TMI Blog2020 (9) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... d show that the assessee was maintaining separate books of account in respect of its various units, allocation of common expenses to different units by itself is a debatable issue. That being the case, the Assessing Officer having dealt with such debatable issue in the assessment order, it cannot be dealt with again in rectification proceedings under section 154 of the Act which is only meant to rectify mistakes apparent on the face of record. - Decided against revenue. Disallowance of deduction claimed u/s 80IC - HELD THAT:- Similar allocation of R D expenses and depreciation on Head Office assets were made in assessee s own case in assessment year 2009 10. The Tribunal while deciding the issue [ 2013 (10) TMI 1541 - ITAT MUMBAI] restored the issue to the Assessing Officer. Further, while considering identical issue in assessee s own case in the assessment year 2010 11, the Tribunal following its order in assessment year 2009 10 also restored the issue to the AO for re adjudication. Facts being identical, respectfully following the consistent view of the Tribunal in assessee s own case as noted above, we restore the issue to the Assessing Officer for re adjudication after du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is eligible to claim deduction u/s 80IC - HELD THAT:- Tribunal while deciding assessee s appeal for the assessment year 2010 11 has directed the Assessing Officer to allow the expenditure incurred towards packing and delivery charges, analytical expenses, advertisement and sales promotion expenses, whereas, directed him to re adjudicate afresh the issue of reallocation of R D expenses and depreciation on Head Office assets to the Baddi unit. Facts being identical, respectfully following the consistent view of the Tribunal in assessee s own case as noted above, we allow assessee s claim of expenses with regard to packing and delivery charges, analytical expenses, advertisement and sales promotion expenses. Whereas, the issue relating to re allocation of depreciation on Head Office assets and R D expenses are restored back to the Assessing Officer for fresh adjudication after providing due opportunity of being heard to the assessee. Ground is partly allowed. - ITA no.6532/Mum./2017, ITA no.6533/Mum./2017, ITA no.4591/Mum./2017, ITA no.4536/Mum./2017, ITA no.4537/Mum./2017, ITA no.4628/Mum./2017, ITA no.4629/Mum./2017 - - - Dated:- 3-9-2020 - Shri Saktijit Dey, Judicial Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by an amount of ₹ 4,07,02,900. Against the assessment order so passed, the assessee preferred appeal before the first appellate authority. In the meanwhile, the Assessing Officer, alleging incorrect allowance of deduction under section 80IC of the Act as well as R D expenses under section 35 of the Act, initiated proceedings under section 154 of the Act and ultimately passed an order under section 154 of the Act on 29th July 2015. In the said order, the Assessing Officer held that while completing the assessment, the Assessing Officer has wrongly allocated the actual revenue expenditure instead of total R D expenditure including the amount on which the assessee had claimed deduction under section 35(2AB) of the Act. Further, the Assessing Officer held that the deduction of R D expenditure has to be allowed as per the amount mentioned in Form no.3CL, issued by the DSIR. Against the order passed under section 154 of the Act, the assessee preferred appeal before the first appellate authority. 6. After considering the submissions of the assessee in the context of the facts and material on record, learned Commissioner (Appeals) observed that the issues on which the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and the entire issue relating to the allocation of expenditure to the Baddi unit was subject matter of the appeal. As rightly observed by learned Commissioner (Appeals), while completing the assessment under section 143(3) of the Act, the Assessing Officer has allocated the common expenditure including R D expenditure to different units on pro rata basis. It is also a fact that in the assessment order, the Assessing Officer has never given any finding that the eligible deduction under section 35 of the Act has to be allocated to various units. Thus, when the Assessing Officer after applying his mind to the facts and material on record in the course of assessment proceedings has computed deduction under section 80IC of the Act on re allocation of certain expenditure, proceedings under section 154 of the Act could not have been initiated only because it is felt that certain expenditure has been improperly allocated. When the facts on record show that the assessee was maintaining separate books of account in respect of its various units, allocation of common expenses to different units by itself is a debatable issue. That being the case, the Assessing Officer having dealt with such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d disallowance before learned Commissioner (Appeals), however it was unsuccessful. The learned Counsel for the assessee submitted, while deciding similar issue in preceding years the Tribunal has restored the issue to the Assessing Officer. 13. The learned Departmental Representative also agreed with the aforesaid submissions of the learned Counsel for the assessee. 14. We have considered rival submissions and perused the material on record. The Head Office expenses which were allocated to the Baddi unit by the Assessing Officer are as under: R D Expenses ₹ 3,26,94,848 Depreciation on Head Office Assets ₹ 80,08,052 Total: ₹ 4,07,02,900 15. It is seen from the material on record that similar allocation of R D expenses and depreciation on Head Office assets were made in assessee s own case in assessment year 2009 10. The Tribunal while deciding the issue in ITA no.4478/Mum./2012, dated 9th October 2013, restored the issue to the Assessing Officer. Further, while considering identical issue in assessee s own case in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal Representative submitted, the disallowance made by the Assessing Officer should be restored. 21. The learned Counsel for the assessee strongly relying upon the observations of learned Commissioner (Appeals) submitted, MCI Regulations are applicable only to the doctors and not pharmaceutical companies. Therefore, by relying upon MCI guidelines, the expenditure claimed by the assessee cannot be disallowed. Further, he submitted, CBDT circular no.5 of 2012 dated 1st August 2012, cannot enlarge the scope of MCI guidelines or the provisions of the Act in the absence of any enabling provisions. Therefore, even the CBDT circular no.5 of 2012 cannot be pressed into action to disallow assessee s expenditure irrespective of whether such circular will apply prospectively or retrospectively. Further, he submitted, identical issue has been decided in favour of the assessee in its own case in the preceding assessment years. Additionally, the learned Counsel for the assessee submitted that the issue is otherwise squarely covered by the following decisions of the Tribunal: i) Medley Pharmaceuticals Ltd. v/s DCIT, ITA no.2344/ Mum./2018, dated 22.07.2020; ii) DCIT v/s PHL Pharmace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved, though, CBDT can tone down the rigors of law in order to ensure a fair enforcement of the provisions by issuing circulars for clarifying the statutory provisions, however, it is divested of all its power to create a new impairment adverse to an assessee or to a class of assessees without any sanction or authority of law. The aforesaid legal propositions have been subsequently reiterated in a number of decisions rendered by the Tribunal which are as under: i) Aristo Pharmaceuticals Pvt. Ltd. v/s ACIT, 107 taxmann.com 119; ii) Medley Pharmaceuticals Ltd. v/s DCIT, ITA no.2344/ Mum./2018, dated 22.07.2020; and iii) Aishika Pharma Pvt. Ltd. v/s ITO, 106 taxmnn.com 192 (Del.). 24. Thus, from the ratio laid down in the aforesaid decisions, it can be safely concluded that neither the MCI Regulations 2002 nor the CBDT circular no.5 of 2012 dated 1st August 2012, would be applicable to the pharmaceutical companies. That being the case, the expenditure incurred by the assessee cannot be disallowed alleging infraction of law in terms of Explanation 1 to section 37(1) of the Act. The decisions relied upon by the learned Counsel for the assessee clearly supports the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f learned Commissioner (Appeals), we dismiss the ground raised by the Revenue. 28. In the result, Revenue s appeal is dismissed. ITA no.4536/Mum./2017 Assessee s Appeal A.Y. 2012 13 29. The only issue in dispute in this appeal is in relation to part disallowance of deduction claimed under section 80IC of the Act by re allocating certain expenditure to Baddi unit which is eligible to claim deduction under section 80IC of the Act. As discussed earlier, the assessee in the return of income filed for the impugned assessment year had claimed deduction under section 80IC of the Act in respect of its manufacturing unit at Baddi. During the assessment proceedings, the Assessing Officer while verifying assessee s claim under section 80IC of the Act was of the view that certain commission and Head Office expenses which have not been allocated to the Baddi unit should be allocated on pro rata basis. Accordingly, he compared the total sales as against the sales effected by the Baddi unit and found that the sale of Baddi unit works out to 35% of the total sales. Thus, he allocated 35% of the expenditure incurred under the head packing and delivery charges, analytical expenses, ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses. Whereas, the issue relating to re allocation of depreciation on Head Office assets and R D expenses are restored back to the Assessing Officer for fresh adjudication after providing due opportunity of being heard to the assessee. Ground is partly allowed. 31. In the result, assessee s appeal is partly allowed. ITA no.4591/Mum./2017 Revenue s Appeal A.Y. 2012 13 32. The only dispute in the present appeal relates to deletion of disallowance of expenditure incurred towards gift/freebies given to doctors. 33. This issue is identical to the issue raised in grounds no.1 to 4 of ITA no.4629/Mum./2017. Following our decision therein, we uphold the order of learned Commissioner (Appeals) by dismissing the grounds raised by the Revenue. 34. In the result, Revenue s appeal is dismissed. ITA no.6532/Mum./2017 Assessee s Appeal for A.Y. 2013 14 ITA no.6533/Mum./2017 Assessee s Appeal for A.Y. 2014 15 35. The first common issue raised in ground no.1, in both the appeals relates to disallowance of expenditure incurred towards providing gift/freebies to doctors. 36. As could be seen, though, learned Commissioner (Appeals) had allowed the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X
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