DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2 1 1 AHMEDABAD, AHMEDABAD vs. LA RENON HEALTHCARE PRIVATE LIMITED, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL "B” BENCH, AHMEDABAD DR. B.R.R. KUMAR VICE PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 2181, 2182, 2183 & 2174/AHD/2025 Assessment Year:2017-2018,2018-2019,2020-2021&2023-2024 Deputy Commissioner of Income Tax, Circle (2)(1)(1), Ahmedabad 406, 4th Floor, AaykarBhawan, Vejalpur, Ahmedabad-380015, Gujarat. …………. Appellant Vs La Renon Healthcare Private Limited 207-208, Iscon Elegance, Circle-P Prahladnagar Cross Road, S.G. Highway Ahmedabad-380015, Gujarat. [PAN:AABCL3431G] …………. Respondent Appearance For the Appellant/Assessee : Shri Biren Shah For the Respondent/Department : Shri Abhijit Date Conclusion of hearing : 16.06.2026 Pronouncement of order : 18.06.2026

O R D E R Per Rahul Chaudhary, Judicial Member: 1. These are four appeals preferred by the Revenue for the Assessment Year 2017-2018, 2018-2019, 2020-2021 and 2023-2024 pertaining to the same Assessee. Since the appeals involved identical issues, the same were taken up together and are being disposed off by way of a common order.

ITA No. 2181/AHD/2025 2. We would first take up ITA No. 2181/AHD/2025 as the lead matter. This appeal has been preferred by the Revenue against the Order, dated 15/09/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 Learned CIT(A) had partly allowed the appeal against the Assessment Order, dated 27/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’],for the Assessment year 2017-2018.

“1. Whether the Ld.CIT(A) has erred in law and on facts in restriction of from addition made u/s.14A r.w.s. Rule 8D of the IT Rules from Rs.57,49,345/- to Rs.9,21,897/-without appreciating the fact that the AO was justified in applying Rule 8D(2) (iii) according to the facts of the case ?" 2. " Whether the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of ₹5.20 crores made under Section 37(1) of the Income Tax Act, 1961, by incorrectly overriding the binding mandate of CBDT Circular No. 5/2012 and the settled legal position, when the Circular read with the Explanation to Section 37(1), explicitly prohibits the allowance of any expenditure incurred for a purpose prohibited by law, as defined by the MCI regulations, which in this case is freebies to medical practitioners in the form of professional fees?" 4. The relevant facts in brief are that the Assessee is a company engaged in business of manufactures/sales and trading of pharmaceutical products. For the Assessment Year 2017-2018, the Assessee filed return of income which was selected for regular scrutiny. The Assessing Officer completed the assessment vide Assessment Order, dated 27/12/2019, after making the following addition/disallowance to the returned income:

(a) Disallowance of INR.57,49,345/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 [for short ‘IT Rules’]

(b) Disallowance of INR.5,20,18,357/- invoking the provisions of Section 37(1) of the Act read with explanation thereto

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 15/09/2025. The Learned CIT(A) granted substantial relief to the Assessee by deleting the disallowance of INR.5,20,18,357/- made by the Assessing Officer invoking provision under Section 37(1) of the Act. Further, the Learned CIT(A) restricted the disallowance made by the Assessing Officer under Section 14A of the Act read with Rule 8D of the IT Rules to INR.9,21,897/- by taking into consideration only the investments which yielded exempt income during the relevant previous year.

Ground No.2 7. We would first take up Ground No.2. The Revenue has challenged the order passed by the Learned CIT(A) deleting disallowance made by the Assessing Officer in respect of Profession Fee/Consultancy Charges paid to medical practitioner by the Assessee.

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 assessee, creating and disseminating information about the products of the assessee, providing expert advice about the effectiveness and post-launch effects of the drugs of the assessee etc. The Assessee also filed copy of the relevant agreements and details. However, the Assessing Officer was not convinced. According to the Assessing Officer, the Assessee had failed to submitted requisite documentary evidences to prove that the services were actually rendered by the medical practitioners. Further, the Assessing Officer was of the view that the payments made by the Assessee-Company to the medical practitioners were hit by the provisions of Section 37(1) of the Act read with Explanations thereto since the same were prohibited. In this regard, the Assessing Officer drew support from Circular No. 5 of 2012 issued by the Central Board of Direct Taxes (CBDT) and the judgment of the Hon'ble High Court of Himachal Pradesh in the case of Confederation of Indian Pharmaceutical Industry (SSI) vs CDBT [order dated 26-12-2012].

In appeal before the Learned CIT(A), the Assessee contended that 9. during the assessment proceedings the Assessee had placed before the Assessing Officer agreements entered into by the Assessee with the medical practitioner. The scope of the services provided medical practitioner included the following: (a) Conducting Technical Training Programs (b) Conducting Continuous Medical Awareness Programs (c) Conducting Meetings for Medical Practitioners & Paramedical Staff (d) Helping in development of Visual Aids, LBLs and Various other scientific material which will aid in the companies communication with the Medical Fraternity and the Patients (e) Reviewing information and advising on developments and issues in the relevant field of the medical advisor (f) Advising the company (and/or its associate companies) on new clinical data for the existing molecules and the future molecules, its impact on the current management and

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 relevance in the relevant field of Medical Advisor (g) Research and Guidance to be provided on the conceptualized ideas of the Business Development Team of the Company (h) Advising on marketing, Medical and medico-marketing strategies (i) Clinical Study and Protocol Development (j) Conducting post marketing pharamcovigilance studies The Assessee had also placed that Learned CIT(A) details of payments made by the medical practitioners which included name of payee, PAN, complete address, amount paid, TDS deducted and nature of services provided. After taking into consideration the details of the document furnished by the Assessee, the Learned CIT(A) deleted the disallowance made by the Assessing Officer holding that disallowance under Section 37(1) of the Act read with Explanation thereto was not warranted.

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 assistance in research/training. In this regard, reliance was placed by the Learned Departmental Representative on Paragraph 3.5.3 of the Assessment Order.

“5.9 Further, the assessee has submitted the certified copies (signed and recognised by the medical practitioners) agreements with the

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 medical practitioners wherein such practitioners/medical experts have agreed to provide these services to the assessee company Therefore, considering these cardinal facts, the assessee company has submitted documents of the name, address and PAN number of the person who has rendered the services, nature and character of the service rendered, amount paid to the medical expert and TDS deducted on such payment. Therefore, the onus of the genuineness of the expenses incurred exclusively wholly for business purpose is primarily proved by the assessee within the meaning of provisions of section 37(1) of the IT Act. Further, it is found that the assessee has relied upon the decision on the ITAT in its own case vide ITA No. 2380/Ahd/2015 with respect to the identical issue” 14. The above factual finding returned by the Learned CIT(A) have not been controverted by the Revenue during the present appellate proceedings before this Tribunal. We have perused the observations made by the Assessing Officer in Paragraph 3.2 to 3.7 of the Assessment Order. We find that the Assessing Officer has failed to bring on record any material to show that the payments made by the Assessee were towards freebees. In the facts and circumstances of the present case, the general observations made by the Assessing Officer in relation to failure of the Assessee to submit reports/studies are not sufficient to conclude that the transactions were sham and the payments were in the nature of freebees or monetary grants. That being the case, Circular No. 5 of 2012 issued by CBDT would not have any application to the facts and circumstances of the present case. We note that the Assessee had placed before the Assessing Officer the agreement giving complete detail of medical practitioners to whom payments were made. Therefore, concurring with the Learned CIT(A), we hold that the Assessee had placed relevant material on record in support of his claim/contention and had, thereby, primarily proved that the payments made to the medical practitioners were wholly and exclusively for the purpose of business. On the other hand, a perusal of Assessment Order shows that no inquiry/verification was carried out by the Assessing Officer before rejecting the details/documents furnished by the Assessee and

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 drawing adverse inference against the Assessee. Therefore, in the present case the preponderance of possibility lies in favour of the Assessee. Further, in any case, the Ahmedabad Bench of the Tribunal has decided identical issue in favour of the Assessee vide Order, dated 06/08/2024, passed in ITA No.165/AHD/2020. The relevant extract of the aforesaid decision reads as under:

“6. This ground is relating to disallowance of Rs.2,07,28,000/- u/s. 37(1) of the Act on account of the payment of professional fees paid to doctors. The Ld.Departmental Representative (DR) stated that the AO has dealt with this issue in detail in his assessment order and, hence, placed reliance on order of the AO. 7. The Ld.Authorised Representative (Ld.AR) of the assessee, stated that this issue is covered by the decision of Co-ordinate Bench in assessee's own case for the A.Y. 2011-12 to A.Y. 2014-15 in ITA Nos. 2380/Ahd/2015, and CO No.69/Ahd/2020 (By assessee) ACIT vs. M/s.La Renon Healthcare Pvt.Ltd. The Ld.AR also submitted the details covering nature of assignment and number of hours used of concerned doctor. These details were already submitted to AO. 8. We have considered the decision of Co-ordinate Bench in assessee's own case for earlier assessment years. The Tribunal has noted - - That, the assessee established the genuineness of the transactions and that the expenses were incurred for business purposes. - That, the Documentary evidence, such as agreements and confirmations from doctors, supported the claims. - That, the professional fees were aligned with business exigencies and aimed at promoting the company's pharmaceutical products. - That, the MCI guidelines [para 6.8(g)] permit doctors to work with pharmaceutical companies in an advisory capacity. - That, the CBDT Circular No. 5/2012 applies to gifts and hospitality, not to professional fees for services rendered. - That, the Tribunal concluded that the professional fees paid by the assessee did not violate the MCI guidelines or the CBDT Circular. 8.1. The Judicial Precedents considered by the tribunal supported the principle that genuine business expenses paid through proper

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 channels should be allowed and also highlighted that expenses paid through banking channels with TDS deducted are not bogus. These decisions reinforced that sufficient evidence of services rendered justifies business expenditure and affirmed that genuine business expenses are allowable if supported by agreements and proper documentation. 8.2. In the present case, the AO has not doubted the genuineness of these payments. He stated that no documentary evidence has been submitted by the assessee in support of its claim that the doctors have worked in the capacity as consultants, researchers or advisors. Whereas we noted that the assessee has already provided all the details like logbook along with agreements with different doctors, summary sheets of professional fees paid, copies of scientific broachers, training manuals and research papers. The Ld.CIT(A) has also noted that the facts are identical and followed the decision of tribunal while deleting the disallowance. We do not find any infirmity in the order of the Ld.CIT(A), so as to interfere with his decision. Therefore, this ground of Revenue is dismissed.” 15. In view of the above and respectfully following the above decision of the Tribunal in the case of the Assessee, we decline to interfere with the order passed by the Learned CIT(A) deleting the disallowance made by the Assessing Officer invoking provisions of Section 37(1) of the Act read with explanations thereto and allowing deduction of INR.5,20,18,357/- claimed by the Assessee in respect of payments made to medical practitioners as per the service agreements after deducting tax at source. Accordingly, Ground No. 2 raised by the Revenue is dismissed.

Ground No. 1 16. As regards Ground No. 1 raised by the Revenue is concerned, we find that Learned CIT(A) has returned following findings while restricting disallowance of INR.57,49,345/- made by the Assessing Officer under Section 14A read with Rule 8D of the IT rules to INR.9,21,897/-:

“6. The assessee has contested grounds of appeal at serial number 4 for stating that the Ld. AO has grossly erred in invoking the provisions of section 14A of the Act and thereby making a disallowance of Rs.57,49,345/- when no such addition is called for.

6.1 to 6.7 xx xx

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 6.8 Further, it is found that during the course of appellate proceedings the assessee has questioned the average investment made by the assessing officer and submitted as under: “It is a well settled fact that investments from which exempt income is earned should only be considered while calculating average value of investment under Rule 8D of the Act. As other investments are concerned, it is submitted that no exempt income has actually been derived from amount parked in such investments and therefore, no question arises to disallow expenditure on such investments as no prudent businessmen would spent any amount without getting any return out of it. The Investments from which exempt income earned during the year under consideration are submitted as under: xxxxx:” 6.9 After considering the facts and circumstance of the case, submission of the assessee, matted available on record, findings of the assessing officer and provisions of section 14A read with Rule 8D of Income Tax Rules, 1962, 1% of Average Monthly Investments 9,21,897/- is found to be in order.

6.10 Therefore, considering the facts and circumstance of the case, submission of the assessee, the grounds of appeal contested by the assessee at serial No. 4 is partly allowed” 17. The Revenue is aggrieved by the fact that the Learned CIT(A) has accepted the contention of the Assessee and has recomputed the amount of disallowance in terms of Section 14A read with Rule 8D of the IT Rules by only taking into consideration the investments yielding exempt income during the relevant previous year. We note that the approach adopted by the Learned CIT(A) is supported by the decision of Special Bench of the Tribunal in the case of Assistant Commissioner of Income-tax, Circle 17 (1), New Delhi vs. Vireet Investment (P.) Ltd. [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB)/[2017] 165 ITD 27 (Delhi - Trib.) (SB). Therefore, we decline to interfere with the order passed by the Learned CIT(A) restricting disallowance under Section 14A read with Rule 8D of the IT Rules to INR. INR.9,21,897/-. Accordingly, Ground No. 1 raised by the Revenue is dismissed.

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 18. In result, the present appeal preferred by the Revenue [ITA No. 2181/AHD/2025] is dismissed.

ITA No. 2182/AHD/2025 19. We would next take up ITA No. 2182/AHD/2025 preferred by the Revenue against the Order, dated 16/09/2025, passed by the Learned CIT(A) whereby the Learned CIT(A) had partly allowed the appeal against the Assessment Order, dated 20/02/2021, passed under Section 144(3) r.w.s. 143(3A) & 143(3B) of the Act for the Assessment year 2018-2019.

“1. Whether the Id.CIT(A) has erred in law and on facts in restriction of addition made u/s.14A r.w.s. Rule 8D of the IT Rules 15,11,084/- to Rs.9,33,637/-without appreciating the fact that the AO was justified in applying Rule 8D(2)(iii) according to the facts of the case ?" 2. "Whether the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.3,43,15,000/- made under Section 37(1) of the Income Tax Act, 1961, by incorrectly overriding the binding mandate of CBDT Circular No. 5/2012 and the settled legal position, when the Circular read with the Explanation to Section 37(1), explicitly prohibits the allowance of any expenditure incurred for a purpose prohibited by law, as defined by the MCI regulations, which in this case is freebies to medical practitioners in the form of professional fees?" 21. The relevant facts in brief are for the Assessment Year 2018-2019, assessment was completed by the Assessing Officer after making following addition/disallowance:

(a) Disallowance of INR.15,11,084/- under Section 14A of the Act read with Rule 8D of the IT Rules

(b) Disallowance of INR.3,43,15,000/- invoking the provisions of Section 37(1) of the Act read with explanation thereto

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 granted substantial relief to the Assessee deleting the disallowance made by the Assessing Officer invoking provision under Section 37(1) of the Act. Further, the Learned CIT(A) restricted the disallowance made by the Assessing Officer under Section 14A of the Act read with Rule 8D of the IT Rules to INR.9,33,637/- by taking into consideration only the investments which yielded exempt income during the relevant previous year and accepting the computation average funds furnished by the Assessee.

ITA No. 2183/AHD/2025 26. We would next take up ITA No.2183/AHD/2025 preferred by the Revenue against the Order, dated 16/09/2025, passed by the Learned CIT(A) whereby the Learned CIT(A) had allowed the appeal against the Assessment Order, dated 26/09/2022, passed under Section 143(3)

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 r.w.s. 144B of the Act for the Assessment Year 2020-2021.

“1. Whether the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.4,50,20,000/- made under Section 37(1) of the Income Tax Act, 1961, by incorrectly overriding the binding mandate of CBDT Circular No. 5/2012 and the settled legal position, when the Circular read with the Explanation to Section 37(1), explicitly prohibits the allowance of any expenditure incurred for a purpose prohibited by law, as defined by the MCI regulations, which in this case is freebies to medical practitioners in the form of professional fees?" 28. The relevant facts in brief are for the Assessment Year 2020-2021, assessment was completed by the Assessing Officer after making disallowance of INR.4,50,20,000/- invoking the provisions of Section 37(1) of the Act read with explanation thereto. Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) which was disposed off as allowed. The Learned CIT(A) deleted the disallowance made by the Assessing Officer invoking provision under Section 37(1) of the Act. Being aggrieved by the aforesaid relief granted by the Learned CIT(A), the Revenue has preferred the present appeal before this Tribunal on the grounds reproduced in Paragraph 27 above.

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 2183/AHD/2025] is dismissed.

ITA No. 2174/AHD/2025 31. We would next take up ITA No.2174/AHD/2025 preferred by the Revenue against the Order, dated 16/09/2025, passed by the Learned CIT(A) whereby the Learned CIT(A) had allowed the appeal against the Assessment Order, dated 09/01/2025, passed under Section 143(3) r.w.s. 144B of the Act for the Assessment Year 2023-2024.

“1. Whether the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.4,06,15,000/- made under Section 37(1) of the Income Tax Act, 1961, by incorrectly overriding the binding mandate of CBDT Circular No. 5/2012 and the settled legal position, when the Circular read with the Explanation to Section 37(1), explicitly prohibits the allowance of any expenditure incurred for a purpose prohibited by law, as defined by the MCI regulations, which in this case is freebies to medical practitioners in the form of professional fees?" 33. The relevant facts in brief are for the Assessment Year 2023-2024, assessment was completed by the Assessing Officer after making disallowance of INR.4,06,15,000/- invoking the provisions of Section 37(1) of the Act read with explanation thereto. Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) which was disposed off as allowed. The Learned CIT(A) deleted the disallowance made by the Assessing Officer invoking provision under Section 37(1) of the Act. Being aggrieved by the aforesaid relief granted by the Learned CIT(A), the Revenue has preferred the present appeal before this Tribunal on the grounds reproduced in Paragraph 32 above.

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 apply mutatis mutandis to corresponding Ground No.1 raised in the present appeal for the Assessment Year 2023-2024. Accordingly, adopting our reasoning/finding given while adjudicating appeal for the Assessment Year 2017-2018, Ground No.1 raised by the Revenue in the present appeal Assessment Year 2023-2024 is dismissed.

The order is pronounced on 18.06.2026

Sd/- Sd/- (Dr. B.R.R. Kumar) (Rahul Chaudhary) Vice President Judicial Member

िदनांक Dated : 18.06.2026 अहमदाबाद Ahmedabad; True Copy H.C. PS

ITA No.2181, 2182, 2183 & 2174 /AHD/2026 Assessment Year: 2017-2018, 2018-2019, 2020-2021 & 2023-2024 आदेशक��ितिलिपअ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent. 3. संबंिधतआयकरआयु�/ Concerned CIT 4. आयकरआयु�(अपील) / The CIT(A) 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड�फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, अहमदाबाद / ITAT, Ahmedabad