TMI Blog2018 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal filed by the Assessee against the order of CIT(A)-12, Pune, dated 03-09-2015 for the A.Y. 2010-11. 2. Ground No.1 raised by the assessee deals with the core issue. Grounds of appeal No. 2 to 6 by the assessee are argumentative in nature and support the said Ground No.1. Therefore, the said ground is extracted as under : 1. The Ld. CIT(A) erred in confirming the disallowance of the marketing sales promotion expenses to the extent of ₹ 76,28,622/- considered by the Ld. AO as Freebies to Doctors in view of Circular No.5/2012 [F.No.225/142/2012-ITA.II] dated 01-08-2012. 3. Background facts of the case are that assessee is a Pharmaceutical company engaged in the manufacturing of Generic Drugs. Assessee filed the return of income declaring income of ₹ 1,78,74,660/-. Assessee is covered under the provisions of section 80IB(4) of the Act. During the assessment proceedings, AO noticed that the assessee claimed Advertisement Sales Promotion expenses of ₹ 2,07,99,694/-. While providing the breakup of the same, assessee submitted that ₹ 50,70,963/- relates to the expenditure on account of Print and Promotion items and the balance of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d their sales people or representatives. Therefore, the pharmaceutical industries are not barred from giving the gifts, if any. Further, bringing our attention to the CBDT Circular No.05/2012, dated 01-08-2012 (Placed at page 92 of the paper book), Ld. AR for the assessee read out Para No.3 which specifies the direction to the Field Officers for making disallowance u/s.37(1) of the Act in respect of the gifts made by the Pharmaceuticals or allied Health sector industries or other assessees like the present assessee and also the Medical practitioners. He submitted that expanding the scope of the said code and conduct of the Medical Council of India Circular to the Pharmaceutical companies like the present assessee is not proper. This part of the circular is unsustainable as the same does not emanate from the said circular of Medical Council of India dated 11-03-2002 as well as the Modification of the Notification published on 14-12-2009. It is the creation of the CBDT and it does not have the backing of the circulars of the Medical Council of India. 6. Further, Ld. AR for the assessee submitted that there are various decisions in favour of excluding the Pharmaceutical companies o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d avoid while dealing with pharmaceutical companies and allied health sector industry. It provides guidelines to the medical practitioners of their ethical codes and moral conduct. Nowhere the regulation or the notification mentions that such a regulation or code of conduct will cover pharmaceutical companies or health care sector in any manner. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner........ The aforesaid provision applies to an assessee who is claiming deduction of expenditure while computing his business income. The Explanation provides an embargo upon allowing any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. This means that there should be an offence by an assessee who is claiming the expenditure or there is any kind of prohibition by law which is applicable to the assessee. Here in this case, no such offence of law has been brought on record, which prohibits the pharmaceutical company not to incur any development or sales promotion expenses. A law which is applicable to differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of business. We had also carefully gone through the notification dated 11/03/2002 notifying the regulations issued by the Medical Council of India (MCI). The code of conduct laid down in the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('MCI Regulations ) issued with effect from 10th December 2009 applies only to doctors and not to Pharmaceutical and Medical device companies. Accordingly, MCI Regulations are not applicable to assessee, the question of assessee incurring expenditure in alleged violation of the regulations does not arise. 18. On the plain and simple reading of the provision of the Indian Medical Council Act, 1956, it is apparent that the ambit of statutory provisions relating to professional conduct of registered medical practitioners under the Indian Medical Council Act, 1956 is restricted only to persons registered as medical practitioners with the State Medical Council and whose names are entered into the Indian Medical Register maintained u/s 21 of the Act. 'Under the scheme of the Act. 19. Furthermore, there is no ambiguity of any kind in the scheme of the Indian Medical Council Act, 1956 that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hospital v. MCI in [WPC 1334 of 2013, dated 10-1-2014], wherein the Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is inapplicable upon Pharma companies like assessee then, where is the violation of any of law/regulation? Under which provision there is any offence or violation in incurring of such kind of expenditure. 23. Now coming to the Explanation to Section 37(1) invoked by the CIT, the Explanation provides an embargo upon allowing any expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itio' in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving administrative relief or for clarifying the provisions of law and cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scope of a different regulation issued under a different act so as to impose any kind of hardship or liability to the assessee. In any case, it is trite law that the CBDT circular which creates a burden or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be applied prospectively only. Here in this case the CBDT has enlarged the scope of 'Indian Medical Council Regulation, 2002' and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect. The free sample of medicine is on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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