TMI Blog2022 (6) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sector health industry. We are of the considered view that the CIT(A) has rightly upheld the order by relying on the identical issue decided in Hon ble Rajasthan High Court [ 2017 (12) TMI 931 - RAJASTHAN HIGH COURT ] . The Commissioner of Income Tax (Appeals) after considering the relevant facts has rightly held that the expenses claimed by the assessee is allowable u/s.37(1) of the Income Tax Act, 1961. Thus, we do not find any merit in the case of the Revenue. - ITA. No. 11/JP/2022 - - - Dated:- 13-6-2022 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Revenue : Shri A.S. Nehra (Addl. CIT) For the Assessee : Shri P.C. Parwal ( C.A.) ORDER PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the Revenue directed against the order of the National Faceless Appeal Centre, Delhi (hereinafter called as NFAC ) dated 23.11.2021 for the Assessment year 2013-14. 2. The Revenue raised the following additional ground of appeal:- 1. Whether in the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 5,37,270/- in view of the provisions of the Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wgich was submitted by the AR in his paper book at page number 8 relates to the expenses on account of Rental Expenses paid. Secondly, the Ld DR is questioning the Ledger Account 5 profession promotion Expenses, where the asessee has TDS commission for (refer Cases). Pages 9 to 13 of paper book of AR. there is an Audit objection Thirdly, The Ld DR submitted that according to the CBDT Circular, No 05/2012 dated 01.08.2012,the assesee has to be disallowance u/s 37 and the AO accordingly made disallowance Rs.5,37,270/-. Further, the Ld DR submitted that the AO has taken appropriate findings after due consideration of the facts and circumstances of the case. 7. The Ld AR for the assesee has reiterated his submissions, which was taken on record by the CIT (A). Before us the Ld AR for assessee submitted a detailed Written submissions which are as under :- 1. The assessee is running a hospital in the name of his proprietorship concern M/s Deep Hospital Research Centre and derives income from house property, profession, capital gain other sources. 2.During the year assessee debited a sum of Rs.5,37,270/- on account of professional promotion expenses. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to be disallowed as per section 37 of the Act read with CBDT Circular No.05/2012 dated 01/08/2012. Accordingly he made disallowance of Rs.5,37,270/-. 6. Against the order of AO, assessee filed an appeal before Ld. CIT(A) challenging the order passed u/s 154 of the Act and on merits of the case. The Ld. CIT(A) after relying on the order dt. 06.03.2018 of Hon ble ITAT (supra) allowed the appeal of assessee on merits without giving any finding on the validity of order passed u/s 154 of the Act. Submission:- 1. At the outset it is submitted that since in the present case the tax effect does not exceed Rs.50 lacs, the appeal filed by the department is not maintainable in view of CBDT Circular No.17/2019 dt. 08.08.2019. 2. On merits it is submitted that professional development expense incurred by the assessee is not hit by the provisions of section 37 read with Circular No.05/2012 dt. 01.08.2012. In fact this circular is applicable on the expenditure incurred in providing freebies to medical practitioner by pharmaceuticals and allied sector health industry which is not applicable in the present case as the payment made by the assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -13) .We are of the opinion that AO has not doubted the genuineness of the expenditure incurred by the assessee as referral charges but the disallowance was made by the AO only on the ground that the said expenditure is hit by the explanation to Section 37(1) being prohibited. When the genuineness of the expenditure is not doubted then the claim of the assessee cannot be disallowed. 9. We are of the view that the AO has wrongly interpreted the CBDT circular. No 05/2012 dated 01/08/2012. The Ld. AR for assesee submitted that the circular is not applicable for the present case, it is applicable for expenditure incurred in providing freebies to medical practitioner by pharmaceuticals and allied sector health industry. We are of the considered view that the CIT(A) has rightly upheld the order by relying on the identical issue decided by the Jaipur ITAT in the case ITA No.409/JP/2004 dated 06.03.2018 and along the same order of Hon ble Rajasthan High Court in ITA No 485/2008. 10. We further note that an identical issue has been considered by the Coordinate Bench of this Tribunal vide order dated 06.03.2018 in case of ACIT Vs. Dr. Anil Gupta in ITA No. 409/JP/2004 and the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, it could not succeed as the ld. CIT(A) has decided in this issue in para 4.3 is as under:- 4.3 I have carefully considered the findings of the A.O. and also the submission of the appellant. It may be noted that as per explanation to the sec. 37(1) of IT Act any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. In this background it may be noted that as per the regulations issued by MCI, Notified on 14.12.2009 which is a statutory body of Govt. of India certain payments/expenditure incurred on account of gifts/travel facilities/hospitality and cash and monitory grants to the medical practitioners by any pharmaceutical companies or any individual dealing in health care for pharmaceutical sectors was prohibited and accordingly as per explanation to Sec. 37(1), such claim of expenditure under the income tax act was not to be allowed. There is no dispute on the fact that such prohibition came into effect w.e.f. 14.12.2009 as also that the assessee is a pharmaceutical c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i High Court in case of Max hospital, Pitampura vs. Medical Council of India; ILR (2014) 1 Delhi 620 where expenses are required to be allowed to the hospital as business expenses and wherein the Delhi High court has observed as under:- In the counter affidavit filed by the Respondent, it is not disputed that the MCI under the 2002 Regulations has jurisdiction limited to taking action only against the registered medical practitioners. It s plea however, is that it has not passed any petitioner cannot have any grievance against the impugned order. At the same time, it is stated that only simple observations were made by the ethics committee of the MCI about the state of affairs in the petitioner hospital and the same did not harm any legal right or interest of the petitioner. It will be apposite to extract the relevant paragraphs of the counter affidavit filed by the MCI as under:- 4. Preliminary objections: (i) That the instant writ petition is not maintainable under Article 226 of the Constitution of India as there is not cause of action for filing of this instant petition. The MCI has not passed any order against the petitioner in the impugned minutes of mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lities available in the petitioner hospital and since it had no jurisdiction to go into the same, the observations were uncalled for an cannot be sustained. 7. he has also relied upon the decision in case of Dr. T.A. Quereshil vs. Commission of Income Tax reported in (2006) 287 ITR 0547 where the expenses were allowed for business loss as a result of seizure of heroine. 8. However, counsel for the respondent Mr. Jain contended that action of the respondent unethical and in view of the decision of Punjab Haryana High Court in case of Commissioner of income Tax vs. Kap Scan and Diagnostic Centre P. Ltd. reported in (2012) 344 ITR 476 and also the decision of Supreme Court in case of M/s Maddi Venkataraman and CO. (P) Ltd. vs. Commissioner of Income Tax reported in (1998 299 ITR 534 wherein para 24 and 25 it has been had as under:- 24. In the instant case the assessee had indulged in transactions in violation of the provisions of Foreign Exchange ( Regulation) Act. The assessee s plea is that unless it entered into such a transaction, it would have been unable to dispose of the unsold stock of inferior quality of tobacco. In other words, the assessee would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that view of the matter, we are of the opinion that the CIT(A) observations which are made by the CIT are required to be accepted. The explanation cannot come into play on appeal which was filed at this stage. Even otherwise in income tax proceedings the medical ethics will not be taken into consideration. At the most even if it is a professional misconduct it is to be dealt with my Medical Council of India. The income tax authority cannot decide the medical ethics when the original authority has partly allowed the expenses . Respectfully the following the decision of the jurisdiction High Court (supra) we set aside the orders of the authorities below and allow the claim of the assessee. We make it clear that the AO has not doubted the genuineness of the expenditure incurred by the assessee but the disallowance was made by the AO only on the ground that the said expenditure is hit by the explanation to Section 37(1) being prohibited by the MCI Regulations, 2002 issued on 10.12.2012 w.e.f. 14.12.2012 and consequently CBDT Circular no. 5/2012 dated 01.01.2012. Thus, when the genuineness of the expenditure is not doubted then the claim of the assessee cannot be disallowed in v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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