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2015 (12) TMI 1172 - AT - Income TaxDisallowance under section 37(1) - expenditure incurred towards distribution of free samples to doctors/medical practitioners - whether the same to be incurred in contravention of the guidelines issued by Indian Medical Council read with circular 05/2012 issued by the CBDT - whether the free samples were neither ‘freebies’ not ‘gifts’ and were distributed by the appellant to doctors/medical practitioners on the specific written request of the latter? - Held that:- As held by the Hon’ble Supreme Court in the case of Eskayef Pharmaceuticals (2000 (7) TMI 1 - SUPREME Court ), “the object of distribution of the samples of the drugs to the doctors is to make them aware that such drugs are available in the market in relation to the cure of a particular affliction and, therefore, to persuade them to prescribe the same in appropriate cases and this is tantamount to publicity and sales promotion.” Accordingly, such expenditure cannot be said to be disallowable u/s 37(1) of the Income-tax Act in the hands of the Pharma companies distributing such free samples to doctors. In the light of the details discussion made above, the Panel holds that the free samples are not covered by the IMC regulations of 2002 (as amended in 2009) read with CBDT circular no. 5/2012, UCPMP and the Drugs and Cosmetic Act and regulations made there under. Accordingly the AO is directed to delete the proposed addition on this account.- Decided against REVENUE Transfer Pricing Adjustment on account of provision of business support services - Held that:- Since the operating profit to cost margin of the appellant at 9.26% is higher than the operating profit to cost ratio of the comparable companies at 6.30%, the adjustment made by the AO/TPO/DRP, in relation to international transaction of provision of business support services, is deleted. In view of the above conclusion, we do not find, it necessary to adjudicate as to the comparability of inclusion of ‘Aptico Limited’, ‘Global Procurement Consultants Limited.’ and HCCA Business Services (P) Ltd., and the objection of the assessee in respect of these two companies are kept open. The grounds are allowed to the extent discussed above.
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