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2018 (4) TMI 1898 - AT - Income TaxDisallowance of sale promotion expenses u/s 37(1) - disallowance was made on the ground that the payment made by assessee is covered by Circular No.5/2012 issued by CBDT - Assessee Company is engaged in the business of manufacturing of Pharmaceuticals product and in Oral care products - - HELD THAT:- The assessee has to satisfy the AO that the expenditure is not in violation of the Medical Council regulation. Thus, if the assessee brings out that the MCI regulation is not applicable to the assessee before the AO, the same cannot be applied blindly. Hon’ble Delhi High Court in Max Hospital v. MCI[2014 (1) TMI 1829 - DELHI HIGH COURT] held the Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. The High Court further held that it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. Thus, considering the above factual and the legal position, we are of the view that expenditure incurred by assessee on distributing glass, face mask, pen, writing pad, towel set, wall clock, paper cups except ‘Voltas Cooler and stabilizer’ cannot be regarded as freebies given to the Doctors. Hence, except the cost of the Voltas Cooler and stabilizer we allow all the remaining expenditure incurred by the assessee on account of sale promotion expenses. Therefore, the ground of appeal raised by the assessee is partly allowed.
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