No.4164/M/2019 - - - Dated:- 1-2-2021 - Shri Rajesh Kumar, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Assessee : Shri Harsh Shah, A.R. For the Revenue : Shri Sajit V. Nair, Sr.A.R ORDER PER RAJESH KUMAR, ACCOUNTANT MEMBER: The present appeal has been preferred by the Revenue against the order dated 28.03.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2013-14. 2. The only issue raised by the Revenue is against the dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same are prohibited by the Medical Council of India Act. Finally, the AO observed that these samples were given to veterinary doctors for distribution to prospective customers are very high which is evident from the quantum of expenses debited to the P L account of the assessee, which is almost 9 to 10% of the total turnover of the assessee. Thus, the assessee has adopted unethical practice of impressing the doctors to prescribe their medicines by giving freebies/ samples which is in violation of guidelines issued by Veterinary Council of India and therefore not allowable under section 37(1) of the Act and consequently added the same to the income of the assessee by framing the assessment under section 143(3) dated 31.03.2016. 5. In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee after taking into account the contentions and submissions of the assessee by holding and observing as under: 4. Decision : I have carefully perused the assessment order of the AO and the submissions made by the AR of the Appellant in support in his arguments. After taking into consideration, the AO's findings and the Appellant's oral and written submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... people about their product and offer them free samples to use. The medical representative would remain there for a week and then on the response of the customers and looking at the results on the animals and birds the sale of medicine would increase. The marketing man informs the doctor about the result of his product and in which places it is used and by whom The customer if they get good result buy from the appellant company's stockiest and do not buy from doctors. The samples given have a label with clear reading stating sample not for sale . In this entire process there is no relation of assesse and doctor as the recommendation is done only on the basis of the end users verdict and information of gathered by the medical representative. Doctor cannot sell the product and also cannot earn any income by selling samples as no free samples are given to them. Thus from the above fact it can be seen that no freebies is given to doctors. Further, no gift, travel facility, hospitality, cash or monetary grant is given to the doctors. Board circular No 5/2012, dated 1.08.2012 is clear on this fact and it mentions that only if any gift, travel facility, hospitality, cash or monetary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain the efficacy of medicine and introduce it in the market for circulation. Nothing contrary about incurring these expenses is reported. Hence the Assessing officer is directed to delete the addition made in respect of sample distribution. 5. In the result appeal of the assessee is Allowed. 6. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that the assessee is engaged in manufacturing of veterinary products, selling and exporting thereof. During the year the assessee has distributed free samples of ₹ 6,10,76,573/- in order to promote its business and charged the same to the profit loss account. According to the AO the said expenses are not allowable under section 37(1) as the same are prohibited by the regulation as issued by the Veterinary Council of India. The AO also referred to the circular issued by Medical Council of India No.5/2012 F.No.225/M/142/2012-ITA.II) dated 01.08.2012 and observed that similar restriction has been placed by the Medical Council of India on the medical professionals and their associates from taking any gift, travel facility, hospitality, cash or monetary grant from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of any guidelines issued by the Veterinary Council of India or Medical Council of India. Besides the said regulations are applicable to the doctors and their associate professionals and not to the company engaged in manufacturing of these veterinary products. In fact these expenses are incurred wholly and exclusively for the purpose of increasing the sale of the company by making these samples available to the end user and also studying the effect of those products on animal and birds. Moreover the case of the assessee is supported by the decisions as referred and relied before the ld CIT(A) by the assessee. In the case of Max Hospital Vs MCI Supra), the Hon ble Delhi High Court has held that regulations issued by MCI are applicable to medical professional and not to the pharmaceutical companies. Hon ble Apex Court in the case of Eskayel Pharmaceutical s India Ltd Vs CIT(supra) has held that physician samples are must in order to ascertain the efficiency and efficacy of the medicine and introduce the same in the market for circulation. Under these circumstances and facts and inview of the ratio laid down by the Hon ble Apex Court and Hon ble Delhi High Court, we are in agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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