TaxTMI 
TaxTMI 
2018 (1) TMI 1671
X X X X Extracts X X X X
X X X X Extracts X X X X
....xplanation to Sec.37(1) of the Act and disallowed the expenses claimed by the assessee to the extent of Rs. 2,31,93,985/- under the head 'Sales Promotion Expenses' and Rs. 2,40,97,174/- under the head 'Other Selling Expenses' on the ground that the same were with regard to providing gifts/freebies to Doctors and Medical Practitioners and the same was against the Medical Council Act, 1956 in view of the amendment made to the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 imposing a prohibition on the Medical Practitioner and their Professional Associations from taking any gift, travel facility, hospitality, cash or monetary grant from the pharmaceutical and allied sector industries. It was a submission that on appeal, the Ld.CIT(A) had granted the assessee partial relief on the ground that the amendment to the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 had been made w.e.f. 14.12.2009 and therefore till 14.12.2009, the amendment of the gifts/freebies to the Doctors and Medical Professionals did not fall within the purview of the explanation to Sec.37(1) of the Act. It was a submission that to the extent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e also has been considered wherein in Para No.7.2 of the said order, the Co-ordinate Bench of this Tribunal has held as follows: 7.2 During the appellate proceedings, the assessee's counsel submitted before the Ld.CIT(A) that the appellant company, during appellate hearings, submitted that the company was engaged in the manufacturing of mainly "Zincovit", a healthcare supplement, but not a pharmaceutical product. In order to create awareness of the product and popularize it, the best persons were the medical practitioners only. The Company also claimed that the above sales promotions expenses and other selling expenses are mainly in the forms of refrigerators, LCD TVs, Laptops, gold coins etc, which are mainly intended to disseminate the information to the medical practitioners and from them to the ultimate consumers. Therefore, these expenses are essentially advertisement expenses for creating awareness and to promote sales. The appellant further claimed that it is neither engaged in the manufacturing of any pharmaceutical product nor prohibited by any law from incurring such expenses. Hence the appellant claimed that the above expenses, which are incurred wholly and exclusively....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gulations) on 10.12.2009 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries. 3. Section 37(1) of Income Tax Act provides for deduction of any revenue expenditure (other than those falling under Sections 30 to 36) from the business Income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense, if the same has been incurred for a purpose which is either an offence or prohibited by law. Thus, the claim of any expense incurred in providing above mentioned or similar freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under Section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid freebees and claimed it as a deductable e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by law shall not be deemed to have been incurred for the purpose of business or profession. The sum and substance of the circular is also the same. In case the assessing authorities are not properly understanding the circular then the remedy lies for each individual assessee to file appeals under the Income-tax Act but the circular which is totally in line with Section 37(1) cannot be said to be illegal. In fact para 4 of the circular quoted hereinabove itself clarifies that the value of the freebies enjoyed by the medical practitioner is also taxable as business income or income from other sources depending on the facts of each case. Therefore, if the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the assessing officer that the expense is not in violation of the Medical Council Regulations referred to above. 4. We, therefore, find no merit in the petition, which is accordingly rejected. No costs. 8. A perusal of the decision of Co-ordinate Bench of this Tribunal in the assessee's own case as also the decision o....