TMI Blog2018 (8) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... so observed that the assessee had not supplied any item free of cost to the hospitals, but these items were representing part of the machinery and equipments supplied to various parties. - order of CIT(A) confirmed - Decided against the revenue. - I.T.A. No. 55/Ahd/2016 - - - Dated:- 31-7-2018 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SMT MADHUMITA ROY, JUDICIAL MEMBER Appellant by : Shri Prasoon Kabra, Sr. D.R. Respondent by : Shri S. K. Sodhwani, A.R. ORDER Per Waseem Ahmed, Accountant Member The captioned appeal has been filed at the instance of the Revenue against the appellate order of the Commissioner of Income Tax(Appeals)-7, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)- 7/383/15-16 dated 14.10.2015 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) dated 12.01.2015 relevant to Assessment Year (AY) 2012-13. 2. The grounds of appeal raised by the Revenue are as under:- 1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance made by the AO u/s.40(a)(ia) of the Act amounting to ₹ 10,77,754/-, without properly appreciating the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in their respective books of accounts and these parties have paid the taxes. Therefore, the assessee should not be treated as assessee in default u/s 201(1) of the Act. Accordingly, no disallowance on account of non- deduction of TDS can be made. The assessee also submitted that these Forms 26A were to be filed with the DGIT (Systems) or any person authorized by DGIT (Systems) as per the Rule 31ACB of Income Tax Rule. However, this requirement to file the certificate to DGIT (Systems) was inserted on 19-02-2013. Thus, during the relevant time, there was no authority prescribed for filing the requisite form as discussed above. The assessee further submitted in respect of interest paid to the party mentioned at Serial No. 5 i.e., Barclays Investments and Loans (India) Limited that it had filed a certificate u/s 195(3) of the Act to the assessee for not deducting the TDS. Therefore, no TDS was deducted on the payment of interest to Barclays Investments and Loans (India) Limited. The ld. CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under : 4.4.1 A perusal of the submissions made by the appellant during the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prescribed form to the [Assessing] Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1) Thus, since the appellant company was exempted from deduction of tax at source in respect of interest paid to Barclays Investments and Loans (India) Ltd., no disallowance u/s. 40(a)(ia) was called for. In view of the discussion above, the disallowance of ₹ 10,77,754/- is deleted. Ground of appeal No 1 is accordingly allowed. Being aggrieved by order of ld. CIT(A) Revenue is in appeal before us. Both the parties before us relied on the order of authorities below as favorable to them. 6. We have heard the rival contentions and perused the materials available on record. The issue in this instant case relates to the expenses claimed by the assessee without deducting TDS. The ld. AR before us inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, 35[has not been paid on or before the due date specified in sub-section (1) of section 139 :] 36[Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] The following second proviso shall be inserted in sub-clause (ia) of clause (a) of section 40 by the Finance Act, 2012, w.e.f. 1-4- 2013 : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1)of section 201, then, for the purpose of this sub-clause, it shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd., (supra) we hold that the claim of the assessee for the interest expenses cannot be denied due to non deduction of TDS under section 194A r.w.s.40(a)(ia) of the Act. About the interest payment to the party mentioned at Serial No.5 i.e. Barclays Investments and Loans (India) Limited, we note that it has filed a certificate u/s 195(3) of the Act to the assessee for the deduction of TDS at NIL rate. Therefore, in our considered view there was no liability for the deduction of TDS on the payment of interest to Barclays Investments and Loans (India) Limited. Accordingly, we do not want to disturb the finding of the ld. CIT-A. Thus we direct the AO to delete the same. Thus the ground of appeal of the Revenue is dismissed. 7. The second issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO for ₹ 47,20,260/- on account of infringement of the law. 8. The Assessee during the year has incurred an expense of ₹ 47,20,260/- under the head of sales promotion expenses. The assessee claimed that it had supplied UPS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. In fact, the sales promotion expenses represent the product supplied to the Govt. Hospital in pursuance to the purchase order issued by the Govt. of Gujarat. The ld. CIT(A) after considering the submission of the Assessee deleted the observation made by the AO by observing as under: 6.2 I have considered the assessment order and the submissions made by the appellant. A perusal of the assessment order shows that the AO had disallowed the amount of ₹ 47,20,260/- debited as sales promotion expenses in view of CBDT Circular No. 5 of 2012. This Circular was issued by the CBDT to curb the practice of pharma companies offering gifts for promotion of their products. The appellant has submitted during appellate proceedings that it was not a pharmaceutical company but was engaged in the business of supplying medical equipments imported from other countries. Hence, the said Circular was not applicable to it. After a perusal of the submissions made by the appellant, I am of the opinion that disallowance of sales promotion expenses by applying provisions of Circular No.5/2012 cannot be made since the appellant is not a pharmaceutical company. The items which were given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not fall under the category of pharmaceutical and allied health Sector Industries. Therefore, the Circular issued by the CBDT cannot be applied to the instant case. Ld. AR further submitted that the products were supplied in pursuance to the purchase order issued by the Govt. of Gujarat, which is placed on Pages 23 to 28. Therefore it cannot be concluded that the products were supplied free of cost. The ld, AR further submitted that the Circular issued by the CBDT is not applied retrospectively. In this regard, the ld. AR relied on the order of Mumbai Tribunal in the case of Macleods Pharmaceuticals Ltd vs. ACIT reported in 161 ITR 291. The ld. AR in support of his claim also relied on the order of this Jurisdictional Tribunal in the case of M/s. Cadila Pharmaceutical Ltd vs. DCIT in ITA No.1117/Ahd/2012. The Ld. DR in his rejoinder submitted that if products were supplied to the Government Hospital in pursuance to the purchase order, then it should not be shown under the head sales promotion expenses. Rather it should have been shown in the financial Statement as purchase and sales of the goods. The ld. AR in his rejoinder submitted that the products supplied to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was observed as under : The task of interpretation of the laws is the exclusive domain of the courts. However, - this is what Shri Ramachandran really has in mind - circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory power under section 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of the Act. The Tribunal, much less the High Court, is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to the assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. But that is not the same thing as saying that such circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is, however, support of certain judicial observations for the view that such circulars constitute external aids to construction. In view of the above, we hold that no reliance can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TGC, Focus, Post Processing and Frame Filters. 8 Magnification 4 (both in live/ Frozen mode) 9 General Measurements Distance, Velocity, volume, Area and Circumference. Auto Spectral Doppler calculation in live and post freeze images. 10 Application specific measurements, calculations and report formats for. Obstetrics (OB lables, Rations, Art, Growth curves, Bio Physical score) Gynaecology, Abdomen, Urology Cardiology and small parts user aditable report formats. 11 Image labeling aids Application specific body marks, annotations and multi-directional arrows. 12 Non-volatile image and report memory storage and retrieval of up to 500 images and 500 reports. 13 Key board Alphanumeric Key board with special character keys. 14 External Interface 2 separate USB ports. DICOM III compatible. 15 Machine should have inbuilt hard di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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