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2021 (5) TMI 1073 - AT - Income TaxAllowability of the sales promotion expenses incurred by assessee/pharmaceutical company - freebies given to doctors in light of the CBDT Circular No. 5/2012 read a/w the Medical Council of India (MCI) Regulations, 2012 - HELD THAT:- Expenses wholly and exclusively incurred by a pharmaceutical company in the normal course of its business towards, viz. gifts, travel facility, conference expenses or similar freebies to medical practitioners or their professional associations would not be hit by the ‘Explanation 1’ to Sec. 37 of the Act. Tribunal had concluded that even if the assessee had incurred expenditure on distribution of ‘freebies’ to doctors and medical practitioners, the same, may though not be in conformity with the Indian Medical Council (Professional Conduct, Etiquette and Ethics) regulations, 2002, however, as the same only regulates the code of conduct of the medical practitioners/doctors, therefore, in the absence of any prohibition on the pharmaceutical companies on incurring of such sale promotion expenses, it cannot be held to have incurred an expenditure for a purpose which is an offence or is prohibited by law. See M/S. ARISTO PHARMACEUTICALS PVT. LTD. VERSUS DCIT-2 (1) (1) (VICE-VERSA) [2020 (1) TMI 777 - ITAT MUMBAI] In the case of the present assessee before us, as it is neither a fact nor the case of the revenue that the assessee had incurred expenses for the purpose of personal benefit/enjoyment of the doctors or their spouses, therefore, on a similar footing as in the case of PHL Pharma P. Ltd. (2017 (1) TMI 771 - ITAT MUMBAI), the order passed by the Tribunal in the case of Liva Healthcare Limited (2016 (9) TMI 856 - ITAT MUMBAI] being distinguishable on facts would not assist the case of the revenue. Thus we are of the considered view that the CIT(A) had erred in upholding the disallowance of the assessee’s claim for deduction of sale promotion expenses. Entitled for deduction of “cess” - HELD THAT:- As respectfully following the judgment of Sesa Gold Limited [2020 (3) TMI 347 - BOMBAY HIGH COURT] we are principally in agreement with the assessee’s claim that “Education Cess” and the “Secondary and Higher Education Cess” are not disallowable as a deduction u/s 40(a)(ii) of the Act. However, as the aforementioned claim had been raised by the assessee for the very first time before us, we, therefore, in all fairness restore the matter to the file of the A.O for considering the said claim of the assessee in the backdrop of our observations recorded hereinabove, though, subject to verification of the factual position as had been claimed by the assessee before us. Ground of appeal No. 4 is allowed for statistical purposes in terms of our observations recorded hereinabove.
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