2018 (5) TMI 2013 - AT - Income Tax

Disallowance of expenditure incurred on sales promotion - participation fees and installation of stall prohibited by the Medical Council Act - HELD THAT - Respectfully following the order in assessee s own case 2018 (4) TMI 1813 - ITAT MUMBAI we do not find any merit for the disallowance so made by the AO. - Decided against revenue.

Summary

Issues:
Cross appeals by assessee and revenue against disallowance of expenditure on sales promotion for A.Y. 2012-13.

Analysis:
The judgment pertains to cross appeals filed by the assessee and revenue against the order of CIT(A)-16, Mumbai for A.Y. 2012-13 concerning the disallowance of expenditure on sales promotion. The assessee, a Private Limited Company engaged in pharmaceuticals, filed its Return of Income declaring total income of ?11,93,31,790. The Deputy Commissioner disallowed ?3,28,79,269 from Sales Promotion expenses. The CIT(A) partially deleted the disallowance, leading to further appeals by both parties. The Tribunal considered the previous year's order in the assessee's case where a similar addition was deleted. The dispute centered on the applicability of Circular No.5 of 2012 dated 01.08.2012 issued by the CBDT, which the assessee argued was prospective and not applicable retrospectively.

The assessee contended that the expenses were allowable, citing various judicial precedents. The Tribunal noted that the CBDT Circular was prospective and not applicable for the A.Y. 2012-13 under consideration. It referenced several decisions supporting this view, including DCIT Vs. PHL Pharma, Solvay Pharma India Ltd. Vs. PCIT, Macleods Pharmaceuticals Ltd. Vs. ADIT, Sycom Formulations India Ltd., UCB India Pvt. Ltd. Vs. ITO, and Sunflower Pharmacy Vs. ITO. Based on the consistent interpretation of the Circular's prospective nature, the Tribunal found no merit in the AO's disallowance and ruled in favor of the assessee while dismissing the revenue's appeal.

In conclusion, the Tribunal's decision was based on the understanding that the CBDT Circular was prospective and not applicable retrospectively for the A.Y. 2012-13. The consistent interpretation of various judicial pronouncements supported the assessee's claim for the allowance of sales promotion expenses, leading to the allowance of the assessee's appeal and the dismissal of the revenue's appeal.