TMI Blog2019 (9) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... PER Ms. MADHUMITA ROY - JM: The bunch of appeals filed by the assessee are directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-2, Ahmedabad on the different dates under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to the Act ) arising out of the order passed by the Assessing Officer whereby and whereunder the disallowance of professional fess made to the Doctors has been allowed as business expenditure u/s 37(1) of the Act upon deletion of addition made by the Assessing Officer for Assessment Year 2011-12, 2012-13, 2013-14 and 2014-15 respectively. Since all the appeals relate to the same assessee, the same are heard analogously and are being disposed of by a common order. 2. Appeal Being ITA No.2380/Ahd/2015 is taken as a lead case. ITA No.2380/Ahd/2015 for A.Y. 2011-12: 3. The short point involved in this particular matter is this as to whether the processional fees paid to the Doctors as Medical Advisors/ Sr. Consultant/ Scientific Consultant can be allowed as business expenditure within the provision of section 37(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports and such reports in the prescribed form are to be submitted to the Drug Controller and approval has to be obtained. In this procedure, the Appellant has not submitted the role of Doctors to whom professional fees are paid as to how they have conducted clinical trials. He has also questioned as to who were the patients on whom such clinical studies were conducted. (iv) The Appellant had submitted copies of certificates issued by Scientific Consultants or Medical Advisors which provide comprehensive details about the services rendered during the FY 2010-11 to the Appellant. With reference to this it is observed by the Assessing Officer that the Doctors have issued identical certificates mentioning different services provided as per the agreements. (v) No basis for the professional fees paid to Doctors for such services was given. (vi) The Appellant had explained that the expenditure was covered by clause (g) 'Affiliation' whereby a medical practitioner may work for pharmaceutical and healthcare industry in advisory capacity, as consultant, researcher, or in any other professional capacity and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Learned CIT(A). On the contrary, the Learned DR relied upon the judgment passed by the Hon ble Himachal Pradesh High Court in the matter of Indian Pharmaceutical Industry (SSI)-vs-CBDT. He further contended that expenditure has been incurred by the assessee for the purpose which is restricted by the Indian Medical Council (professional conduct etiquette and ethics) Regulations 2002 whereby and whereunder the prohibition has been imposed upon any medical practitioner or their professional associates from accepting any gift, travel facility, hospitality, cash or monetary grant from any pharmaceutical and allied health sector Industries. He, further relies upon Circular being No.5/2012. Finally, the Learned DR relied upon the order passed by the Learned AO. The Learned Assessing Officer has observed that the said payment made to the Doctors as professional fees is restricted by MCI Guidelines and CBDT Circular No.5 of 2012 as well as the Judgment passed by the Hon ble Himachal Pradesh High Court and also the guidelines framed by the Medical Council of India. Those professionals are prohibited from accepting any gift, travel facility, hospitality, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entary evidences in support of the claim of the assessee regarding payment as well as the agreement executed with doctors, confirmation of such doctors as well as the details of services rendered by them, the ledger accounts corresponding with doctors, the scientific brochures, training manuals, research papers published by eminent doctors in respect of the products developed by the appellant company were also considered by the first appellant authority as it appears from the order impugned before us. 5. Heard the respective parties, perused the relevant materials available on record including the judgments relied upon by the respective parties. It further appears from the records that the Learned CIT(A) while holding the issue in favour of the assessee by deleting the addition made by the Learned AO observed as follows: On a careful consideration of entire facts of the case, it is noted that the Assessing Officer has not disputed the appointment of Doctors and the services as per the agreements. However, he has disallowed the claim mainly for want of documentary evidence for the services as stated in the confirmation provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... octors are related and hence they are paid higher amount. As such, the payment is made for the services rendered by Doctors, as per the agreement and out of c6mmercial expediency. It is settled legal law that revenue could not sit in the arm's chair of the assessee and decide as to how affairs of the business were to be run and wasteful or excessive expenditure was to be curtailed. The question of commercial expediency was to be judged by the assessee and not by the Assessing Officer. The appellant has rightly placed reliance on the decision of Hon'ble Delhi High court in the case of CIT V/s. Oracle India (p) Limited, which squarely applies to the facts of the case. The Appellant has also explained that the payment is made by cheque and TDS has been deducted. The details submitted by appellant clearly suggest that it has discharged the onus casted upon it to prove that genuine business expenditure has been incurred and claimed as revenue expenditure in return of income. The AO has not brought on record any contrary evidence to prove that the payments are not genuine. The appellant has rightly placed reliance on the judgement of Hon'ble Gujarat High co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, we see no infirmity in the order of CIT(A), deleting the disallowance. His order on this is issue is upheld The Hon'ble Ahmedabad ITAT in the case of ACIT V/s R.N. Dobaria (I.T.A. No.1788 / Ahd/2009) vide its order dated 05 April 2013 while dealing with disallowance of sub-contract expenses has also held as under: 7. We have considered the rival submissions and perused the material on record. It is an undisputed fact that the assessee submitted complete names, addresses, PAN, confirmation of I T Returns, bank statement of the sub-contractors along with details of proof of payment before A.O. Ld. CIT(A) and also before us. Ld. CIT(A) while deleting the addition has given finding that the book results of the assessee have improved considerably during the current year as compared to the earlier year and the assessee has fully discharged the onus of proving the sub-contract expenses. He has further held that the A.O. has not brought any tangible evidence on record to prove that the expenses were not genuine and has made ad-hoc disallowance of 25% and the aforesaid finding of Ld. CIJ(A) could not be controverted by the revenue by bringing- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussed herein above. The AO was, therefore, not right to conclude that the payment is prohibited by the Circular No. 5 of CBDT and is not admissible under Section 37(1) of the Act. In view of the above discussion, I am of the considered opinion that the AO was not justified in making disallowance of professional fees of ₹ 2,29,16,147/- as same is an allowable business expenditure u/s 37(1) of the Act. The disallowance made by him is therefore directed to be deleted. The grounds of appeal are accordingly allowed. Apart from that, the chart given by the appellant regarding the details of the medical professionals whose professional fees are in question has also been scanned by the first appellate authority in the order impugned before us. The judgment passed by the Hon ble Jurisdictional High Court in the case of CITvs- Mundra Port and Sez Ltd. reported in 223 taxman 150 wherein identical issue has been finalized to this effect that when payment had been made through banking channel and tax was deducted at source and the party was also not found to relate to the assessee. The Assessing Officer cannot treat the expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bribe and payment of bribe by public servants is held to be an offence and the Parliament has passed legislation for preventing the same, merely because those laws are not applicable to private persons, it cannot be said that it is moral, deceiving or paying bribe is a crime. Persons indulging in the same cannot be protected by law Courts. The Courts cannot extend their aid to uphold such transactions. In that view of the matter, even if it is not an offence as contended certainly, it is immoral and it causes injury to public and therefore the expenditure incurred in such immoral acts cannot be construed as expenditure incurred for the purpose of profits and gains of business or profession and the benefit of deduction or allowance under the Parliamentary legislation cannot be extended to such persons or to such expenditure. Such a question would fall within the Explanation-of s. 37 and is not deductible under s. 37.- J.K Panthaki Co. v. ITO (2011) 57 DTR (Bang) (Trib) 233 : (2011) 139 TTJ (Bang) 337affirmed. (Para 45) 13.2.9 In view of the discussion as above, the objection raised by the assessee is rejected.' 28. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature and, thus, not applicable to case of assessee - Held, yes - Whether, further, since goods were supplied to hospitals in pursuance to purchase order, it could not be concluded that products were supplied free of cost; thus, claim of assessee of expenditure under head sales promotion expenses was to be allowed - Held, yes [Para 10] [In favour of assessee] Taking into consideration the entire aspect of the matter, we are of the considered opinion that the professional fees paid to the doctors to the tune of ₹ 2,29,16,147/- is not in violation of either MCI Guidelines or CBDT Circular as discussed above and hence the same is allowable business expenditure u/s 37(1) of the Act which has been taken into consideration in its proper prospective by the Learned CIT(A). Thus this Court does not find any infirmity in the order passed by the Learned CIT(A), so as to warrant interference. The question is accordingly answered in the affirmative, i.e. in favour of the assessee and against the Revenue. Consequently, appeal fails and is accordingly dismissed. 6. In the result, all the revenue s appeals are dismissed. This Order pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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