SYNTHES MEDICAL P.LTD,MUMBAI vs. ACIT LTU-1, MUMBAI

It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend the tax payers' money in pursuing litigation for the sake of it."

What follows from the above is that normally the ordinary rule is to be applied, namely, revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the IT Department cannot deny the same. However, in those cases where the assessee himself wants to spread the expenditure over a period of ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) ensuing years, it can be allowed only if the principle of 'Matching Concept' is satisfied, which upto now has been restricted to the cases of debentures.

In the instant case, as noticed above, the assessee did not want spread over of this expenditure over a period of five years as in the return filed by it, it had claimed the entire interest paid upfront as deductible expenditure in the same year. In such a situation, when this course of action was permissible in law to the assessee as it was in consonance with the provisions of the Act which permit the assessee to claim the expenditure in the year in which it was incurred, merely because a different treatment was given in the books of account cannot be a factor which would deprive the assessee from claiming the entire expenditure as a deduction. It has been held repeatedly by this Court that entries in the books of account are not determinative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act [See - Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC); Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 227 ITR 172/93 Taxman 502 & 6006/Del/2013 & ITA No. 5807/Del/2013 (SC); Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC) and United Commercial Bank v. CIT [1999] 240 ITR 355/106 Taxman 601 (SC).

At the most, an inference can be drawn that by showing this expenditure in a spread over manner in the books of account, the assessee had initially intended to make such an option. However,it abandoned the same before reaching the crucial stage, inasmuch as, in the income tax return filed by the assessee, it chose to claim the entire expenditure in the year in which it was spent/paid by invoking the provisions of Section 36(1)(iii) of the Act.Once a return in that manner was filed, the AO was bound to carry out the assessment by applying the provisions of that Act and not to go beyond the said return. There is no estoppel against the Statute and the Act enables and entitles the assessee to claim the entire expenditure in the manner it is claimed." 4.3.4 In the aforesaid judgment, there Lordships have held that normally revenue expenditure is to be allowed in the year in which it is incurred but at the instance of the assessee, spreading out of the expenditure is permissible. 4.3.5 In such circumstances, we are of considered opinion that the amount of Rs.50,33,418/- treating loaner sets expenditure as capital expenditure was not in accordance with law and therefore, directed to be deleted. Thus, the grounds No. 1 and 2 of the appeal are accordingly allowed.’ Considering the above,we decide grounds no.2-5 in favour of the assessee.

In the counter affidavit filed by the Respondents, 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 order against the Petitioner hospital therefore; the 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: XXXXX 8. It is clearly admitted by the Respondent that it has no jurisdiction to pass any order against the Petitioner hospital under the 2002 Regulations. In fact, it is stated that it has not passed any order against the Petitioner hospital. Thus, I need not go into the question whether the adequate infrastructure facilities for appropriate post-operative care were infact in existence or not in the Petitioner hospital and whether the principles of natural justice had been followed or not while passing the impugned order. Suffice it to say that the observations dated 6 ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) 27.10.2012 made by the Ethics Committee do reflect upon the infrastructure facilities available in the Petitioner hospital and since it had no jurisdiction to go into the same, the observations were uncalled for and cannot be sustained.” 5.3.2.In the case of PHL Pharma P Ltd.(ITA/4605/Mum/2014-AY.2010-11,dtd.18/5/2016) following grounds of appeal were raised by the AO: “1.Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.22,99,72,607/- being freebies given by the assessee to doctors, ignoring the fact that such payments are specifically prohibited w.e.f. 10.12.2009 by the Medical Council of India (MCI), which is the competent authority, and therefore, the said expenses are illegal and consequently not allowable as per the Explanation to Section 37(1) of the Income-tax Act, 1961? 2.Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.22,99,72,607/- being freebies given by the assessee to doctors observing that the prohibition by IMA is on medical practitioners and not applicable to Pharma companies without appreciating that the Prohibition of IMA is to curb the malpractices in the medical profession and equally binding on both medical practitioners and Pharma companies? 3.The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the A.O. be restored.” We are reproducing the relevant portion of the order which reads as under: 2.The brief facts of the case qua the issue raised in the grounds of appeal are that, the assessee is a pharmaceutical company engaged in the business of providing Pharma marketing consultancy and detailing services to develop mass market for Pharma products. ………….On further perusal of the details appearing in the ledger account furnished by the assessee, he further noted that there are certain expenses which has been debited by the assessee like, ‘Customer Relationship & Management expenses’ (CRM) of Rs.7,61,96,260/-; ‘Key Account Management expenses’ (KAM)of Rs.2,56,68,509/-; gift articles of Rs.9,20,22,518/-; and cost of samples of Rs.3,60,85,320/-, which according to him are in the nature of freebies given to medical practitioners/doctors which are disallowable in terms of Explanation to section 37(1) as clarified by CBDT vide its Circular No.5/2012 dated 1.8.2012. In response to the show cause notice by the AO, firstly, as regard CRM expenses, assessee submitted that expenditure under this category includes activities like holding national level seminars on new medical researches and drugs for discussion panels of eminent doctors and inviting other doctors to participate in it; arranging lectures or sponsoring knowledge upgrade course, wherein eminent doctors are invited to speak on the selected topic related to the therapeutic area and also share their research and other latest knowledge updates; subscription of costly journals, information books etc.; and sponsoring travel and accommodation expenses of doctors for such important conferences. Under the KAM services, the assessee promotes ICCU range of products, which normally focuses on either single brand or a group of brands in one particular therapy area. This is done for certain key doctors, who are opinion leaders and has larger potential for sale of brands. Regarding gift articles, it was stated that this includes expenses for small value items given across the entire pool of doctors in India so as to maintain brand memory on a continuous basis. These small items include diaries, pen sets, injection boxes, calendars, table weights, postcard holders, stationery items, etc., wherein logo of the assessee company and the name of the medicine is advertised. This is important because in the same generic drug there are more than 40 to 60 brands, therefore, brand promotion is done through small value items. Lastly, for cost of samples, it was stated that these samples are distributed through various agents to doctors to prove the efficacy of the drug and to establish the trust of the doctors on quality of drugs. Free samples are given of smaller size, wherein it is marked as “physician sample not for sale”. Various other expenditure under the aforesaid head, have been elaborately explained and illustrated by the assessee in its reply dated, 27.12.2012 before AO. The relevant portion of the reply has been incorporated by the AO from pages 3 to 6 of the assessment order. Regarding the applicability of CBDT Circular No.5 of 2012 (supra), ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) wherein the CBDT has referred to amendment to the “Indian Medical Council Regulations, 2002”, brought from 10.12.2009, imposing prohibition of medical practitioner and their professional associations from taking any gift, travel facility, hospitality, cash or monetary grant from the pharmaceutical and allied health sector industries, the assessee submitted that firstly, cost of free samples, KAM expenses, CRM expenses are not prohibited under any law and, secondly, the CBDT Circular cannot have retrospective effect so as to be made applicable in the AY. 2010-11 as the Circular is dated 01.08.2012. As required by the AO, the assessee also segregated expenses incurred after 10.12.2009, i.e., the date of amendment brought in the Indian Medical Council Guidelines. After segregating the expenses, AO disallowed the expenditure aggregating to Rs.22,99,72,607/- (post 10.12.2009) on the ground that, firstly, the guidelines issued by the Medical Council of India is binding because it is a statutory body having been set up under the Act of the Parliament; secondly, the amended notification dated 10.12.2009, which has been reproduced by him in the order, clearly forbids medical practitioners to receive any kind of gift, travel facilities, hospitality and any kind of cash or monetary grants from any pharmaceutical or health care industries. Thus, such an expenses, he held that, is disallowable in terms of Explanation to section 37(1). 5.We have considered the rival contentions made by ld. CIT DR as well as ld. Sr. Counsel, Mr J.D. Mistry, perused the relevant finding given in the impugned orders and material referred to before us. The entire controversy revolves around, whether the expenditures in question incurred by the assessee (a pharmaceutical company) is hit by Explanation 1 below section 37(1) in view of CBDT Circular dated 01.08.2012, interpreting the amendment dated 10.12.2009 brought in Indian Medical Council Regulation 2002 or not. The break-up of sales promotion expenses, which has been disallowed by the AO, are as under: SN. Particulars of expenses Amount (in Rs.) 1 Customer Relationship Management expenses (CRM) 7,61,96,260 2 Key Account Management expenses(KAM) 2,56,68,509 3 Gift Articles 9,20,22,518 4 Cost of samples 3,60,85,320 Total 22,99,72,607 The nature of aforesaid expenses has already been explained above. Now whether the nature of such expenditure incurred by the assessee is to be disallowed in view of the CBDT Circular dated 01.08.2012.For the sake of ready reference, the said CBDT Circular No.5/2012 is reproduced hereunder: xxxx From the perusal of the aforesaid Board Circular, it can be seen that heavy reliance has been placed by the CBDT on the Circulars issued by the Medical Council of India, which is the regulatory body constituted under the ‘Medical Council Act, 1956’. One such regulation has been issued is “Indian Medical Council Professional Conduct, Etiquette and Ethics) Regulations, 2002”. The said regulation deals with the professional conduct, etiquette and ethics for registered medical practitioners only. Chapter 6 of the said regulation/notification deals with unethical acts, whereby a physician or medical practitioners shall not aid or abet or commit any of the acts illustrated in clause 6.1 to 6.7 of the said regulation which shall be construed as unethical. Clause 6.8 has been added (by way of amendment dated 10.12.2009) in terms of notification published on 14.12.2009 in Gazette of India. The said clause reads as under:- xxxxx 6. On a plain reading of the aforesaid notification, which has been heavily relied upon by the department, it is quite apparent that the code of conduct enshrined therein is meant to be followed and adhered by medical practitioners/doctors alone. It illustrates the various kinds of conduct or activities which a medical practitioner should avoid while dealing with pharmaceutical companies and allied health sector industry. It provides guidelines to the medical practitioners of their ethical codes and moral conduct. Nowhere the regulation or the notification mentions that such a regulation or code of conduct will cover pharmaceutical companies or health care sector in any manner. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner. On the contrary, before us the learned senior counsel, Shri Mistry brought to our notice the judgment of Hon’ble Delhi High Court in the case of Max Hospital vs. MCI in WPC 1334/2013 judgment dated 10.01.2014, wherein the ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. Relevant portion of the said judgment reads as under: xxxxx From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is inapplicable upon Pharma companies like assessee then, where is the violation of any of law/regulation? Under which provision there is any offence or violation in incurring of such kind of expenditure. The relevant provision of section 37(1)reads as under: xxxxx The aforesaid provision applies to an assessee who is claiming deduction of expenditure while computing his business income.The Explanation provides an embargo upon allowing any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. This means that there should be an offence by an assessee who is claiming the expenditure or there is any kind of prohibition by law which is applicable to the assessee. Here in this case, no such offence of law has been brought on record, which prohibits the pharmaceutical company not to incur any development or sales promotion expenses. A law which is applicable to different class of persons or particular category of assessee, same cannot be made applicable to all. The regulation of 2002 issued by the Medical Council of India (supra), provides limitation/curb/prohibition for medical practitioners only and not for pharmaceutical companies. Here the maxim of “Expressio Unius Est Exclusio Alterius” is clearly applicable, that is, if a particular expression in the statute is expressly stated for particular class of assessee then by implication what has not been stated or expressed in the statute has to be excluded for other class of assessee. If the Medical Council regulation is applicable to medical practitioners then it cannot be made applicable to Pharma or allied health care companies. If section 37(1) is applicable to an assessee claiming the expense then by implication, any impairment caused by Explanation1 will apply to that assessee only. Any impairment or prohibition by any law/regulation on a different class of person/assessee will not impinge upon the assessee claiming the expenditure under this section. 7.Before us the learned CIT DR strongly relied upon the fact that CBDT Circular, while clarifying the applicability of Explanation 1 to section 37(1) on medical practitioners and pharmaceutical companies have interpreted that Indian Medical Council Regulation is applicable for pharmaceutical companies also. He also brought to our notice that another notification was issued by Indian Medical Council which was published on 01.12.2016 which further prohibits such kind of embargo on medical practitioners and have added para 6.8.1 and also given instances of action which shall be taken upon medical practitioners. The relevant clause of the said notification as relied upon by him is reproduced hereunder: xxxxx From the aforesaid notification, ld. CIT DR submitted that so many violations and censures have been prescribed for any expenditures/ or benefit given to doctors, thus, violation of such guidelines for incurring such kind of expenditures cannot be held to be allowable expenditure. CBDT is well within its power to clarify and interpret the law and prohibit allowance of any expenditure which violates any statute or is in nature of offence. 8.From a perusal of above amendment/notification in the MCI regulation, it is quite clear again that same is applicable for medical practitioners only and the censure/action which has been suggested by it is only on medical practitioners and not for pharmaceutical companies or allied health sector industries. The violation of the aforesaid regulation would not only ensure a removal of a doctor from the Indian Medical Register or State Medical Register for ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) a certain period of time and it does not impinge upon the conduct of pharmaceutical companies. important distinction has to be kept in mind that regulation issued by Medical Council of India is qua the doctors/medical practitioners and not for the pharmaceutical companies. As a logical corollary to it, if there is any violation or prohibition as per MCI regulation in terms of section 37(1) r.w.Explanation1, then it is only meant for medical practitioners and not for pharmaceutical company (Assessee Company) for claiming the expenditure. 9.Adverting to the contention of the Ld. CIT DR that CBDT is well empowered to issue such clarification, it is seen that the CBDT Circular dated 01.08.2012 (supra) in its clarification has enlarged the scope and applicability of ‘Indian Medical Council Regulation 2002’ by making it applicable to the pharmaceutical companies or allied health care sector industries. Such an enlargement of scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provisions either under the provisions of Income Tax Law or by any provisions under the Indian Medical Council Regulations. The CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like ‘contemporanea expositio’ in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving administrative relief or for clarifying the provisions of law and cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scope of a different regulation issued under a different act so as to impose any kind of hardship or liability to the assessee. In any case, it is trite law that the CBDT circular which creates a burden or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be applied prospectively only. Here in this case the CBDT has enlarged the scope of ‘Indian Medical Council Regulation, 2002’ and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect. The same CBDT circular had come up for consideration before the co- ordinate Bench of the ITAT, Mumbai Bench in the case of Syncom Formulations (I) Ltd. (in & 6428/Mum/2012 for A.Ys. 2010-11 and 2011-12, vide order dated 23.12.2015), wherein Tribunal held that CBDT circular would not be not be applicable in the A.Ys. 2010-11 and 2011-12 as it was introduced w.e.f. 1.8.2012. 10.From the perusal of the nature of expenditure incurred by the assessee, it is seen that under the head “Customer Relationship Management”, the assessee arranges national level seminar and discussion panels of eminent doctors and inviting of other doctors to participate in the seminars on a topic related to therapeutic area. It arranges lectures and sponsors knowledge upgrade course which helps pharmaceutical companies to make aware of the products and medicines manufactured and launched by it. Under Key Account Management, the assessee makes endeavour to create awareness amongst certain class of key doctors about the products of the assessee and the new developments taking place in the area of medicine and providing correct diagnosis and treatment of the patients. The said activities by the assessee are to make the doctors aware of its products and research work carried out by it for bringing the medicine in the market and its results are based on several levels of tests and approvals. Unless the pharmaceutical companies make aware of such kind of products to key doctors or medical practitioners, then only it can successfully launch its products/medicines. This kind of expenditure is definitely in the nature of sales and business promotion, which has to be allowed. Coming to the gift articles and free samples of medicines, it is seen that the assessee gives various kind of articles like, diaries, pen sets, calendars, paper weights, injection boxes etc. embossed with bold logo of its brand name and the product name so that the doctors remembers the brand of the assessee and also the name of the medicine. All the gift articles, as pointed out by the assessee before the authorities below and also before us are very cheap and low cast articles which bears the name of assessee and it is purely for the promotion of ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) its product, brand reminder, etc. These articles cannot be reckoned as freebies given to the doctors. Even the free sample of medicine is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors but for promotion of its products. The pharmaceutical company, which is engaged in manufacturing and marketing of pharmaceutical products, can promote its sale and brand only by arranging seminars, conferences and thereby creating awareness amongst doctors about the new research in the medical field and therapeutic areas, etc. Every day there are new developments taking place around the world in the area of medicine and therapeutic, hence in order to provide correct diagnosis and treatment of the patients, it is imperative that the doctors should keep themselves updated with the latest developments in the medicine and the main object of such conferences and seminars is to update the doctors of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies. Further as pointed out and concluded by the learned CIT(A) there is no violation by the assessee in so far as giving any kind of freebies to the medical practitioners. Thus, such kind of expenditures by a pharmaceutical companies are purely for business purpose which has to be allowed as business expenditure and is not impaired by EXPLANATION 1 to section 37(1). 11.Before us, the Ld. CIT DR has also much harped upon the decision of the Hon’ble Himachal Pradesh High Court in the case of Confederation of Indian Pharmaceutical Industry (SS) vs. CBDT (supra), in support of the argument that CBDT Circular has been approved and confirmed by the High Court and therefore, it has a huge binding precedence. From the perusal of the said judgment of the Hon’ble High Court, it is seen that in that case the validity of Circular No.5/12 dated 1.8.2012 was challenged. The Hon’ble High Court though upheld the validity of the said circular but with a rider that if the assessee satisfies the assessing authority that the expenditure is not in violation of the regulation framed by the medical council, then it may legitimately claim the deduction. The assessee has to satisfy the AO that the expenditure is not in violation of the Medical Council regulation. Thus, if the assessee brings out that the MCI regulation is not applicable to the assessee before the AO, the same cannot be applied blindly.

In the background of such claim the Hon’ble Apex court held that, if the expenditure falls within the bare minimum it will not be caught by subsection (3A) of section 37. On the contrary, the Hon’ble Apex Court observed that physicians samples are necessary to ascertain the efficacy of medicine and introduce it in the market for circulation and it is only by this method the purpose is achieved. In such cases giving a physician samples for reasonable period is essential to the business of manufacture and sale of medicine. It is only if a particular medicine has been introduced by the market and its uses are established then giving of free samples could only be the measure of sale/ promotion and development would thus be hit by subsection (3A). Said decision no way prohibits the nature of expenditure which has been incurred in the case of the assessee. Therefore, such a reference to a Hon’ble Apex Court decision is not germane to the issue involved. Thus, in our opinion, the aforesaid decision of this Tribunal is clearly distinguishable and cannot be held to be applicable and also we have already given our independent finding as to allowability of expenses in the hands of the assessee as business expenditure.Accordingly, we uphold the order of the ld. CIT(A) deleting the disallowance aggregating to Rs.22,99,72,607/-.” 5.3.3..Lastly,we want to refer to the case of Syncom Formulations in & 6428/ Mum/2012,dated 23.12.2015, the Tribunal has held that the CBDT Circular,dated 1.8.2012 is applicable w.e.f.1.8. 2012 relevant to AY.2013-14.While holding so,it was observed as under: “We have considered rival contentions and found that receiving of gifts by doctors was prohibited by MCI guidelines, giving of the same by manufacturer is not prohibited under any law for the time being in force. Giving small gifts bearing company logo to doctors does not tantamount to giving gifts to doctors but it is regarded as advertising expenses. As regards sponsoring doctors for conferences and extending hospitality, pharmaceuticals companies have been sponsoring practicing doctors to attend prestigious conferences so that they gather contemporary knowledge about management of certain illness/disease and learn about newer therapies. We found that the disallowance was made by the AO by relying on the CBDT Circular dated 01.08.2012 onwards. However, the Circular was not applicable because it was introduced w.e.f.01.08.2012 i.e. AY. 2013-2014, whereas the relevant AY. under consideration is 2010-2011 and 2011-2012. Accordingly, we do not find any merit in the disallowance so made by the AO in both the AY.s under consideration”. 5.4.Considering the above,we are of the opinion that the MCI guidelines are applicable to the professionals i.e. Doctors only.They do not and cannot govern the other tax entities like Drug manufacturing or drug distributing Companies or individuals other than the doctors, or HUF,s., or Firms etc.MCI,as a body can formulate policy for the Doctors.The assessee is not a practicing professional.So,any guidelines issued by it cannot decide the allowability or otherwise of an expenditure under the Act.Income tax Act is a code in itself and business income an assessee has to be assessed and taxed as envisaged by the provisions of the Act.The AO/DRP had not doubted incurring of expenditure.They have heavily relied upon the guidelines issued by the MCI for the doctors.The Hon’ble Delhi High Court in the case of MAX Hospital,Pitampura (supra)has clearly held that MCI could issue guide lines for the Doctors only and that the MCI in its affidavit admitted that it has ‘no jurisdiction’ to pass any order against the ‘Petitioner hospital’.Ethics 13 ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) Committee of MCI is authorised to pass some order about the infrastructure of any hospital. But,as far as corporate entities are concerned MCI cannot issue any guide lines. Therefore,we are not dealing with the issue as to from which AY.the guide lines would be applicable.We would also like to hold that distribution of free samples cannot be treated as violation of Expl.1 to section 37(1). 5.5.We would also like to prefer to follow the judgment of the Hon’ble Delhi High Court delivered in the case of MAX Hospital,Pitampura and the above referred two orders of the Tribunal i.e. PHL Pharma P Ltd.(supra)and Syncom Formulations(supra)over the order of Ochoa Lab. (supra).Accordingly,third effective ground of appeal(Gs.OA 20-32)is decided in favour of the assessee.” 4.4.Considering the above,we are of the opinion that the DRP was not justified in endorsing the view of the AO and approving disallowance made on account of payments to .We allow Grounds 6-9.

Hon'ble jurisdictional High Court in the case Maruti Suzuki. Ltd. (supra) held that when there being no international transaction in AMP spend with an ascertainable price, neither substantive noi machinery provision of Chapter - X were applicable to transfei pricing adjustment exercise. In Bausch & Lomb Eycare ('India) (F) Ltd. (supra), Hon'ble jurisdictional High Court held that in the absence of an international transaction involving AMP expenses between isse.s:5 e'e and its AE, addition is not sustainable. Similar1y, in Whirlpool of India Ltd. (supra) case also, Hon'ble Court held that merely because there is an incidental benefit to AE, it cannot be said that AMP expenses incurred by the Indian entity are for promoting brand of its AR.

In the instant case, the Revenue has not brought on record any material that brand loyalty has been generated by making payment on account of selling commission and selling expenses by the assessee company. Furthermore, the assessee has made payment under AMP head to its independent parties for promotion of its own business which exclude this transaction from th definition of international transaction particularly in the face of the fact ITA/1784/Mum/2016; I.T.A./1857/Mum/2016 & C.O. No.160/Mum/2016 (11-12) Synthes Medical Private Limited (merged with Johnson & Johnson Pvt.Ltd.) that there is no agreement between the assessee and AR fcr sharing the AMP expenses When we examine all these facts in the light of the fact that no such adjustment has been made by the R e v e n u e f o r the earlier years,the details of which is given in tabulated form by the assessee in its synopsis as hereunder :- XXXXX This adjustment made by TPO is not sustainable in the eyes of law.: 27.So,in the given circumstances, we are of the considered view that addition made by the TPO/AO/DRP by wrongly computing AMP expenses by including selling commission of Rs.4,99,32,478/- and selling expenses of Rs. 1,47,72,866/- as part of total turnover during the year under assessment is not sustainable in the eyes of law. So, Grounds No.2, 2. 1, 2.2, 2.3, 2.49 2.5, 2.6, 3, 2.8, 3.0 & 3.1 are determined in favour of the assessee and the TPO/AO are directed to benchmark the international transactions in the light of the findings returned herein above.” Respectfully following the above,we dismiss Grounds of appeal No.1-4,rasied by the AO.