TMI Blog2018 (4) TMI 1813X X X X Extracts X X X X X X X X Extracts X X X X ..... 13-14 onwards. Order passed by the PT. VISHWANATH SHARMA [ 2008 (2) TMI 423 - ALLAHABAD HIGH COURT] is only deals with the commission expenses whereas no such issue is in question in the present case. Now, coming to the applicability of the circular dated 01.08.2012 is concerned, we are of the view that the same is not applicable retrospectively and in this regard we are also finding support in law settled in DCIT Vs. PHL Pharma (P.) [2017 (1) TMI 771 - ITAT MUMBAI] . Accordingly, we are of the view that the expenses are allowable, therefore, we decide this issue in favour of the assessee against the revenue. - I.T.A. No.80/Mum/2016, ITA. No. 138/Mum/2016 - - - Dated:- 2-4-2018 - Shri R.C. Sharma, AM And Shri Amarjit Singh, JM Revenue by: Shri V. Vidhyadhar Assessee by: Ms. Krupa R. Gandhi ORDER Amarjit Singh, The Revenue as well as assessee have filed the above mentioned appeals against the order dated 30.10.2015 passed by the Commissioner of Income Tax (Appeals)-16, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2011-12. ITA NO. 80/M/2016 2. The Revenue has filed the present appeal against the order dated 30.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing categories: - Category Amount Nature of expense Continued medical education 270520 These expenses are incurred for continuing medical education that helps those in the medical field to maintain competence and learn about new and developing areas of their field. The assessee has incurred a sum of ₹ 1,02,324/-, which is shown to have been reimbursed to Swiss Biogenics Limited towards Galderma Annual Symp 2010 expenses in Colombo, Srilanka. Further, the assessee has incurred a sum of ₹ 1,03,846/- at Hyatt Regency, Delhi for medical education. conference; and other expenses of ₹ 64,350/-. Thus, these come within the mischief of the IMP Regulations. P,G. Grant 1230833 It is incurred to provide a fixed grant to PG students presenting posters at the National Conference- It is not a business related activity. Thus, it comes within the mischief of the IMC Regulations Indian Acne Alliance 561172 It is incurred on group of doctors practicing in Dermatology. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 44,61,914/- for damage/expired goods assuming the contingent liability. The claim of the damage for /expired goods to the tune of ₹ 44,61,914/- was disallowed and added to the income of the assessee. The income of the assessee was assessed to the tune of ₹ 10,30,96,510/- and book profit u/s 115JB of the Act was assessed to the tune of ₹ 7,03,96,640/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) and the CIT(A) allowed the claim u/s 37(1) of the Act to the tune of ₹ 97,93,996/-, therefore, the revenue has filed the present appeal before us. ISSUE NO. 1:- 7. Under this issue the revenue has challenged the allowance of expenses of ₹ 97,93,996/- which was disallowed by the AO in view of the Explanation-1 to Section 37(1) of the Act. Before discussing further, it is necessary to advert on the record that the assessee claimed the sale promotion expenses to the tune of ₹ 2,93,78,445/- under heads. The details of which are hereby given below: - Sr. No. Particulars Amount Claimed Amount disallowed 1 Continued Medical educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has adjudicated the sum of ₹ 14,06,32.438/- as sales and distribution expends. The AO has relied upon the amendmend made in the Indian Medical Council Act, wherein clause 6.8 was inserted w,e.f 10,12.2009. Clause 6.8 introduced a code of conduct for doctors and professional association of doctors in their relationship with pharmaceutical and allied health sector industry. According to this clause, a medical practitioner shall not: a. Receive any gift from any pharmaceutical or allied, health care industry and their sales people or representatives; b Accept any travel facility inside the country or outside, including rail, air, ship, cruise tickets, paid vacations etc from any pharmaceutical or allied health care industry or their representative for self and family members for vacation or for attending conferences, seminars, workshops, CME program me etc as a delegate; c. Accept individually any hospitality like hotel accommodation for self and family members under any pretext; d. Receive any cash or monetary grants from any pharmaceutical and allied healthcare industry for individual purpose in individual capacity under any pretext. 4.4.3. It was pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profession in computing the income chargeable under the head profit or gains of business or profession. The Explanation thereof disallowed an expenditure which is incurred by an assessee for which is an offence or which is prohibited by law. The Explanation thus makes it dear that such an expenditure shall not he treated to be a business or professional expenditure, it is not in dispute behaved the parties and the counsel for the assessee also did not dispute that a Government servant is not entitled to receive any amount in consideration of discharge of his official duty unless provided/permitted the rules and regulations applicable to his conditions of service. The Government doctors were not entitled to realize $such amount for the purpose of prescribing medicines of the petitioner and thereby promoting his business interest. The amount paid to the Government doctors by the assessee dearly comes within the category of illegal gratification. or bribe . It is also not in dispute that an illegal gratification or bribe is an offence under Prevention of Corruption Act, 1988. Earlier an offence under s. 161 IPC The conduct rules applicable to Government servant also prohibit such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtisement of its products. Seminars are organized by the IADVL large number of doctors and Specialists participate in it. Therefore, having a stall and participation in the congress is very useful in promoting and advertising the products of the assesses company. Jt was once again reiterated -hat the expenses were exclusively incurred for installation of stall and fixed fee payment required for participation. It was clarified that expenses mentioned against MDVL New year, 1ADVL, State IADVL, Other conference, were not incurred on organization of seminars or giving free gifts, accommodation to doctors or any other favours to doctors. Necessary bills and vouchers relating to above mentioned expenses were also produced during course of appellate proceedings. These expenses incurred were exclusively for participation fee and installation of stall which are not prohibited by the Indian Medical Council Act Therefore, provisions of Explanation -1 to Section 37(1) will not be applicable in respect to payments of ₹ 97,93,996/-. Keeping in view the facts of the case, expenditure for an amount of ₹ 97,93,996/- incurred in connection with installation of stall and participation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is in connection with the expenses of ₹ 1,98,47,412/- is concerned, the claim of the assessee is that the said expenses is not required to be allowed on the basis of the Circular No.5 of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes, New Delhi vide F.No.225/142/20120-ITA-11which was prospective in nature. It is not in dispute that the present assessment year is for the A.Y. 201112 Circular No. 5 and of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes, New Delhi vide F.No.225/142/20120-ITA-11 and was applicable prospectively for the A.Y. 2013-14 onwards. As discussion above, the order passed by the Allahabad High Court (supra) is only deals with the commission expenses whereas no such issue is in question in the present case. Now, coming to the applicability of the circular dated 01.08.2012 is concerned, we are of the view that the same is not applicable retrospectively and in this regard we are also finding support in law settled in DCIT Vs. PHL Pharma (P.) Ltd. (2017) 163 ITD 10 (Mum. Trib.), macleods Pharmaceuticals Ltd. Vs. ADIT (2016) 161 ITD 291 (Mum. Trib.), Syeom formulations India Ltd. (ITA No. 6429/M/2012 (Mum. Trib.) UCB Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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