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2016 (1) TMI 500 - AT - Income Tax


Issues:
1. Disallowance of expenditure on distribution of samples of medicines under section 37(1) of the Income Tax Act.
2. Inclusion of disallowance under section 14A of the Act in book profit.
3. Whether disallowance under normal provisions should be added under section 115JB.

Analysis:

Issue 1: Disallowance of Expenditure on Distribution of Samples of Medicines
The Appellate Tribunal considered the appeal regarding the disallowance of expenditure incurred on distributing samples of medicines to physicians free of cost. The Assessing Officer disallowed the expenditure, and the CIT(A) confirmed a portion of the disallowance under normal provisions but excluded it from the book profit under section 115JB. The Tribunal observed that the expenditure was for business purposes and should be allowed under section 37(1) of the Act. The Tribunal disagreed with the CIT(A)'s decision based on CBDT Circular and a previous judgment, stating that providing samples to physicians is essential for creating market reputation and falls within the ambit of business expenditure. Therefore, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to reassess the expenditure.

Issue 2: Inclusion of Disallowance under Section 14A in Book Profit
The Tribunal addressed the issue of including the disallowance under section 14A of the Act in the book profit. Referring to a decision by the Delhi High Court, the Tribunal upheld the CIT(A)'s order on this issue, ruling against the assessee.

Issue 3: Disallowance under Normal Provisions and Section 115JB
Regarding the disallowance of expenses under normal provisions and whether they should be added under section 115JB, the Tribunal upheld the CIT(A)'s decision, stating that such disallowances are not required to be included under section 115JB of the Act.

In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal. The order was pronounced in an open court on 18.12.2015.

 

 

 

 

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