TMI Blog2018 (11) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... l-being of the society as a whole and it is in the interest of the patients that the doctors are trained. After going through the details of expenditure so incurred, we found that the expenditure incurred by the assessee is not in violation of the provisions of any statute so as to render it excessive and inadmissible. The expenditure incurred by the assessee is on account of business exigencies and not in violation of any statute. - Decided in favour of assessee. - ITA No.1553/Mum/2016 - - - Dated:- 20-11-2018 - Shri R.C. Sharma, AM And Shri Ram Lal Negi , JM For the Assessee : Shri Madhur Agarwal For the Revenue : Shri Rajore Satish Chandra Ramsevak ORDER PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- 16, Mumbai dated 28/12/2015 for A.Y.2010-11 in the matter of order passed u/s.143(3) of the IT Act. 2. Following grounds have been taken by the assessee:- i. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income-tax (Appeals)-16 ['the CIT(A)'] erred in upholding the action of the Deputy, Commissioner of Income tax - 8(1) (Assessing Officer) in dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, the Hon'ble CIT(A) erred in upholding the disallowance of expenditure amounting to Rs,47,643 incurred for providing lunch and snacks to doctors at various conferences. The Appellant prays that the Assessing Officer be directed to delete the aforesaid disallowance. 5. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the Assessing Officer in levying interest under section 2346 of the Income Tax Act, 1961 ('Act'). The Appellant prays that the Assessing Officer be directed to delete the interest levied under section 2346 of the Act. 6. The Appellant craves leave to add, alter, amend, delete, modify or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing as they may be advised to do so. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in the business of distributing the heart therapy products and related medical equipments manufactured by its group companies. The assessee mainly sells products falling with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales promotion expenditure vide letter dated 20 February 2014. Pursuant to this, the assessee also submitted sample supporting documents in respect of the conference expenditure vide its submission dated 28 February 2014. 8. Our attention was also invited by Mr. Madhur Agarwal to the information called by the AO for details regarding expenditure incurred post the notification of the guidelines issued by Medical Council of India ('MCI') and asked the assessee to submit why the conference expense of ₹ 3,91,10,683 (forming part of the advertisement and sales promotion expenditure) should not be disallowed in terms of the Circular no. 5 ('Circular') dated 1st August 2012 issued by the Central Board of Direct Taxes CCBDT). The assessee vide letter dated 11 March 2014 filed a detailed submission claiming that the conference expenses incurred by the assessee are not hit by the said Circular and accordingly, should not be disallowed. 9. As per learned AR, the expenditure so incurred is not as per the CBDT Circular in so far as the same is applicable only to the expenditure incurred post 14/12/2009 i.e., when the notification relating to MCI guidelines was publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judicial pronouncements relied on by the lower authorities in their respective orders. 14. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR during the course of hearing before us in the context of factual matrix of the case. 15. From the record we found that assessee is engaged in the business of distributing the heart therapy products and related medical equipments manufactured by its group companies. The AO called for details of expenditure incurred on advertisement and sales promotion. The assessee had filed a breakup of the advertising and sales promotion expenditure and also filed detailed submission on allowability of advertisement and sales promotion expenditure vide letter dated 20 February 2014. Pursuant to this, the assessee also submitted sample supporting documents in respect of the conference expenditure vide its submission dated 28 February 2014. During the assessment proceedings, the AO sought the breakup of the advertisement and sales promotion expenditure incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in relation to the sponsoring of conferences like Atlas, CTCOMCON, IACTA etc. These expenses are also not incurred on the doctors/medical practitioners and are incurred wholly and exclusively for the purpose of business. 20. With regard to the expenditure incurred for participation / sponsorship of conference amounting to ₹ 87,36,056/- we found that these expenses represent the sponsorship charges of the conferences, seminars like CTCON, IACTA, CME's etc paid by the assessee. This expenditure is incurred by the assessee to promote and create awareness about its product. These expenses are also not incurred on the doctors/medical practitioners and are incurred wholly and exclusively for the purpose of business. 21. From the record we found that AO has disallowed these expenditure by observing that these expenses are incurred by the staff on behalf of doctors and accordingly is a freebie which is not allowable in the light of circular. As per our considered view these expenses are not in the nature of gifts, travel facilities, hospitality, cash or monetary grants to doctors. The MCI guidelines prohibits accepting gifts, travel facilities, hospitality, cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts of pharmaceutical companies are sold at the counter through prescription, assessee's products are not sold at counter through prescriptions. Also, the patient is not the buyer of the assessee's products rather it is the medical institutions, hospitals to whom the assessee sells its products. 25. We also observe that assessee's high end technological products and to carry out heart valve surgeries, which are very complex in nature, the doctors/surgeons also need training. In the medical conferences, the doctors are also provided skill set training wherein live surgeries are performed so as to educate the doctors about the use of the new technologically advanced products. Considering the need, the assessee nominates few selected doctors/surgeons to attend the training. These doctors/surgeons further provide training to other doctors so as to also make them also aware about the use of Assessee's product. It was also brought to our notice that these life saving devices necessary for the well-being of the society as a whole and it is in the interest of the patients that the doctors are trained. 26. After going through the details of expenditure so incurred, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1956 that it neither deals with nor provides for any conduct of any association / society and deals only with the conduct of individual registered medical practitioners. There is no other interpretation, which is possible under the Act. 20. The intent of the applicability of the MCI Regulations was always to cover only individual medical practitioners, and not the pharmaceutical and medical device companies. Whether there is any contravention of the MCI Regulations or not is a matter which can be decided by the MCI itself and not by the Income-tax Department. Furthermore, the MCI has itself admitted that it has no jurisdiction whatsoever over any association/ society etc and its jurisdiction is confined only to the conduct of the registered medical practitioners. Furthermore, since the said MCI Regulations 2002 contains punitive provisions, it has to be read strictly and consequently it can apply only to Medical Practitioners and Physicians and not to the pharmaceutical companies. Further, MCI Act, 1956 does not apply pharmaceutical companies and consequently MCI Regulations 2002 cannot apply to such companies. 21. CBDT Circular no. 5 of 2012 seeks to disallow exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 different class of persons or particular category of assessee, same cannot be made applicable to all. The regulation of 2002 issued by the Medical Council of India (supra), provides limitation/curb/prohibition for medical practitioners only and not for pharmaceutical companies. Here the maxim of 'Expressio Unius Est Exclusio Alterius' is clearly applicable, that is, if a particular expression in the statute is expressly stated for particular class of assessee then by implication what has not been stated or expressed in the statute has to be excluded for other class of assessee. If the Medical Council regulation is applicable to medical practitioners then it cannot be made applicable to Pharma or allied he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cine is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors but for promotion of its products. The pharmaceutical company, which is engaged in manufacturing and marketing of pharmaceutical products, can promote its sale and brand only by arranging seminars, conferences and thereby creating awareness amongst doctors about the new research in the medical field and therapeutic areas, etc. Every day there are new developments taking place around the world in the area of medicine and therapeutic, hence in order to provide correct diagnosis and treatment of the patients, it is imperative that the doctors should keep themselves updated with the latest developments in the medicine and the main object of such conferences and seminars is to update the doctors of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies. 28. Considering the nature of expenditure so incurred with reference to the judicial pronouncements referred above, we do not find any merit in the action of CIT(A) for upholding the expenditure inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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