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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 30.08.2022 passed by the Ld. Commissioner of Income-tax (Appeals)-National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:
That, the Impugned Order dated 30.08.2022 under Section 250 of the Income Tax Act ("IT Act") passed
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 2 ITA No. 2751/M/2022 AY 2012-13
by the Commissioner of Income by the Commissioner of Income-tax (Appeals) tax (Appeals) National Faceless Appeal Centre (in short "Ld. National Faceless Appeal Centre (in short "Ld. National Faceless Appeal Centre (in short "Ld. CIT(A)), is illegal, arbitrary, based on extraneous CIT(A)), is illegal, arbitrary, based on extraneous CIT(A)), is illegal, arbitrary, based on extraneous consideration, consideration, without without jurisdiction, jurisdictio n, violative violative of of principles of natural justice, contrary to well-settled principles of natural justice, contrary to well principles of natural justice, contrary to well principles principles principles of of of law, law, law, based based based on on on unsubstantiated unsubstantiated unsubstantiated presumptions presumptions presumptions and and and erroneous erroneous erroneous interpretation interpretation interpretation of of of provisions of law. Thus, the Impugned Order is provisions of law. Thus, the Impugned Order is provisions of law. Thus, the Impugned Order is likely to be set aside by this Hon'ble Tribunal; likely to be set aside by this Hon'ble Tribunal; likely to be set aside by this Hon'ble Tribunal; 2. That, the Ld. CIT (A) while passing the Impugned That, the Ld. CIT (A) while passing the Impugned That, the Ld. CIT (A) while passing the Impugned Order has assumed jurisdiction, outside the scope of Order has assumed jurisdiction, outside the scope of Order has assumed jurisdiction, outside the scope of its jurisdiction under the IT Act and has rendered a its jurisdiction under the IT Act and has rendered a its jurisdiction under the IT Act and has rendered a 'conclusive and a sweeping finding that the 'conclusive and a sweeping finding that the 'conclusive and a sweeping finding that the Appellant Company is in violation of "all related Appellant Company is in violation of "all related Appellant Company is in violation of "all related laws" laws" pertaining to sales and marketing of infant pertaining to sales and marketing of infant and child nutrition food traded by the Appellant, and child nutrition food traded by the Appellant, and child nutrition food traded by the Appellant, including the Indian Medical Council (Professional including the Indian Medical Council (Professional including the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (IC Conduct, Etiquette and Ethics) Regulations, 2002 (IC Conduct, Etiquette and Ethics) Regulations, 2002 (IC Regulations') and the Infant Milk Substitutes, Regulations') and the Infant Milk Substitutes, Regulations') and the Infant Milk Substitutes, Feeding Bot Feeding Bottles and Infant Foods (Regulation of tles and Infant Foods (Regulation of Production, Supply and Distribution) Act (in short Production, Supply and Distribution) Act (in short Production, Supply and Distribution) Act (in short 'IMS Act'): 'IMS Act'): 3. That, the Ld. CIT (A) ought to have exercised That, the Ld. CIT (A) ought to have exercised That, the Ld. CIT (A) ought to have exercised jurisdiction and confined the scope of its enquiry jurisdiction and confined the scope of its enquiry jurisdiction and confined the scope of its enquiry limited to its powers conferred upon it under the IT limited to its powers conferred upon it under the IT limited to its powers conferred upon it under the IT Act. In the present case, the Ld. CIT (A) has illegally n the present case, the Ld. CIT (A) has illegally n the present case, the Ld. CIT (A) has illegally assumed jurisdiction under the IMC Regulations and assumed jurisdiction under the IMC Regulations and assumed jurisdiction under the IMC Regulations and IMS Act and has illegally rendered erroneous finding IMS Act and has illegally rendered erroneous finding IMS Act and has illegally rendered erroneous finding that the Appellant company is in violation of "all that the Appellant company is in violation of "all that the Appellant company is in violation of "all related laws" including the IMC Regulations and IMS related laws" including the IMC Regulations and IMS related laws" including the IMC Regulations and IMS Act, which are ex Act, which are ex-facie without jurisdiction and facie without jurisdiction and uncalled for; uncalled for; 4. That, the Ld. CIT (A) ought to have confined its That, the Ld. CIT (A) ought to have confined its That, the Ld. CIT (A) ought to have confined its enquiry and findings limited only to as to whether enquiry and findings limited only to as to whether enquiry and findings limited only to as to whether the order dated 15.03.2016 passed by the Ld. the order dated 15.03.2016 passed by the Ld. the order dated 15.03.2016 passed by the Ld. Assistant Commissioner of Income Tax under Assistant Commissioner of Income Tax under Assistant Commissioner of Income Tax under Section 143 (3) of the IT Act disallowing certain costs ion 143 (3) of the IT Act disallowing certain costs ion 143 (3) of the IT Act disallowing certain costs and expenses incurred by the Appellant Company is and expenses incurred by the Appellant Company is and expenses incurred by the Appellant Company is correct or not as per the provisions of the IT Act. correct or not as per the provisions of the IT Act. correct or not as per the provisions of the IT Act. However, the Ld. CIT (A), while passing of the However, the Ld. CIT (A), while passing of the However, the Ld. CIT (A), while passing of the Impugned Order, has rendered 'conclusive finding Impugned Order, has rendered 'conclusive finding Impugned Order, has rendered 'conclusive finding
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 3 ITA No. 2751/M/2022 AY 2012-13
on an on an erroneous interpretation of provisions of the erroneous interpretation of provisions of the IMC | Regulations and IMS Act, which are beyond IMC | Regulations and IMS Act, which are beyond IMC | Regulations and IMS Act, which are beyond its powers and without jurisdiction; its powers and without jurisdiction; 5. That, it is well settled that a statutory authority, That, it is well settled that a statutory authority, That, it is well settled that a statutory authority, performing administrative or quasi performing administrative or quasi-judicial duty(s), judicial duty(s), must exercise its j must exercise its jurisdiction within the four corners urisdiction within the four corners of the statute and any action taken which is not of the statute and any action taken which is not of the statute and any action taken which is not within the domain of the said authority would be within the domain of the said authority would be within the domain of the said authority would be illegal and without jurisdiction; illegal and without jurisdiction; 6. That, the Ld. CIT (A) being an authority established That, the Ld. CIT (A) being an authority established That, the Ld. CIT (A) being an authority established under the IT Act, ought to have con under the IT Act, ought to have confined itself within fined itself within the four corners of the IT Act and ought not to have the four corners of the IT Act and ought not to have the four corners of the IT Act and ought not to have acted in excess of its authority vested by law. In the acted in excess of its authority vested by law. In the acted in excess of its authority vested by law. In the present present present case, case, case, the the the Ld Ld Ld CIT' CIT' CIT' (A) (A) (A) has has has clearly clearly clearly transgressed the boundary of its jurisdiction and transgressed the boundary of its jurisdiction and transgressed the boundary of its jurisdiction and rendered findings which are beyond i rendered findings which are beyond its jurisdiction ts jurisdiction and thus, the Impugned Order is illegal and bad in and thus, the Impugned Order is illegal and bad in and thus, the Impugned Order is illegal and bad in law; 7. That, the Ld. CIT (A) is not an authority designated That, the Ld. CIT (A) is not an authority designated That, the Ld. CIT (A) is not an authority designated enquire, consider or 'conclusively' render a finding enquire, consider or 'conclusively' render a finding enquire, consider or 'conclusively' render a finding as to whether or not the Appellant company has as to whether or not the Appellant company has as to whether or not the Appellant company has violated the provisions of the violated the provisions of the IMC Regulations or IMS IMC Regulations or IMS Act or any other related law; Act or any other related law; 8. That, the Appellant company was never issued any That, the Appellant company was never issued any That, the Appellant company was never issued any notice/ show cause notice either by the Ld. notice/ show cause notice either by the Ld. notice/ show cause notice either by the Ld. Assistant Commissioner of Income Tax or by the Ld. Assistant Commissioner of Income Tax or by the Ld. Assistant Commissioner of Income Tax or by the Ld. CIT (A) to state its response in relation to the CIT (A) to state its response in relation to the CIT (A) to state its response in relation to the violations violations, if any, of the IMC Regulations or IMS Act , if any, of the IMC Regulations or IMS Act or any other law pertaining to sale and marketing of or any other law pertaining to sale and marketing of or any other law pertaining to sale and marketing of infant and child nutrition food traded by the infant and child nutrition food traded by the infant and child nutrition food traded by the Appellant company. In fact, the Appellant company Appellant company. In fact, the Appellant company Appellant company. In fact, the Appellant company could not have been put to notice to answer the said could not have been put to notice to answer the said could not have been put to notice to answer the said violations violations, even if any, in the proceedings before the , even if any, in the proceedings before the Ld. CIT (A) under the IT Act. Despite the said fact, Ld. CIT (A) under the IT Act. Despite the said fact, Ld. CIT (A) under the IT Act. Despite the said fact, the Ld. CIT (A) has rendered findings which are not the Ld. CIT (A) has rendered findings which are not the Ld. CIT (A) has rendered findings which are not only beyond the scope of its jurisdiction but violative only beyond the scope of its jurisdiction but violative only beyond the scope of its jurisdiction but violative of the principles of natural justice as the Appellant of the principles of natural justice as the Appell of the principles of natural justice as the Appell company was never given any opportunity to company was never given any opportunity to company was never given any opportunity to answer the alleged violations under the IMC answer the alleged violations under the IMC answer the alleged violations under the IMC Regulations or IMS Act or any other related law: Regulations or IMS Act or any other related law: Regulations or IMS Act or any other related law:
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 4 ITA No. 2751/M/2022 AY 2012-13
That, it is well That, it is well-settled position in law that an order settled position in law that an order of a quasi of a quasi-judicial authority given in violation of the judicial authority given in violation of the principles of natural justice is an order without iples of natural justice is an order without iples of natural justice is an order without jurisdiction and a nullity; jurisdiction and a nullity; 10. That the finding of the Ld. CIT (A) that the That the finding of the Ld. CIT (A) that the Appellant company had violated all related laws Appellant company had violated all related laws Appellant company had violated all related laws pertaining to sales and marketing of infant and child pertaining to sales and marketing of infant and child pertaining to sales and marketing of infant and child nutrition food traded by it includin nutrition food traded by it including the IMC g the IMC Regulations and IMS Act is erroneous, based on Regulations and IMS Act is erroneous, based on Regulations and IMS Act is erroneous, based on wrongful interpretation of the provisions of the IMC wrongful interpretation of the provisions of the IMC wrongful interpretation of the provisions of the IMC Regulations and IMS Act by the Ld. CIT (A) in its Regulations and IMS Act by the Ld. CIT (A) in its Regulations and IMS Act by the Ld. CIT (A) in its own subject wisdom; own subject wisdom; 2. Briefly stated, facts of the case are that the assesseecompany Briefly stated, facts of the case are that the assesseecompany Briefly stated, facts of the case are that the assesseecompany is engaged in the business of trading of in the business of trading of ‘infant& ‘children nutrition children nutrition food’. For the year under consideration, the . For the year under consideration, the assessee assessee filed return of income on 30.11.2012 declaring total income of Rs.3,67,59,810/- income on 30.11.2012 declaring total income of Rs.3,67,59,810/ income on 30.11.2012 declaring total income of Rs.3,67,59,810/ under section 139(1) of the Income-tax Act, 1961 (in short ‘the Act’). tax Act, 1961 (in short ‘the Act’). The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. and statutory notices under the Act were issued and complied with. and statutory notices under the Act were issued and complied with. In the scrutiny assessment completed u/s 143(3) of the Act, the In the scrutiny assessment completed u/s 143(3) of the Act In the scrutiny assessment completed u/s 143(3) of the Act Assessing Officer made disallowance sing Officer made disallowance of expenses on account of free expenses on account of free samples samples amounting amounting to to Rs.1,66,083/ Rs.1,66,083/- and and disallowance disallowance of of conference & seminar expenses of Rs.44,66,926/-. On further conference & seminar expenses of Rs.44,66,926/ conference & seminar expenses of Rs.44,66,926/ appeal, the Ld. CIT(A) also upheld the disallowance vide impugned appeal, the Ld. CIT(A) also upheld the disallowance vide impugned appeal, the Ld. CIT(A) also upheld the disallowance vide impugned order.
Aggrieved, the assessee is before the Tribunal by way of raising grieved, the assessee is before the Tribunal by way of raising grieved, the assessee is before the Tribunal by way of raising grounds as reproduced above. grounds as reproduced above.
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 5 ITA No. 2751/M/2022 AY 2012-13
Before us, the Ld. Counsel of the assessee has filed a Before us, the Ld. Counsel of the assessee has filed a Before us, the Ld. Counsel of the assessee has filed a Paperbook containing paged 1 to 144 Paperbook containing paged 1 to 144 interalia interaliaInfant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Substitutes, Feeding Bottles and Infant Foods (R Substitutes, Feeding Bottles and Infant Foods (R Production, Supply and Distribution) Act, 199 Production, Supply and Distribution) Act, 1992, Indian Medical , Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, Council (Professional Conduct, Etiquette and Ethics) Regulations, Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002. In the ground raised, the assessee is aggrieved with both the 2002. In the ground raised, the assessee is aggrieved with both the 2002. In the ground raised, the assessee is aggrieved with both the additions sustained by the Ld. CIT(A) additions sustained by the Ld. CIT(A). The assessee is also agitated essee is also agitated with the observation of the Ld. CIT(A) in para 9 of the impugned the observation of the Ld. CIT(A) in para 9 of the impugned the observation of the Ld. CIT(A) in para 9 of the impugned order. Most of the grounds of the grounds raised are in respect of making those are in respect of making those observation without providing providing any opportunity to explain. any opportunity to explain.
We have heard rival submission of the par We have heard rival submission of the parties on the issue ties on the issue-in- dispute and perused the relevant material on record. As far as the dispute and perused the relevant material on record. As far as the dispute and perused the relevant material on record. As far as the first issue of disallowance of free samples is concerned, the Ld. first issue of disallowance of free samples is concerned, the Ld. first issue of disallowance of free samples is concerned, the Ld. CIT(A) observed that due to failure on the part of the assessee in CIT(A) observed that due to failure on the part of the assessee CIT(A) observed that due to failure on the part of the assessee providing list of the name and addr providing list of the name and address of the recipient of ess of the recipient of free samples/products oducts before before the the Assessing Assessing Officer, Officer he made disallowance for 50% of the total expenses which was worked out to disallowance for 50% of the total expenses which was worked out to disallowance for 50% of the total expenses which was worked out to Rs.1,60,083/-. The Ld. CIT(A) has observed that such list of name . The Ld. CIT(A) has observed that such list of name . The Ld. CIT(A) has observed that such list of name and address was not provided before him and address was not provided before him also therefore, he upheld also therefore, he upheld disallowance observing as under: disallowance observing as under:
“6.2. The appellant in its reply dated 08.01.20 has argued 6.2. The appellant in its reply dated 08.01.20 has argued 6.2. The appellant in its reply dated 08.01.20 has argued that distribution of such free samples is a part of regular that distribution of such free samples is a part of regular that distribution of such free samples is a part of regular practice. The appellant also relied on the case of PHL practice. The appellant also relied on the case of PHL practice. The appellant also relied on the case of PHL (Pharma) (P) Ltd., 146 (Pharma) (P) Ltd., 146 DTR 0149 (Mum).
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 6 ITA No. 2751/M/2022 AY 2012-13
6.3.While considering the argument of the appellant it is 6.3.While considering the argument of the appellant it is 6.3.While considering the argument of the appellant it is imperative tonote its failure to supply relevant names & imperative tonote its failure to supply relevant names & imperative tonote its failure to supply relevant names & addresses for verification by the AO. Even while admitting addresses for verification by the AO. Even while admitting addresses for verification by the AO. Even while admitting such requisition from the AO in its reply under such requisition from the AO in its reply under such requisition from the AO in its reply under consideration, no consideration, no attempt was made to provide slightest attempt was made to provide slightest particulars of the recipients of the impugned free samples. particulars of the recipients of the impugned free samples. particulars of the recipients of the impugned free samples. It is needless to add that the appellant would not be It is needless to add that the appellant would not be It is needless to add that the appellant would not be distributing such free samples to all and sundry. If free distributing such free samples to all and sundry. If free distributing such free samples to all and sundry. If free samples were actually distributed, those must samples were actually distributed, those must have been have been given to the appellant's traders, dealers, distributor etc. given to the appellant's traders, dealers, distributor etc. given to the appellant's traders, dealers, distributor etc. having definite names and addresses. Failure to provide having definite names and addresses. Failure to provide having definite names and addresses. Failure to provide even relevant names either before AO or at this stage even relevant names either before AO or at this stage even relevant names either before AO or at this stage poses serious doubts regarding veracity of the claim. poses serious doubts regarding veracity of the claim. poses serious doubts regarding veracity of the claim. Evidently, the appell Evidently, the appellant is consciously trying to escape ant is consciously trying to escape verification in this regard. verification in this regard. 6.4.Therefore, in the case of the appellant authenticity or 6.4.Therefore, in the case of the appellant authenticity or 6.4.Therefore, in the case of the appellant authenticity or genuineness ofthe claim was put in question by the AO. In genuineness ofthe claim was put in question by the AO. In genuineness ofthe claim was put in question by the AO. In conclusion, what remained unproven or dubious is conclusion, what remained unproven or dubious is conclusion, what remained unproven or dubious is reliability of expenses reliability of expenses incurred, not its legitimacy. In this incurred, not its legitimacy. In this way, in absence of any verifiable data regarding way, in absence of any verifiable data regarding way, in absence of any verifiable data regarding expenditure incurred on distribution of free samples, expenditure incurred on distribution of free samples, expenditure incurred on distribution of free samples, estimated addition made by the AO appears to be estimated addition made by the AO appears to be estimated addition made by the AO appears to be justified. This ground of appeal is thus, decided against justified. This ground of appeal is thus, decided against justified. This ground of appeal is thus, decided against the appellant. lant. 6.5.Before departing from this issue, it is pertinent to refer 6.5.Before departing from this issue, it is pertinent to refer 6.5.Before departing from this issue, it is pertinent to refer that referenceto the case of PHL (Pharma) (P) Ltd. will not that referenceto the case of PHL (Pharma) (P) Ltd. will not that referenceto the case of PHL (Pharma) (P) Ltd. will not come to the rescue of the appellant, as this decision no come to the rescue of the appellant, as this decision no come to the rescue of the appellant, as this decision no longer holds good after the decisions in the cases of Apex longer holds good after the decisions in the cases of Apex longer holds good after the decisions in the cases of Apex Laboratories (P.) Ltd., [2022] 135 taxmann.com 286 (SC) s (P.) Ltd., [2022] 135 taxmann.com 286 (SC) s (P.) Ltd., [2022] 135 taxmann.com 286 (SC) and Peerless Hospitex Hospital and Research Center Ltd., and Peerless Hospitex Hospital and Research Center Ltd., and Peerless Hospitex Hospital and Research Center Ltd., [2022] 137 taxmann.com 359 (Calcutta). discussed herein [2022] 137 taxmann.com 359 (Calcutta). discussed herein [2022] 137 taxmann.com 359 (Calcutta). discussed herein below. Therefore, on both counts addition made by the AO below. Therefore, on both counts addition made by the AO below. Therefore, on both counts addition made by the AO is upheld.” 5.1 Before us, also no such l Before us, also no such list of recipients of free samples has of free samples has been provided by the assessee. been provided by the assessee. Further, on perusal of section 4 of n perusal of section 4 of the Infant Milk Substitutes, Feeding Bottles and Infant Foods the Infant Milk Substitutes, Feeding Bottles and Infant Foods the Infant Milk Substitutes, Feeding Bottles and Infant Foods
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 7 ITA No. 2751/M/2022 AY 2012-13
(Regulation of Production, Supply and Distribution) Act, 1992, we (Regulation of Production, Supply and Distribution) Act, 1992, we (Regulation of Production, Supply and Distribution) Act, 1992, we find that distribution find that distribution of samples of Infant Milk Substitutes, Feeding of samples of Infant Milk Substitutes, Feeding Bottles and Infant Foods has been prohibited under the Act. For Bottles and Infant Foods has been prohibited under the Act. For Bottles and Infant Foods has been prohibited under the Act. For ready reference, the relevant section is reproduced as under: ready reference, the relevant section is reproduced as under: ready reference, the relevant section is reproduced as under:
Prohibition of incentives for the use or sale Prohibition of incentives for the use or sale “Section 4 – of infant milk substitut of infant milk substitutes or feeding bottles No person shall No person shall— a. Supply Supply or or distribute samples samples of of infant infant milk milk substitutes or [feeding bottles or infant foods] or gifts of substitutes or [feeding bottles or infant foods] or gifts of substitutes or [feeding bottles or infant foods] or gifts of utensils or other articles; or utensils or other articles; or b. Contact any pregnant woman or the mother of an Contact any pregnant woman or the mother of an Contact any pregnant woman or the mother of an infant ; or infant ; or c. Offer inducement of Offer inducement of any other kind, for the purpose of promoting the use or sale of infant milk or the purpose of promoting the use or sale of infant milk or the purpose of promoting the use or sale of infant milk substitutes or [feedings substitutes or [feedings bottles or infant foods].” 5.2 In view of above, the contention of the assessee that this In view of above, the contention of the assessee that this In view of above, the contention of the assessee that this expenditure was for the purpose of its business expenditure was for the purpose of its business, is not accepted is not accepted as the distributing of free samples the distributing of free samples to healthcare personnel is to healthcare personnel is prohibited. In view of provisions of reproduce above, we do not find prohibited. In view of provisions of reproduce above, we do not find prohibited. In view of provisions of reproduce above, we do not find any error in the order of the Ld. CIT(A) in upholding the any error in the order of the Ld. CIT(A) in upholding the any error in the order of the Ld. CIT(A) in upholding the disallowance made by the Assessing Officer following the ratio in disallowance made by the Assessing Officer following the ratio in disallowance made by the Assessing Officer following the ratio in the case of M/s Apex Laboratories Pvt. Ltd. v. DCIT (supra) M/s Apex Laboratories Pvt. Ltd. v. DCIT (supra) M/s Apex Laboratories Pvt. Ltd. v. DCIT (supra).
5.3 The next issue is in respect of disallowance of expenses of The next issue is in respect of disallowance of expenses of The next issue is in respect of disallowance of expenses of Rs.42,66,926/- on account of org on account of organizing conference anizing conference and seminars for the doctors and healthcare professionals. The contention of th octors and healthcare professionals. The contention of th octors and healthcare professionals. The contention of the assessee that said expenses have assessee that said expenses have been incurred for conference and incurred for conference and
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 8 ITA No. 2751/M/2022 AY 2012-13
seminar, travel facility of the healthcare professionals travel facility of the healthcare professionals travel facility of the healthcare professionals etc. The assessee has justified the business expediency of the expenses by assessee has justified the business expediency of the expenses by assessee has justified the business expediency of the expenses by submitting that the expenses enable the healthcare professional to submitting that the expenses enable the healthcare profe submitting that the expenses enable the healthcare profe gather technical knowledge and commercial insights about the gather technical knowledge and commercial insights about the gather technical knowledge and commercial insights about the products. products. products. The The The assessee assessee assessee submitted submitted submitted that that that incurring conference/seminars conference/seminars expenses indirectly enhance sale of enhance sale of healthcare products in the field of infant and child nutrition products. The Ld. products in the field of infant and child nutrition products. The Ld. products in the field of infant and child nutrition products. The Ld. CIT(A) however, rejected the contention of the assessee that CIT(A) however, rejected the contention of the assessee that CIT(A) however, rejected the contention of the assessee that assessee is not covered under the allied healthcare services and assessee is not covered under the allied healthcare services and assessee is not covered under the allied healthcare services and Regulation of Indian Medical Council (Professional Conduct, Regulation of Indian Medical Council (Profession Regulation of Indian Medical Council (Profession Etiquette and Ethics) Regulations, 2002 are not applicable on the Etiquette and Ethics) Regulations, 2002 are not applicable on the Etiquette and Ethics) Regulations, 2002 are not applicable on the assessee. The Ld. CIT(A) extensively discussed d. CIT(A) extensively discussed the provisions of the provisions of Indian Medical Council (supra) and the decision of the Hon’ble Apex Indian Medical Council (supra) and the decision of the Hon’ble Apex Indian Medical Council (supra) and the decision of the Hon’ble Apex Court (supra) and decision of the Hon’ble Cal Court (supra) and decision of the Hon’ble Calcutta High Court in cutta High Court in the case of in Peerless Hospitex Hospital and Research Center Peerless Hospitex Hospital and Research Center Peerless Hospitex Hospital and Research Center Ltd. [2002] 137 taxmann.com 359 (Calcutta) Ltd. [2002] 137 taxmann.com 359 (Calcutta). The Ld. CIT(A) also . The Ld. CIT(A) also found the activity of the assessee in violation of provisions of Infant found the activity of the assessee in violation of provisions of Infant found the activity of the assessee in violation of provisions of Infant Foods (Regulation of Production, Suppl Foods (Regulation of Production, Supply and Distribution) Act, y and Distribution) Act, 1992. The relevant observation The relevant observations are reproduced as under: under:
“8. As the appellant company has argued that being a 8. As the appellant company has argued that being a 8. As the appellant company has argued that being a trader of infant and child nutrition products it is not covered trader of infant and child nutrition products it is not covered trader of infant and child nutrition products it is not covered under "allied healthcare", let me briefly discuss the Inf under "allied healthcare", let me briefly discuss the Inf under "allied healthcare", let me briefly discuss the Infant Milk Substitutes, Feeding Bottles, and Infant Foods (IMS) Milk Substitutes, Feeding Bottles, and Infant Foods (IMS) Milk Substitutes, Feeding Bottles, and Infant Foods (IMS) Act. In 1992, India adopted the Infant Milk Substitutes, Act. In 1992, India adopted the Infant Milk Substitutes, Act. In 1992, India adopted the Infant Milk Substitutes, Feeding Bottles, and InfantFoods (IMS) Act. It was further Feeding Bottles, and InfantFoods (IMS) Act. It was further Feeding Bottles, and InfantFoods (IMS) Act. It was further amended in 2003 to strengthen certain provisions and close amended in 2003 to strengthen certain provisions and close amended in 2003 to strengthen certain provisions and close
Mead Johnson (India) Pvt. Ltd., Mead Johnson (India) Pvt. Ltd., 9 ITA No. 2751/M/2022 AY 2012-13
any loopholes infan any loopholes infant formula companies had found. The IMS t formula companies had found. The IMS Act comprehensively bans all forms of promotion of foods Act comprehensively bans all forms of promotion of foods Act comprehensively bans all forms of promotion of foods marketed to children up to two years of age. It also bans marketed to children up to two years of age. It also bans marketed to children up to two years of age. It also bans sponsorship to health care professionals and health sponsorship to health care professionals and health sponsorship to health care professionals and health organizations by these infant formula companies. V organizations by these infant formula companies. V organizations by these infant formula companies. Violation of the IMS act is a criminal offense and may result in fines of the IMS act is a criminal offense and may result in fines of the IMS act is a criminal offense and may result in fines and imprisonment. and imprisonment. 8.1 Thus, IMS Act prohibits: Thus, IMS Act prohibits: 1. Advertising and promotion of infant milk substitutes, 1. Advertising and promotion of infant milk substitutes, 1. Advertising and promotion of infant milk substitutes, feeding bottles, or infant foods. feeding bottles, or infant foods. 2. 2. 2. Unauthorized Unauthorized Unauthorized labelling labelling labelling of of of products, products, products, including including including complementary foods, such as the use of images of mothers complementary foods, such as the use of images of mothers complementary foods, such as the use of images of mothers and children or words that imply superiority to breastmilk. and children or words that imply superiority to breastmilk. and children or words that imply superiority to breastmilk. 3. Supply and distribution of infant milk substitutes, 3. Supply and distribution of infant milk substitutes, 3. Supply and distribution of infant milk substitutes, feeding bottles, or infant foods. feeding bottles, or infant foods. 4. Educational materials, including advertisemen 4. Educational materials, including advertisemen 4. Educational materials, including advertisements, that promote infant milk substitutes, feeding bottles, and infant promote infant milk substitutes, feeding bottles, and infant promote infant milk substitutes, feeding bottles, and infant foods. 5. Sponsorships, gifts, fellowships, and financial benefits to 5. Sponsorships, gifts, fellowships, and financial benefits to 5. Sponsorships, gifts, fellowships, and financial benefits to health care providers and their associations. health care providers and their associations. 8.2.Violation of IMS Act, therefore, occurs when a 8.2.Violation of IMS Act, therefore, occurs when a 8.2.Violation of IMS Act, therefore, occurs when a manufacturer breach manufacturer breachessection 3 to 10 of the said Act in any essection 3 to 10 of the said Act in any of the following manners: of the following manners: 1. Gives any kind of incentives like discounts or free gifts 1. Gives any kind of incentives like discounts or free gifts 1. Gives any kind of incentives like discounts or free gifts etc for the use or sale of infant milk substitutes, feeding etc for the use or sale of infant milk substitutes, feeding etc for the use or sale of infant milk substitutes, feeding bottles or infant foods to anyone. bottles or infant foods to anyone. 2. Distributes information and ed 2. Distributes information and educational material related ucational material related to promotion of infant milk substitutes, feeding bottles and to promotion of infant milk substitutes, feeding bottles and to promotion of infant milk substitutes, feeding bottles and infant foods to mothers, families etc. (They can give infant foods to mothers, families etc. (They can give infant foods to mothers, families etc. (They can give educational material to health professionals like doctors, educational material to health professionals like doctors, educational material to health professionals like doctors, nurses etc provided it has information prescribed in cl nurses etc provided it has information prescribed in cl nurses etc provided it has information prescribed in clause 7 of the IMS Act, 2003. The education material should have 7 of the IMS Act, 2003. The education material should have 7 of the IMS Act, 2003. The education material should have only factual information and should not promote the only factual information and should not promote the only factual information and should not promote the products of the company). products of the company).
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Labels tins, cartons, accompanied leaflets of these 3. Labels tins, cartons, accompanied leaflets of these 3. Labels tins, cartons, accompanied leaflets of these products with pictures of mothers or babies, cartoons, products with pictures of mothers or babies, cartoons, products with pictures of mothers or babies, cartoons, phrases or any other such images. ses or any other such images. 4. Displays placards, posters in a hospital, nursing home, 4. Displays placards, posters in a hospital, nursing home, 4. Displays placards, posters in a hospital, nursing home, chemist shop etc for promoting infant milk substitutes, chemist shop etc for promoting infant milk substitutes, chemist shop etc for promoting infant milk substitutes, feeding bottles or infant foods feeding bottles or infant foods 5. Makes financial inducements or gifts to health workers or 5. Makes financial inducements or gifts to health workers or 5. Makes financial inducements or gifts to health workers or to any members of to any members of his family for the purpose of promoting his family for the purpose of promoting the use of infant milk substitutes, feeding bottles or infant the use of infant milk substitutes, feeding bottles or infant the use of infant milk substitutes, feeding bottles or infant foods. 6. Demonstrates to mothers or their family members how to 6. Demonstrates to mothers or their family members how to 6. Demonstrates to mothers or their family members how to feed these products.However, a doctor can demonstrate this feed these products.However, a doctor can demonstrate this feed these products.However, a doctor can demonstrate this to the mother. to the mother. 7. Gives pecuniary pecuniary pecuniary benefits benefits benefits to to to doctors, doctors, doctors, nurses nurses nurses or or or associations like IAP, IMA, associations like IAP, IMA,NNF etc, for example, funds for NNF etc, for example, funds for organizing seminars, meeting, conferences, contest, fee of organizing seminars, meeting, conferences, contest, fee of organizing seminars, meeting, conferences, contest, fee of educational course, sponsoring for projects, research work educational course, sponsoring for projects, research work educational course, sponsoring for projects, research work or tours. 8. Fixes any commission for 8. Fixes any commission for employees on the ba employees on the basis of volume of sales of these volume of sales of these, products.” 5.4 Further, the Ld. CIT(A) also made a comment in para 9 Further, the Ld. CIT(A) also made a comment in para 9 Further, the Ld. CIT(A) also made a comment in para 9 wherein he has observed that assessee conclusively had violated all wherein he has observed that assessee conclusively had wherein he has observed that assessee conclusively had related laws pertaining to sales and marketing of infant and child related laws pertaining to sales and marketing of infant and child related laws pertaining to sales and marketing of infant and child nutrition food traded by it and under the relevant laws, the nutrition food traded by it and under the relevant laws, the nutrition food traded by it and under the relevant laws, the assessee’s action invites for penalty/prosecution. The relevant assessee’s action invites for penalty/prosecution. The relevant assessee’s action invites for penalty/prosecution. The relevant observation of the Ld. CIT(A) is reproduced as under: observation of the Ld. CIT(A) is reproduced as under: observation of the Ld. CIT(A) is reproduced as under:
“9. The appellant company conclusively had violated all The appellant company conclusively had violated all The appellant company conclusively had violated all related lawspertainin related lawspertaining to sales and marketing of infant and g to sales and marketing of infant and child nutrition food traded by it.Whether it is violation of child nutrition food traded by it.Whether it is violation of child nutrition food traded by it.Whether it is violation of Indian Medical Council (Professional Conduct, Etiquette and Indian Medical Council (Professional Conduct, Etiquette and Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('IMC Regulations') or the Infant Ethics) Regulations, 2002 ('IMC Regulations') or the Infant Ethics) Regulations, 2002 ('IMC Regulations') or the Infant
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Milk Substitutes, Feeding Bottles, a Milk Substitutes, Feeding Bottles, and Infant Foods (IMS) nd Infant Foods (IMS) Act, the appellant's action calls for penalty &/or prosecution Act, the appellant's action calls for penalty &/or prosecution Act, the appellant's action calls for penalty &/or prosecution 9.1.This once again brings us to the judgment in the case of 9.1.This once again brings us to the judgment in the case of 9.1.This once again brings us to the judgment in the case of PeerlessHospitex Hospital and Research Center Ltd., [2022] PeerlessHospitex Hospital and Research Center Ltd., [2022] PeerlessHospitex Hospital and Research Center Ltd., [2022] 137 taxmann.com 359 (Calcutta), wherein the Hon'ble 137 taxmann.com 359 (Calcutta), wherein the Hon'ble 137 taxmann.com 359 (Calcutta), wherein the Hon'ble High court, after going through a plethora of case laws, including court, after going through a plethora of case laws, including court, after going through a plethora of case laws, including that of Apex Laboratories (P.) Ltd. (supra), held, 26 that of Apex Laboratories (P.) Ltd. (supra), held, 26 that of Apex Laboratories (P.) Ltd. (supra), held, 26……...In my considered opinion petitioner being a participant in an my considered opinion petitioner being a participant in an my considered opinion petitioner being a participant in an actwhich is an offence and is prohibited by law is not actwhich is an offence and is prohibited by law is not actwhich is an offence and is prohibited by law is not entitled for any deduction under section 37(1) of the Income any deduction under section 37(1) of the Income- any deduction under section 37(1) of the Income tax Act, 1961". tax Act, 1961". Similar views were expressed by the Hon'ble Supreme Similar views were expressed by the Hon'ble Supreme Similar views were expressed by the Hon'ble Supreme Court whiledealing with the case of Apex Laboratories (P.) Court whiledealing with the case of Apex Laboratories (P.) Court whiledealing with the case of Apex Laboratories (P.) Ltd., [2022] 135 taxmann.com 286 (SC), as noted above. Ltd., [2022] 135 taxmann.com 286 (SC), as noted above. Ltd., [2022] 135 taxmann.com 286 (SC), as noted above. 9.2.Consequently, disallow 9.2.Consequently, disallowance of the payments made by ance of the payments made by the appellant tothe doctors and healthcare professionals the appellant tothe doctors and healthcare professionals the appellant tothe doctors and healthcare professionals amounting to Rs. 44,66,926/ amounting to Rs. 44,66,926/-, on account of travelling and , on account of travelling and other incidental expenses under the veil of organizing other incidental expenses under the veil of organizing other incidental expenses under the veil of organizing conference seminars and symposiums, appears to be conference seminars and symposiums, appears to be conference seminars and symposiums, appears to be justified. These grounds of appeal are thus, decided against ied. These grounds of appeal are thus, decided against ied. These grounds of appeal are thus, decided against the appellant. the appellant.” 5.5 As far as disallowance of conference and seminars expenses is As far as disallowance of conference and seminars expenses is As far as disallowance of conference and seminars expenses is concerned, though the assessee has contested that same is a part of though the assessee has contested that same is a part of though the assessee has contested that same is a part of research and development activity which aids research and development activity which aids the as the assessee to gain knowledge, remain updated of , remain updated of development of related fields development of related fields,and enables the assessee to innovate andimprove the assessee to innovate andimprove products line, the assessee to innovate andimprove however, we find that the Hon’ble Supreme Court in the case of owever, we find that the Hon’ble Supreme Court in the case of owever, we find that the Hon’ble Supreme Court in the case of Apex Laboratories (supra) has also considered the expenses on Apex Laboratories (supra) has also considered the expenses on Apex Laboratories (supra) has also considered the expenses on conference as disallowable in the form of conference as disallowable in the form of freebies freebies given to the healthcare practitioner/medical practitioners. In the instant case, healthcare practitioner/medical practitioners. In the instant case, healthcare practitioner/medical practitioners. In the instant case, the assessee has not supplied the assessee has not supplied any name and address of the name and address of the
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healthcare personnel, healthcare personnel, to whom the conference or travel expenses conference or travel expenses have been reimbursed. have been reimbursed. The section 4 of the Infant Milk Substitutes, the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply Feeding Bottles and Infant Foods (Regulation of Production, Supply Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992, and Distribution) Act, 1992, strictly prohibit offer of inducement of of inducement of any other kind for the purpose of promoting the use or sale of the any other kind for the purpose of promoting the use or sale of the any other kind for the purpose of promoting the use or sale of the infant milk substitutes or infant foods for taking part in promoting infant milk substitutes or infant foods for taking part in promoting infant milk substitutes or infant foods for taking part in promoting of the infant milk substitutes of the infant milk substitutes, feeding bottles and infant foods. nd infant foods. Therefore, though the assessee is claiming that the expenses on Therefore, though the assessee is claiming that the expenses on Therefore, though the assessee is claiming that the expenses on conference and seminars were for conference and seminars were for his business,however, same owever, same falls under prohibited activity and therefore, expenses incurred thereon prohibited activity and therefore, expenses incurred thereon prohibited activity and therefore, expenses incurred thereon have been validly disallowed of the Assess have been validly disallowed of the Assessing Officer a ing Officer and confirmed by the Ld. CIT(A) invoking by the Ld. CIT(A) invoking Explanation to section 37(1) of the Act xplanation to section 37(1) of the Act, following Hon’ble Supreme Court in ollowing Hon’ble Supreme Court in Apex Laboratories Ltd. Apex Laboratories Ltd. (supra).
5.6 The Ld. Counsel of the assessee submitted before us that The Ld. Counsel of the assessee submitted before us that The Ld. Counsel of the assessee submitted before us that comments made in para 9 comments made in para 9 of impugned order are beyond the are beyond the jurisdiction of the Ld. CIT(A) jurisdiction of the Ld. CIT(A) and without application of mind without application of mind as held in the Hon’ble Supreme court in the case of V.K. Ashokan v. V.K. Ashokan v. held in the Hon’ble Supreme court in the case of Asst. Excise Commissioner &Ors. [(2009) 14 SCC 85]. The Ld. Asst. Excise Commissioner &Ors. [(2009) 14 SCC 85] Asst. Excise Commissioner &Ors. [(2009) 14 SCC 85] Counsel also relied on the decision of the Counsel also relied on the decision of the Hon’ble Supreme Court in Hon’ble Supreme Court in the case of Uma Nath Pandey and Ors v. State of U.P. and Ors. Uma Nath Pandey and Ors v. State of U.P. and Ors. Uma Nath Pandey and Ors v. State of U.P. and Ors. [MANU/SC/0401/2009:AIR 2009 SC 2375] [MANU/SC/0401/2009:AIR 2009 SC 2375] that assessee should that assessee should not be condemned un condemned unheard. As far as the grievance of the assessee As far as the grievance of the assessee
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regarding the comment the Ld. CIT(A) in para regarding the comment the Ld. CIT(A) in para 9 of the impugned 9 of the impugned order is concerned, we are of the opinion that the said comments order is concerned, we are of the opinion that the said comments order is concerned, we are of the opinion that the said comments without providing opportunity opportunity of being heard are not not justified. To levy penalty or filing prosecution for violation of provisions of the levy penalty or filing prosecution for violation of provisions of the levy penalty or filing prosecution for violation of provisions of the Infant Milk Substitutes, Feeding Bottles and Infant Foods Infant Milk Substitutes, Feeding Bottles and Infant Foods Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992, is (Regulation of Production, Supply and Distribution) Act, 1992, is (Regulation of Production, Supply and Distribution) Act, 1992, is within the domain of the relevant authority under said Act, within the domain of the relevant authority under said within the domain of the relevant authority under said following due procedure of law and Ld CIT(A) was not required to due procedure of law and Ld CIT(A) was not required to due procedure of law and Ld CIT(A) was not required to express his conclusion in said matters, that too without providing express his conclusion in said matters, that too without providing express his conclusion in said matters, that too without providing any opportunity of being heard. However, we also note the any opportunity of being heard. However, we also note the any opportunity of being heard. However, we also note the recognized principle of Criminal Jurisprudence that anyone can set recognized principle of Criminal Jurisprudence that anyone can recognized principle of Criminal Jurisprudence that anyone can or put the criminal law into motion except where the statue or put the criminal law into motion except where the statue or put the criminal law into motion except where the statue enacting or creating offence indicate to the contrary. We accordingly enacting or creating offence indicate to the contrary. enacting or creating offence indicate to the contrary. restore this matter back to ld CIT (A) restore this matter back to ld CIT (A) for considering evidence on for considering evidence on record and after providing due opportunity of being heard, express record and after providing due opportunity of being hea record and after providing due opportunity of being hea his opinion, if so, required in the matter. required in the matter. The relevant grounds of The relevant grounds of the appeal of the assessee are the appeal of the assessee are accordingly allowed for statistical allowed for statistical purpose.
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In the result, the appeal of the assessee is allowed partly for In the result, the appeal of the assessee is allowed partly for In the result, the appeal of the assessee is allowed partly for statistical purpose.
Order pronounced pronounced under Rule 34(4) of the ITAT Rules, the ITAT Rules, 1963 on 13/02/2023. /2023. Sd/- Sd/ Sd/- (SANDEEP SINGH KARHAIL SANDEEP SINGH KARHAIL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 13/02/2023 Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar Assistant Registrar) ITAT, Mumbai ITAT, Mumbai