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2022 (10) TMI 478 - AT - Income TaxRevision u/s 263 - Allowable revenue expenditure u/s 37(1) - expenditure incurred on distribution of gifts / freebies to doctors and Medical Practitioners in the form of televisions, laptops, electronic goods, mobiles, sponsorship of tours and conferences and distribution of other similar items which have been charged as expenditure in the Profit and Loss Account under the head ‘Business Promotion Expenditure’ - it is the opinion of PCIT that such expenditure was not allowable in terms of Explanation to section 37(1) of the Act being expenditure for a purpose which was an offence or was prohibited under the law - HELD THAT:- We have no hesitation in holding that the nature of the expenses under the head ‘Business Promotion’ in all the years under consideration have thoroughly been examined/verified by the Assessing Officer, who framed the search assessments simultaneously and, as such, we are of the considered view that the concerned AO had duly applied his mind on this issue and the records of the various assessment proceedings, both in the original and in search assessment, bear testimony to the fact that, no ‘Freebies/Gifts’ have been given to the Medical Practitioners/Doctors and that such gifts were only given to the Stockists/Distributors of the company as is evident from the various promotional schemes launched by the assessee company in different years. It would be relevant here to refer to the judgment of ‘CIT vs. Sunbeam Auto [2009 (9) TMI 633 - DELHI HIGH COURT] wherein has held that the distinction between the ‘lack of enquiry’ and ‘inadequate enquiry’ has to be considered and it has been held that if there was an enquiry, howsoever inadequate that would not give occasion to the Commissioner, who passed an order u/s 263 of the Act, just because he has a different opinion in the matter and under such circumstances, it was held that the assessment cannot be held to be as erroneous and prejudicial to the interest of the revenue. Once there is an application of mind and enquiry has been made by the AO, then in such circumstances, the assessment cannot be branded as erroneous and prejudicial to the interest of revenue and we have no hesitation in setting-aside the orders as passed by the Ld. PCIT u/s 263 of the Act on the issue of ‘Freebies/Gifts’ to the Medical Practitioners/Doctors in all the 11 years under consideration. In assessment year 2017-18, besides the issue of business promotion expenses, there is another issue of non-reference to the Transfer Pricing Officer (TPO) in respect of ‘Specified Domestic Transactions’ and the Ld. AR has been fair enough to concede that the AO was mandatorily required to refer the same to the TPO and, therefore, we hold that the Ld. PCIT was justified in setting aside the assessment on the issue of non-reference to the TPO in Assessment Year 2017-18.
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