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ACIT, Cir. 6 (3) , Mumbai Versus M/s Liva Healthcare Ltd. and Vica-Versa

2015 (12) TMI 619 - ITAT MUMBAI

Disallowance expenses - company to sponsor the foreign trip of the doctors - CIT(a) deleted the addition - Held that:- The assessee is in the business of manufacturing and marketing of medicines and skin care products. There is a stiff competition in the market for the sale of the identical products manufactured by other companies. It is commonly known that the medicine companies sponsor the trips of the doctors to overseas so as to influence them to prescribe the medicines manufactured by their .....

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ce for the doctors to accept such type of incentives, however, so far as the assessee is concerned, sponsorship was purely on account of business angle of the assessee company. We, therefore, do not find any justification on the part of lower authorities in disallowing the said expenditure. Accordingly, the order of the ld. CIT(A) is set aside the addition made on this issue is deleted and the appeal of the assessee is allowed. - Decided in favour of assessee. - I.T.A. No. 847/Mum/2012, I .T.A. .....

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Revenue in its appeal is regarding the deletion of the disallowance of 70% of expenses incurred by the assessee on physician s samples. The assessee is engaged in the business of manufacturing of drugs and pharmaceuticals. During the course of assessment proceedings, the A.O. noticed that the assessee had claimed expenses in relation to free samples distributed to physicians. The A.O., however, observed that the assessee could not prove that the amount expensed was exclusively for business purpo .....

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iness, it distributed physician s sample to various doctors all over the country. He further observed that the A.O. while disallowing the expenditure, relied on the orders of the DRP (Dispute Resolution Panel) in the case of two other companies namely, (i) Glaxo Pharma and Merck Pharma. However, it had not been pointed out by the A.O. how the above cases were identical to the case of the assessee. The A.O., had not discussed how the case of the assessee was covered by the findings of the ld. DRP .....

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, date and amount entered in the purchase register with that of the purchase bills. In the purchase register, the above stated goods were marked as Physician Sample . The receipts of the said sample were supported by delivery challans and invoices. Even, the samples were dispatched through courier/transport agency. The sample dispatch register carried the details of date, serial number, representative number, name of the medical representative, place, transport, weight of the case, freight LR nu .....

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ts were used to be submitted by the medical representatives to the assessee company on daily basis, which constitute the record of the free physician sample distribution. Besides that the assessee had also submitted confirmations of doctors from Ahmedabad who had been beneficiaries of the free samples. The ld. CIT(A) observed that the A.O. had not doubted the genuineness of the distribution of samples carried out by the assessee. The A.O. only doubted the business expediency of the distribution .....

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ee sample of medicines supplied to the doctors is done for the promotion of the product of the company. Even when a new product is launched, the doctors are given necessary inputs regarding the use and effects etc. of the product and which also contributes imparting knowledge to the doctors about the new medicine/product coming into the relevant for practice of their profession. The genuineness of the transactions has not been doubted by the A.O. We do not find any infirmity in the well reasoned .....

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tending seminar etc. and to encourage product awareness and sales promotion of the products manufactured by the assessee. 6. Admittedly, the assessee is engaged in the manufacturing of drugs and pharmaceuticals. The A.O. noted that the assessee had debited a sum of ₹ 42,53,924/- for sponsoring doctors for overseas tour. On being asked to explain in this aspect, the assessee submitted the required details. The A.O. did not doubt the genuineness of the transactions, however, held that sponso .....

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grams. As a part of sales promotion and product awareness program, the foreign tours of the selected doctors were sponsored and this was combined with the product awareness campaign by the assessee. This was also done to create good relationship with the doctors. The assessee had also furnished a list of doctors who had been sponsored along with the visit photographs. The lower authorities had not doubted the incurring of expenses but were of the view that the said expenditure was not directly r .....

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