GALDERMA INDIA P.LTD,MUMBAI vs. DCIT 9(1)(1), MUMBAI

Grievance of assessee and revenue relates to disallowance of expenditure incurred on sales promotion.

At the outset, learned AR placed on record the order of the Tribunal in assessee’s own case for the A.Y.2011-12 dated 02/04/2018, wherein similar addition made by the AO was deleted by the Tribunal in entirety.

We have considered rival contentions and carefully gone through the orders of the authorities below. From the record we found that the assessee is a Private Limited Company. It is engaged in the buying and distribution of pharmaceuticals. The assessee e-filed its Return of Income on 29/11/2012 declaring total income of Rs.11,93,31,790/-. The learned Dy. Commissioner of Income Tax has disallowed a sum of Rs.3,28,79,269/- from Sales Promotion expenses.

By the impugned order, CIT(A) deleted the part of the disallowance.

Against the order of CIT(A), both assessee and Revenue are in further appeal before us. We have considered rival contentions and carefully gone through the orders of the authorities below and also the M/s. Galderma India Pvt. Ltd., order of the Tribunal in assessee’s own case for the A.Y.2011-12, wherein disallowance on similar expenditure was deleted by the Tribunal after having the following observation:- 9. On appraisal of the above mentioned order, we noticed that the CIT(A) disallowed the claim of the assessee on the basis of the decision of Hon'ble High Court of Allahabad in the case of CTT Vs. FT. Vishwanath Sharma (2009) 316 ITR 0419 and on the basis of the Circular No.5 of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes, New Delhi vide RNo.225/142/20 J20-ITA-11. The contention of the Ld. Representative of the assessee is that the judgment passed by the Hon'ble High Court Allahabad in (he case of CJT Vs. FT. Vishwanath Sharma (2009) 31tf ITR 0419 is connection with the payment of commission whereas the factual position in the present case is totally different which nowhere deals the commission paid to the doctor. It is also contended that the present assessment year is the A.Y, of 2011-12 and the Circular No.5 of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes, New Delhi vide F.No.225/142/20120-JTA-l 1 is prospective in nature and is not liable to be applicable in the case of the assessee retrospectively. In this regard, the Ld. Representative of the assessee has placed reliance upon the law settled in DCIT Vs. PHL Pharma (P.) Ltd. (2017) 163 1TD 10 (Mum. Trib.), macleods Pharmaceutical Ltd. Vs. ADIT (2016) 161 1TD 291 (Mum. Trib.), Syeom formulations India Ltd. (ITA No. 6429/M/2012 (Mum. Trib.) & UCB India Pvt. Ltd. Vs. ITO (ITA No. 6681 & 5454/M/2013) (Mum. Trib.) However, on the other hand, the Ld. Representative of the Department has refuted the said contention. The assessee raised the claim of sale promotion expenses which has been declined fully by the Assessing Officer while passing the order dated 08.03.2014. However, the CIT(A) allowed the claim of the assessee to the extent of Rs.97,93,9967- which was belonging to the payment made to IADVL New Year of Rs.31,12,488/-, IADVL of Rs.27,62,350/-, State IADVL of Rs.14,86,648/- and other conference of Rs,24,32,510/- total to the tune of Rs.97,93,996/-. The CIT(A) was of the view that these fees are for participation fees and installation of stall which was not prohibited by the M/s. Galderma India Pvt. Ltd., Medical Council Act. So far as the remaining claim of the assessee is in connection with the expenses of Rs.1,98,47,412/- is concerned, the claim of the assessee is that the said expenses is not required to be allowed on the basis of the Circular No.5 of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes, New Delhi vide F.No.225/142/20120-ITA-llwhich was prospective in nature. It is not in dispute that the present assessment year is for the A.Y. 2011 -12 Circular No. 5 and of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes. New Delhi vide F.No.225/142/20120~ITA-l1 and was applicable prospectively for the A.Y. 2013-14 onwards. As discussion above, the order passed by the Allahabad High Court (supra) is only deals with the commission expenses whereas no such issue is in question in the present case. Now, coming to the applicability of the circular dated 01.08.2012 is concerned, we are of the view that the same is not applicable retrospectively and in this regard we are also finding support in law settled in DCIT Vs, PHL Pharma (P.) Ltd. (2017) 163 ITD 10 (Mum. Trib.), macleods Pharmaceutical Ltd. Vs. ADIT (2016) 161 ITD 291 (Mum. Trib.), Syeom formulations India Ltd. (ITA No. 6429/M/2012 (Mum. Trib.) & UCB India Pvt. Ltd. Vs. ITO (ITA No. 6681 & 5454/M/2013) (Mum. Trib.), Accordingly, we are of the view that the expenses are allowable, therefore, we decide this issue in favour of the assessee against the revenue

The facts and circumstances during the year under consideration are same and the CBDT Circular No.5/2012 dated 01/08/2012 is prospective in nature, therefore, not applicable for the A.Y.2012-13 under consideration. We also found that same view has been taken by the Co- ordinate Bench in the following decisions, wherein it was held that Circular is prospective in nature.  DCIT Vs. PHL Pharma (P.) Ltd. (2017) 163 ITD 10 (Mum. Trib.)  SolvayPharma India Ltd. Vs. PCIT(2018) 169 1TD 13 (Mum. Trib.)  MacleodsPharmaceuticalsLtd. Vs, ADIT (2016) 161 ITD 291 (Mum. Trib.)  Sycom Formulations India Ltd. (ITA No. 6429/Mum/2012) (Mum. Trib.)  UCB India Pvt. Ltd. Vs.ITO (ITA No. 6681 & 6454/Mum/2013) (Mum. Trib.; M/s. Galderma India Pvt. Ltd.,  Sunflower Pharmacy Vs. ITO (ITA No. 2546/Mum/2015) (Ahd. Trib.) (SMC)