TMI Blog2018 (3) TMI 1514X X X X Extracts X X X X X X X X Extracts X X X X ..... 924/- which the assessee has debited under the head marketing and business promotion expenses but which in fact are installments for repayment of loan. In view of the above, ground No. 8 is partly allowed. Disallowance of advertisement expenses - Held that:- From the ledger account of such expenses, it is apparent that all the payments have been made through cheques and not even a single payment has been made in cash. Therefore, the findings of the Assessing Officer that the expenses were not genuine, are not correct and in view of the above, we allow ground taken by the assessee. Addition u/s 68 - Held that:- Such payments received from sister concern which have been credited in the assessee’s account and similarly debited in the books of account of the sister concern, cannot be said to be ingenuine and unexplained credits. Therefore, the addition u/s 68 is not at all justified - ITA No.160/Lkw/2017 - - - Dated:- 19-3-2018 - SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER For The Appellant : Shri Dharmendra Kumar, C.A. For The Respondent : Chaudhary Arun Kumar Singh, D.R. ORDER PER T. S. KAPOOR, A.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 19,73,241/-, whereas, the total expenses claimed by appellant was ₹ 19,38,190/-, hence, he made excess disallowance of expenditure by ₹ 35,051/-. 8. That Ld. Lower authorities failed to consider that marketing and business promotion expenses is a regular feature of appellant's business and he has been consistently incurring the aforesaid expenditure in past years also, further, ratio of aforesaid expenditure is much lower than average ratio of last three years and much lower than immediate preceding assessment year, hence, additions for disallowing the alleged expenditure of ₹ 19,73,241/-, while rejecting the facts, past history, nature of business, evidences produced and explanations furnished before them are arbitrary, unjustified, against the facts and without jurisdiction. 9. That Learned Lower authorities failed to observe that expenses incurred for advertisement is a regular feature of business of appellant and appellant has been consistently incurring the aforesaid expenses in past years also, hence, disallowance of entire expenditure of ₹ 94,464/-, while rejecting the facts, past history, nature of business, evidences produced and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... armaceutical company and is manufacturing medicines and for the purpose of development of its business the assessee used to give samples by marking them as physician s sample not for sale . It was submitted that it is a general practice in the trade to distribute samples. He submitted that the authorities below have made disallowance by holding that the assessee was not able to furnish list of doctors to whom samples were given and further the authorities have held that medical samples to doctors violates law as same was in violation of regulations issued by Medical Council of India. Learned A. R. submitted that these expenses on samples were not gifts and freebees which have been prohibited by Medical Council of India and further by CBDT Circular No. 5 of 2012. He submitted that in a recent order Hon'ble Delhi Tribunal in the case of Eli Lilly Co. (India) Ltd. vs. ACIT has examined the provisions of Medical Council of India and after analyzing the same Hon'ble Tribunal has held that there is a clear distinction between the free samples, gifts, travel facilities, hospitality and cash or monetary grants. In view of the above, it was submitted that the disallowance made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account in the form of cash which the authorities below have not accepted and have held that the cash deposits were not verifiable and therefore, they had made addition u/s 68 of the Act. Learned A. R. in this respect invited our attention to copy of account of sister concern placed at pages 220 to 226 of the paper book where a copy of account of sister concern of the assessee was placed and in which there were regular transactions of sale and purchase and receipt of money from it. Learned A. R. submitted that the sister concern of the assessee is a private limited company which is duly incorporated under the Companies Act having separate PAN and the accounts are duly audited and therefore, identity and creditworthiness of the sister concern was proved and the said receipts were not hit by the provisions of section 68 of the Act. Learned A. R. also filed a copy of income tax return filed by the sister company wherein PAN of the sister company was mentioned. In view of the above facts and circumstances, Learned A. R. argued that additions made by the Assessing Officer are arbitrary and need to be deleted. 3. Learned D. R., on the other hand, heavily placed his reliance on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me returned by the Assessee by estimating gross profit. The power to make such addition on estimate basis is available to the AO under Section 144 of the IT Act. Section 145 enables the AO to invoke the power under Section 144 when certain conditions adumbrated in Sub-section (3) of Section 145 are satisfied. Therefore, it becomes necessaiy and useful to extract Section 145(3) of the IT Act, which reads as follows: 145(3)Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (i) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in Section 144.H 4(c) Therefore, it is sine qua non that the AO to come to a conclusion that the Books of Accounts maintained by the Assessee are incorrect, incomplete or unreliable and reject the Books of Accounts before the proceeding to make his own assessment. In the instant case, there is no reference in the Assessment Order of the AO regarding rejection of Books of Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, the Government would consider making it a statutory code. 1. ... 2. ... 4. ... 5. Samples 5.1 Free sample of drugs shall not be supplied to any person who is not qualified to prescribe such product. 5.2 Where sample of products re-distributed by a medical representative, the sample must be handed directly to a person qualified to prescribe such product or to a person authorized to receive the sample on their behalf. 5.3 The following conditions shall be observed in the provisions of samples to a person qualified to prescribe such product. (i) Such samples are provided on an exceptional basis only (see (ii) to (vii) below) and for the purpose of acquiring experience in dealing with such a product. (ii) Such sample packs shall be limited to prescribed dosages for three patients for required course of treatment. (iii) Any supply of such sample must be in response to a signed and dated request for the recipient. (iv) An adequate system of control and accountability must be maintained in respect of the supply of such samples. (v) Each sample pack shall not be larger than the smallest pack present in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sconduct on the part of the physician. 6.11.6 It is noticed from the above that the medical practitioner is to adhere to the provisions of the, Drugs and Cosmetics Act and regulations made there under. The relevant regulations 65(18) applicable to the license/distributor and regulation 95 regards as under : 65(18) No drug intended for distribution to the medical profession as free sample which bears a label on the container as specified clause (viii) of sub-rule (1) of rule 96 and no drug meant for consumption by the Employees State Insurance Corporation. The Central Government Health Scheme, the Government Medical Stores Depots, the Armed Forces Medical Stores or other Government institutions, which bears a distinguishing mark or any inscription on the drug or on the label affixed to the container thereof indicating this purpose shall be sold or stocked by the licensee on his premises . 95. Prohibition of sale or distribution unless labeled-subject to the other provisions of these Rules, no person shall sell or distribute any drug (including a patent or proprietary) unless it is labeled in accordance with these Rules. Thus, it becomes evident that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. 16. For the aforesaid reasons stated above the disallowance made are deleted and grounds raised are allowed. 4.2.1 In view of the above facts and circumstances and judicial precedents, we delete the disallowance made on account of disallowance of sample expenses and therefore, ground No. 6 is allowed. 4.3 Arguing upon ground No. 7, Learned A. R. submitted that the assessee had incurred an expenditure of ₹ 19,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sement expenses ignoring the nature of business, business practice, past history, books of account and vouchers produced by the assessee. The Assessing Officer has made disallowance by holding that the assessee could not furnish any evidence to show that the camps for doctors were actually held whereas the assessee had claimed that expenditure was incurred towards advertisement for organizing camps for doctors. The copy of account of advertisement expenses is placed at pages 181 to 190 of the paper book. From the ledger account of such expenses, it is apparent that all the payments have been made through cheques and not even a single payment has been made in cash. Therefore, the findings of the Assessing Officer that the expenses were not genuine, are not correct and in view of the above, we allow ground No. 9 taken by the assessee. 4.5 Now coming to ground No. 10 regarding addition made u/s 68 of the Act, we find that the assessee had received an amount of ₹ 7,80,000/- from its sister concern namely Allpa (India) Medicines (P) Ltd. A copy of account of the above said company is placed at pages 227 to 233 of the paper book. The company is an income tax assessee and is regu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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