9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (8) TMI 1444 - AT - Income TaxDisallowance of marketing and sales promotion expenses - allowable revenue expenses for pharmaceutical company - HELD THAT - The circular issued by the CBDT dated 1-8-clarification enlarging the scope of disallowance to the pharmaceutical companies is without any enabling notification or circular of the Medical Council of India. Considering the settled legal position on the issue, we are of the opinion that the issue now stands covered in favour of the assessee. The pharmaceutical company like the assessee is outside the scope of the circulars by the Medical Council of India or the CBDT. Therefore, the conclusions of the AO/CIT(A) in this regard are reversed. Thus, the grounds raised by the assessee are required to be allowed. Claim of credit for foreign TDS - HELD THAT - Nowhere in the provision of s. 91(1) of the Act, it is provided that the payment of taxes outside India shall be during the relevant previous year itself. The purpose of this provision of s. 91(1) of the Act is to provide relief in a case where the assessee has paid the taxes outside the country, not to subject such assessee to double taxation on the same income. If the interpretation put forward by the learned CIT Departmental Representative is accepted, it shall render the provision of s. 91(1) itself as redundant. We find that the assessee has discharged its onus of proving that it has in fact made the payment of taxes in Kuwait in subsequent periods. The CIT(A) has recorded the dates and amount of payment of taxes in Kuwait by the assessee and has recorded that the assessee has furnished before him the original documents evidencing these payments and the same have also been furnished before the AO and has been verified by him. There is no material before us to controvert these findings of the CIT(A) - assessee is entitled to relief u/s 91(1) of the Act and the order of the CIT(A) is confirmed and the ground of appeal of Revenue is dismissed.
Issues Involved:
1. Disallowance of marketing and sales promotion expenses. 2. Claim of credit for foreign TDS of ?73,72,181/-. Detailed Analysis: 1. Disallowance of Marketing and Sales Promotion Expenses: - Background: The assessee, a pharmaceutical company, claimed marketing and sales promotion expenses totaling ?1,90,94,018/-. The Assessing Officer (A.O.) disallowed these expenses under Section 37(1) of the Income Tax Act, citing a circular issued by the Medical Council of India (MCI) and CBDT Circular No. 5/2012. - CIT(A) Decision: The CIT(A) upheld the A.O.'s disallowance, relying on the previous year's decision for A.Y. 2010-11. - Assessee’s Argument: The assessee argued that the ITAT had previously ruled in their favor for A.Y. 2010-11, stating that the MCI circular does not apply to pharmaceutical companies. - Tribunal’s Findings: The Tribunal referenced its earlier decision and similar cases (PHL Pharma Pvt. Ltd. and Solvay Pharma India Ltd.), concluding that the MCI circular and CBDT Circular No. 5/2012 do not apply to pharmaceutical companies. The Tribunal emphasized that these circulars are intended for medical practitioners, not pharmaceutical companies, and thus, the disallowance under Section 37(1) was not justified. - Conclusion: The Tribunal allowed the assessee's appeal, reversing the A.O. and CIT(A)'s decisions, and ruled that the marketing and sales promotion expenses should be allowed. 2. Claim of Credit for Foreign TDS of ?73,72,181/-: - Background: The assessee claimed credit for foreign TDS deducted by its subsidiary in the USA on interest income of ?4,91,47,872/-. The CIT(A) denied this credit, stating it was not paid in the relevant financial year. - Assessee’s Argument: The assessee contended that the interest income was offered to tax on an accrual basis in A.Y. 2011-12, and credit for the foreign TDS should be allowed proportionately. They cited Article 25 of the DTAA between India and the USA and Rule 128, which supports credit for foreign tax in the year the income is offered to tax. - Tribunal’s Findings: The Tribunal referenced the decision in Petroleum India International, where it was held that foreign tax credit is not dependent on the payment being made in the same year. The Tribunal noted that the foreign tax credit should be allowed in the year the income was offered to tax, as per Section 91(1) and Rule 128. - Conclusion: The Tribunal allowed the assessee's claim for foreign TDS credit, reversing the CIT(A)'s decision, and ruled that the credit should be granted in the year the income was offered to tax. Final Judgment: - The appeal of the assessee was allowed in its entirety, with both issues decided in favor of the assessee. The marketing and sales promotion expenses were allowed, and the claim of credit for foreign TDS was granted. Order Pronounced: 27th August 2019.
|
