Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘E’ MUMBAI
Before: Shri Joginder Singh, & Shri Manoj Kumar Aggarwal
सुनवाई क� तार�ख / Date of Hearing: 22/10/2018 31/10/2018 आदेश क� तार�ख /Date of Order:
EISAI Pharmaceuticals India Ltd. आदेश / O R D E R Per Joginder Singh(Vice President) The assessee is aggrieved by the impugned order dated 13/12/2016 of the Ld. First Appellate Authority, Mumbai, confirming the disallowance of Rs.1,39,25,373/- made with respect to expenses on honorarium to doctors, travel and stay facilities of doctors in connection with conferences/seminars, books and subscription charges, expenses on participating in exhibition/sponsorship for conferences and other expenses included in advertisement and promotional expenses on the premise that the said expenditure was incurred for the purposes which are prohibited by law and not allowable under section 37(1) of the Income Tax Act, 1961 (hereinafter the Act).
During hearing of this appeal, the ld. counsel for the assessee, Shri Madhur Agarwal, claimed that the impugned issue is covered by the decision of the Tribunal in the case of assessee itself (ITA No.1381/Mum/2016) for Assessment Year 2011-12, order dated 30/05/2018. This factual matrix was not controverted by Ld. DR, Shri D.G.
Pansari.
EISAI Pharmaceuticals India Ltd. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 30/05/2018 for ready reference and analysis:-
“This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-16, Mumbai [in short ‘CIT(A)’]and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). 2. The grounds of appeal filed by the Revenue read as under:
1. The learned CIT(A) erred in confirming the disallowance made by the assessing officer with regard to honorarium lo doctors, travel and stay facilities of doctors in connection with conferences/seminars, distribution of books, expenses on participating in exhibitions/sponsorships for conferences and provision of expenses included in advertisement and promotional expenses of Rs.1,13,16,311 under section 37(1) of the Income-tax Act, 1961 on the premise that the said expenditure has been incurred for purposes which are prohibited by law.
2. The learned CIT(A) erred in holding that the appellant has not incurred expenditure for participating in exhibitions or installation of stalls rather it was a cash sponsorship prohibited by Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002.
3. The learned CIT(A)erred in not appreciating that the Circular No. 5/2012 dated 1 August 2012 issued by the Central Board of Direct Taxes has prospective effect and accordingly, the same is not applicable for the aforesaid assessment year.
3. Briefly stated, the facts of the case are that the assessee-company is engaged in the business of manufacturing and marketing/selling of drugs. During the course of assessment proceedings, the Assessing Officer (AO) observed that the Medical Council of India, in exercise of the powers conferred by section 33 of the Indian Medical Council Act, 1956, with the previous sanction of the Central
EISAI Pharmaceuticals India Ltd. Government, amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (hereinafter referred to as the “IMC Regulations”), wherein clause 6.8 was inserted w.e.f. 10.12.2009. From the amended IMC Regulations, the AO observed that a doctor or the professional associations shall not receive any freebies in the form of gifts, travel facility, hospitality, and cash or monetary grants from any pharmaceutical or allied healthcare industry or their sales people/representatives under any pretext. During the course of assessment proceedings, the AO drew to the attention of the assessee, the CBDT Circular No. 05/2012 dated 01.08.2012 on the subject “Inadmissibility of expenses incurred in providing freebies to Medical Practitioner by Pharmaceutical and allied health sector Industry”. After going through the details/documents furnished by the assessee, the AO identified the following expenses as having been incurred giving benefit to the doctors/their professional associations by way of freebies. Sl NO. Nature of expenses Amount (Rs.) i. Honorarium to Doctors 14,17,103 ii. Travel and stay facility of doctors in 55,25,138 connection with conferences/seminars iii. Distribution of books 12,20,627 iv. Expenses on participating in 28,58,134 exhibition/sponsorship for conferences v. Other expenses (provision of 2,95,309 expenses) vi. HHC/CME Expenses in relation to 20,75,749 promotional activity by Field staff Total 1,33,92,060
The assessee submitted before the AO that the CBDT Circular does not extend to any of the above expenses as these were incurred wholly and exclusively for the purpose of business of the company. However, the AO was not convinced with the EISAI Pharmaceuticals India Ltd. above explanation and made an addition of the above amount of Rs.1,33,92,060/-.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the addition of Rs.1,13,16,311/- and deleted Rs.20,75,749/- on account of expenses in relation to promotional activity by field staff.
Before us, the Ld. counsel of the assessee relies on the decision in Cadila Pharmaceuticals Ltd. v. DCIT (2017) 85 taxmann.com 354 (Ahmadabad-Trib), Solvay Pharma India Ltd. v. Pr. CIT [2018] 89 taxmann.com 249 [Mumbai-Trib], Macleods Pharmaceuticals Ltd. v. Addl. CIT (2016) 74 taxmann.com 250 (Mumbai-Trib) and Syncom Formulations (I) Ltd. v. DCIT (ITA No. 6428 and 6429/Mum/2012) dated 23.12.2015 by ITAT ‘E’ Bench Mumbai and submits that the CBDT Circular No. 05/2012 dated 01.08.2012 is prospective and therefore, not applicable to the impugned assessment year i.e. 2011-12.
On the other hand, the Ld. DR submits that the Medical Council of India, in exercise of the powers conferred by section 33 of the Indian Medical Council Act, 1956, with the previous sanction of the Central Government, amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002, wherein clause 6.8 was inserted w.e.f. 10.12.2009. Thus the Ld. DR submits that the amended IMC Regulations are applicable to the impugned assessment year and rightly the Ld. CIT(A) has sustained an addition of Rs.1,13,16,311/- made by the AO.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. In response to a query raised by the AO during the course of assessment proceedings, the assessee submitted a detail explanation indicating that the expenses amounting to Rs.1,33,92,060/- located by the AO were incurred wholly and exclusively for the purpose of business of the company and outside the purview of the said CBDT Circular. The AO has extracted it at para 3.12 (page 16-17) of his assessment order dated 08.03.2014. However, instead of examining the issue from accounts and verifying the same, the AO has resorted to psychological and legal aspects, which are in the realm of general propositions. We are reminded of the cardinal principle of law that general propositions do not decide a concrete case.
EISAI Pharmaceuticals India Ltd. There was no lack of compliance by the assessee to the queries asked and details called for by the AO. The AO has failed to verify the same. Resultantly, the amended IMC Regulations relied on by the Ld. DR is not applicable to the instant case. Alsoit is settled law that the Circular issued by CBDT is prospective in nature. Thus the CBDT Circular No. 05/2012 dated 01.08.2012 is not applicable to the impugned assessment year. It has been rightly held in the decisions mentioned at para 5 hereinbefore.
In view of the above reasons, we set aside the order of the Ld. CIT(A) and allow the appeal filed by the assessee.” 2.2. We find that in the aforesaid order, the Tribunal duly considered CBDT Circular No.5/2012, dated 01/08/2012, which was held to be prospective in nature. In the present appeal, before us, the Assessment Year involved is 2012-13 relevant to previous year 2011-12 i.e. from 01/04/2011 to 31/03/2012 and the expenditure has been claimed by the assessee within this period, therefore, the Circular has no applicability to the facts of the case as observed by the Tribunal in abovestated order.
The next ground pertains to not adjudicating the ground with respect to grant of credit of advance taxes of Rs.13 lakhs to the assessee and further withdrawal of interest under section 244A of the Act of Rs.1,65,077/-. The Ld. counsel for the assessee contended that the Ld. Commissioner of Income Tax (Appeal) may be directed to EISAI Pharmaceuticals India Ltd. adjudicate the same. The Ld. DR also had no objection, if the matter is remanded back to the file of the Ld. Commissioner of Income Tax (Appeal) for adjudication.
3.1. Considering the submissions from both sides, the Ld. Commissioner of Income Tax (Appeal) is directed to examine the claim of the assessee afresh and decide in accordance with law. The assessee be given opportunity of being heard, thus, grounds no.4 & 5 are allowed for statistical purposes.
Finally, the appeal of the assessee is partly allowed for statistical purposes.
This Order was pronounced in the open court in the presence of Ld. representatives from both sides at the conclusion of hearing on 22/10/2018.