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TMI Blog2018 (4) TMI 1813X X X X Extracts X X X X X X X X Extracts X X X X ..... and in giving consequential benefit of Rs. 97,93,996/- held as allowable u/s 37(1) of the Act out of the disallowance of business promotion expenses made by the AO." The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the ACIT9(3)(2) be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 4. The brief facts of the case are that the assessee filed its return of income on 30.09.2011 declaring total income to the tune of Rs. 6,80,98,658/-. Thereafter, the assessee filed the revised the return of income on 14.12.2012 declaring total income to the tune of Rs. 6,89,93,188/-. The assessee in its revised return of income declared the book profit to the tune of Rs. 5,95,48,173/-. The return of income was duly processed u/s 143(1) of the I.T. Act. 1961. The case was selected for scrutiny assessment, therefore, notice u/s 143(2) of the Act was issued to the assessee company on 08.09.2012 and 30.07.2013 which were also served upon the assessee. The assessee company was engaged in the business of marketing and trading of dermatology products. The assessee claimed the selling and distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. This expenditure comes within the mischief of the IMC Regulations. Sponsorship local 2770809 The sum of Rs. 27,70,809/- has been incurred on purchase of test kits instruments, which are given to the Doctors. Thus, this expenditure comes within the mischief of the IMC Regulations. Samples 94,29,850 The expenditure of Rs. 18879699 is incurred on manufacture of samples of the company's products, which are given to medical practitioners. As per the assessee, it has incurred this expenditure towards the samples as given to the 600 stockists and the medical practitioners. However, the issue is squarely covered by the CBDT circular because professional autonomy is compromised of the doctor by accepting the free samples from the assessee company. Hence considering the written submission of the assessee the disallowance is restricted to the 50% of the samples cost ie Rs. 94,29,850/- Total 2,93,78,445 6. The assessee also claimed the provision of Rs. 44,61,914/- for damage/expired goods assuming the contingent liability. The claim of the damage for /expired goods to the tune of Rs. 44,61,914/- was disallowed and added to the income of the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account for the year under consideration, the assessee has adjudicated the sum of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business or the 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 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isement 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 Rs. 97,93,996/-. Keeping in view the facts of the case, expenditure for an amount of Rs. 97,93,996/- incurred in connection with installation of stall and participation fees are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 India Pvt. Ltd. Vs. ITO (ITA No. 6681 & 5454/M/2013) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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