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2016 (1) TMI 500 - ITAT MUMBAI

2016 (1) TMI 500 - ITAT MUMBAI - TMI - Exclusion of expenses which was disallowed u/s 37(1) for computing book profit u/s 115JB - MAT computation - Distribution of samples of medicines to the physicians free of cost - Held that:- Distribution of samples of medicines to the physicians free of cost cannot be parted with the business purpose, as the object of supply of free samples of medicines is only to find out by the medical practitioners about the curative value of the medicines and such confi .....

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s were distributed to them. In brief, distribution of samples of medicines to the physicians free of cost cannot be parted with the business conducted by the assessee. Section 37(1) of the Act speaks about the expenditure incurred for the purpose of business. Expenditure incurred upon supply of samples of medicines free of cost to the physicians is not required to be differentiated with the business in any manner. Taking into account all the facts and circumstances of the case, we are of the opi .....

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ssessee in view of the above said observations.

Inclusion of amount disallowed u/s 14A to the book profit - Held that:- This issue is decided against the assessee in the case of CIT vs. Goetze India Ltd. (2013 (12) TMI 607 - DELHI HIGH COURT ). Accordingly, we uphold the order of learned CIT(A) on this issue.

The disallowance of expenses made while computing total income under normal provision of the Act have not been prescribed to be included under the provision of section .....

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assessee are directed against the order of the learned Commissioner of Income Tax (Appeals)-19, Mumbai [hereinafter referred to as "the CIT(A)] dated 03-05-2013 passed in appeal No. CIT(A)-19/ACIT-9(1)/IT.77/2012-13 for the assessment year 2010-11 and these appeals are being taken up together for adjudication for the sake convenience, having common question of law and facts involved therein. 2. The assessee filed return of income for the assessment year 2010-11 declaring total at loss to th .....

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to the physicians free of cost. The A.O. also added the disallowance computed u/s. 14A of the Act. The Assessing Officer added both the disallowances u/s. 115JB of the Act also. Consequently, the assessee went in appeal before the learned CIT(A) who confirmed disallowance to the tune of ₹ 37,60,594/- for computing total income under normal provision of the Act. However, learned CIT(A) held that the said disallowance is not required to be included in Book Profit computed u/s. 115JB of the .....

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lowed u/s 37(1) of the Act for computing book profit u/s 115JB of the Act, hence, his such action is wrong in law and facts of the case and on that basis he submitted that the present appeal may be allowed by setting aside the order of the learned CIT(A). 4. On the other hand, the learned Authorized Representative [hereinafter referred to as "the AR"] for the assessee argued that the AO has wrongly disallowed the expenditure incurred on account of distribution of samples of medicines w .....

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the book profit u/s 115JB of the Act by ₹ 1,89,385/-, being disallowance made u/s 14A of the Act is on wrong footing and hence, is liable to be set aside. 5. With due regard to the contentions raised by the representative of both the parties, it comes to our notice that the bone contention of the assessee is that the assessee has incurred an expenditure of ₹ 37,60,594/- on account of sample distribution of medicines to the physicians free of cost and the said expenditure is required .....

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rned representative of the assessee has argued that distribution of samples of medicines free of cost to the physicians is for the business purpose of the assessee and it is allowable u/s 37(1) of the Act. In support of his contentions, the learned representative of the assessee has placed reliance on the decision reported in 162 CTR 0089 ESKAYEF Vs CIT (SC). No doubt, the said law has been settled for the purpose of section 37(3A) which has now been deleted by the Finance Act, 1985 with effect .....

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ines to the physicians free of cost cannot be parted with the business purpose, as the object of supply of free samples of medicines is only to find out by the medical practitioners about the curative value of the medicines and such confidence could be created mainly by the medical practitioners, when they use such medicines towards treatment of the patients. Moreover, the real person who can create market for medicines are the medical practitioners and when compared to other industrial products .....

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