Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI G.S.PANNU, AM & SHRI AMARJIT SINGH, JM
Assessee by: None Department by: Shri O.P.Meena सुनवाई क� तार�ख / Date of Hearing: 25.02.2016 घोषणा क� तार�ख /Date of Pronouncement: 20.07.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed an appeal against the order dated 19.06.2014 passed by the Commissioner of Income Tax (Appeals)- 17, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2011-12. 2. The assessee has raised the following ground of appeal:-
ITA No.5153/M/14 A.Y. 2011-12
"1. The learned Commissioner of Income-tax (Appeals)-17, Mumbai, has erred in confirming the disallowance of expenditure incurred on sales promotion to medical Practitioner Rs.5,16,336/- and thereby not appreciating the facts of the case and the nature of expenses incurred.”
The facts of the case are that the assessee filed its return of income for the A.Y.2011-12 on 29.09.2011 declaring total income to the tune of Rs.1,53,42,184/-. The said return was processed u/s.143(1) of the Income Tax Act, 1961( in short “the Act”) accepting its return income. The case was selected for scrutiny and notice u/s.143(2) dated 14.09.2012 was issued and duly served upon the assessee on 20.09.2012. Subsequently notice u/s. 142(1) of the Act dated 03.01.2013 & 07.08.2013 alongwith detailed questionnaire was issued and served upon the assessee. The assessee claimed sales promotion expenses to the tune of Rs.27,36,868/-. The Assessing Officer in view of the Circular No.5 of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes, New Delhi and notification dated 10.12.2009 issued by the Medical Counsel of India (MCI) Regulations, gift items which was given to the medical practitioners amounting to Rs.5,16,339/- was disallowed and thereafter the said finding was confirmed by the learned CIT(A) therefore the assessee has filed the present appeal before us.
We have heard the arguments advanced by the learned representative of the parties and perused the record carefully. The ITA No.5153/M/14 A.Y. 2011-12 sole point which has been raised by the assessee is that the gift articles amounting to Rs.5,16,339/- given to the medical practitioners has been wrongly disallowed by the Assessing Officer and wrongly confirmed by the learned CIT(A) because the appellant has distributed only low value items such as desk cleaner, desk tops, free samples of medicines etc. for promoting the product of the company Inga Laboratories Pvt. Ltd.. Therefore, these articles are not freebees, therefore, the said expenditure is liable to be allowed in the interest of natural justice. Before discussing the further, it is necessary to advert the list of articles disallowed by the Assessing Officer on record:-
a. Ties for Medical Representatives b. Mobile Handset for Stockist c. Optical for Foreign Customers d. Ball pens with Company Logo e. Card Holder with Company Logo f. Earwick with Product Logo g. Hand Sanitizer with Product Logo h. Room Freshener with Company Logo i. New Year Diaries with Company Name & Logo While confirming the said disallowance the learned CIT(A) placed reliance on the Circular No. 05 of 2012 dated 01.08.2012 issued by the Central Board of Direct Taxes which clarified that the council in exercise of its statutory power amended the Indian Medical Council
ITA No.5153/M/14 A.Y. 2011-12 (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10.12.2009 imposing a prohibition on the 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. Learned CIT(A) also clarified that section 37(1) of the Act provides for deduction of any revenue expenditure (other than those falling under sections 30 to 36) from the business income if such expense is laid out / expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense, if the same has been incurred for a purpose which is either an offence or prohibited by law. Accordingly, the learned CIT(A) was of the view that the claim of the assessee is not permissible u/s.36(1) of the Act as there expenses have been prohibited by the law. The provision under Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 imposed certain a prohibition on the 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. These provisions are in the interest of patient and public. It is not an issue whether the gift is smaller or the big but these expenses incurred by the appellant are not a sale promotion expenses but are in nature of expenses which qualifies for the personal use by the Doctors and their clinic. These expenses cannot be said to ITA No.5153/M/14 A.Y. 2011-12 be expended wholly and exclusively for the business of the appellant. These gifts are clearly violation of the provision of the above mentioned circular therefore in the said circumstances the learned CIT(A) has rightly decided this issue in favour of the revenue. Finding no material contrary to the discussion made by the learned CIT(A), we are of the view that the learned CIT(A) has passed the order judiciously and correctly which does not require to interfere with at this appellate stage.
Accordingly, appeal of the assessee is hereby dismissed.
Order pronounced in the open court on 20th July, 2016