2018 (3) TMI 1099 - AT - Income Tax

Disallowance of expenses claimed under the head of Sales Promotion - assessee company paid such amount as Freebies to the doctors for prescribing pharmaceutical product of the assessee company - expenses admissible as per instruction No.5/2012 issued by the CBDT - Held that - During the remand proceedings the assessee submitted nine photographs of medical camps, five certificates and seven hotel bills in support of medical camp organized by it and we note that assessing officer did not find any mistake or irregularity therein. During the remand proceedings, the assessee also explained to the AO that medical camps organized by the assessee required large expenditure inter alia for cost of travelling, reimbursement of cost of conveyance, reimbursement of lodging cost, reimbursement of paramedical persons who attended the camps, cost of chemicals, hire charges of certain equipments and cost of free samples of medicines etc, and the assessing officer failed to bring any evidence that these expenses were not genuine. We note that even otherwise the expenses were not covered by the CBDT Circular No.05/2012, as the expenses were incurred by the assessee for the purpose of business. We note that assessing officer was not justified in applying the guidelines as laid down by CBDT in aforesaid circular in respect of A.Y 2012-13. We note that in subsequent assessment years i.e. in A.Y 2013-14 and in A.Y 2014-15, the assessing officer has allowed the similar claims of the assessee. That being so, we decline to interfere with the order of ld CIT(A) deleting the aforesaid addition. - Decided against revenue

Summary

Issues:
Appeal against deletion of addition made by AO under 'Sales Promotion' expenses for A.Y 2012-13.

Analysis:
The Revenue appealed against the deletion of an addition of ?1,62,67,130 made by the AO under 'Sales Promotion' expenses for the assessment year 2012-13. The CIT(A) had deleted the addition, stating that the expenses were for the purpose of business. The Revenue contended that the assessee failed to substantiate the expenses claimed. The AO disallowed the expenses related to doctor investment. The CIT(A) observed that the expenses were for operational services, medical camps, and distribution of free medical samples, essential for business purposes. The Revenue challenged the CIT(A)'s decision, reiterating the AO's stance. The Tribunal noted that the AO's disallowance was based on a circular issued by the CBDT, which the assessee argued was not applicable for the relevant assessment year. The Tribunal referred to a judgment stating that the circular was prospective and not applicable for the year under consideration. The Tribunal found that the AO failed to provide substantial evidence to support the disallowance, relying on a retracted statement without corroborating evidence. The assessee submitted documentation during remand proceedings, which the AO did not find irregularities in. The Tribunal concluded that the expenses were genuine and necessary for business, not covered by the circular. The Tribunal upheld the CIT(A)'s decision to delete the addition, noting that similar claims were allowed in subsequent years. Consequently, the Revenue's appeal was dismissed, affirming the CIT(A)'s order.