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2023 (10) TMI 27 - AT - Income TaxAcceptance of freebies by medical practitioners - Payment made to two doctors disallowed u/s 37(1) - commission paid treated as freebees in violation of provision of Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulation, 2002 - reliance on decisions rendered in assessee own case for prior period - HELD THAT:- Now this issue has been conclusively decided / adjudicated by the Hon’ble Supreme Court and accordingly, any freebies given by the assessees to doctors for sales promotion etc. are liable to be disallowed. Accordingly, in light of the observations made by the Hon’ble Supreme Court in the Apex laboratories decision [2022 (2) TMI 1114 - SUPREME COURT] any reliance on decisions rendered by ITAT in assessee’s own case for prior years shall stand superseded, in case the assessee comes within the four corners of the provisions of Circular No. 5 of 2012 dated 01.08.2012. Whether the doctors had provided any professional advice to the pharmacy and hence the payments were falling outside the purview of Circular issued by the Central Board of Direct Taxes being Circular No. 5 of 2012 dated 01.08.2012? - The assessee has not been able to establish that the aforesaid payments were made by the assessee to the doctors for rendition of any professional / advisory services, and hence, in our considered view, the payments essentially qualify as commission payments made to doctors for promoting the sale of medicines. In the instant facts, the payments have been denied in the hands of the assessee on the ground that in view of Circular No. 5/2012 dated 01.08.2012 read with Explanation 1 to Section 37(1), the aforesaid payments are prohibited by law. In our respectful view, the principles of tax neutrality would not apply in cases the payments have been held to be illegal or are prohibited by law. Accordingly, we are of the considered view that decision of Gujarat Gas Financial Service Ltd. [2015 (7) TMI 743 - GUJARAT HIGH COURT] has been rendered on a different set of facts and would not apply to the assessee’s facts. Whether it can be stated that the assessee being a pharmacy engaged in trading of medicines, is not covered by the provisions of the Circular, which is only applicable to pharmaceutical industry? - We observe that the CBDT has issued Circular No. 5/2012 dated 01.08.2012 in respect of inadmissibility of expenses incurred in providing freebies to medical practitioners by pharmaceutical and “Allied health sector industry”. In our considered view, the assessee is falling in the category of Allied health sector industry and hence covered within the scope of the Circular referred to above. Thus in our considered view, Ld. CIT (Appeals) has not erred in facts and in law in holding that the aforesaid payments made by the assessee to two doctors qualify as commission paid for promoting sale of medicines and hence are not allowable under Section 37(1) of the Act. Appeal of the assessee is dismissed.
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