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TMI Blog2015 (10) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to support the claim of damaged drugs, unusable drugs and drugs consumed for quality control. In other words, the assessee has to produce necessary details with regard to damaged drugs, unusable drugs and drugs consumed for quality control, liquidated damages, if any, claimed from the respective companies for the damaged and unusable drugs. In view of the above discussion, the orders of the lower authorities are set aside and the entire claim of damaged drugs, unusable drugs and drugs consumed for quality control is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matte afresh in the light of the material/details that may be filed by the assessee with regard to damaged drugs, unusable drugs and drugs consumed for quality control and thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee. Cost of blood pressure checking apparatus said to be supplied to the members of the State Legislative Assembly - Held that:- This Tribunal is of the considered opinion that the cost of blood pressure checking apparatus cannot be considered to be a marketing expense. The assessee-company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has not followed the procedure prescribed by FDA. In the absence of any material on record to support the claim of the assessee with regard to damaged drugs, unusable drugs and drugs consumed for quality control, the Assessing Officer disallowed the claim of the assessee. However, on appeal by the assessee, the CIT(A) found that the accounts of the assessee was subjected to audit by Comptroller Auditor General of India u/s 619(3)(b) of the Companies Act, 1956 and they have not made any comments. On the basis of the certificate issued by the C AG, the CIT(A) deleted the addition without making any investigation. The ld. DR further submitted that the certificate said to be issued by the C AG was not available before the Assessing Officer. According to the ld. DR, in the absence of any material available on record, the claim of the assessee with regard to damaged drugs, unusable drugs and drugs consumed for quality control, cannot be allowed as deduction. 3. The ld. DR further pointed out that for assessment year 2010-11, the Revenue has raised one more ground with regard to expenditure incurred by the assessee to the extent of ₹ 6,45,741/- towards customer care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not required to act as a drug/medicine testing agency, the ld. Representative pointed out that the assessee is a State Government Company. The activity of the assessee was procuring and supplying drugs and to provide diagnostic facilities to Government Hospitals in the State of Tamilnadu. Besides, the assessee was also managing CT and MRI scanning. Referring to the Directors' Report, the ld. Representative pointed out that the assessee-company has established a quality control section to ensure quality of drugs procured. In fact, samples are drawn from each batch of supply and tested in empanelled analytical laboratories in order to ensure the quality of drugs. According to the ld. DR, only after checking the quality of the drugs procured, the same will be supplies to the Government Hospitals. In view of the above, it may not be correct on the part of the Assessing Officer to say that the assessee was not required to act as a testing agency. Therefore, the CIT(A) has rightly allowed the claim of the assessee on the basis of the certificate issued by C AG. 6. Referring to the cost of blood pressure checking apparatus supplied to the members of the State Legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on damaged drugs is not incidental to the business of the assessee. The Assessing Officer also found that the assessee has not filed any evidence with regard to damaged drugs and unusable drugs. The so called damaged drugs were not destroyed by following FDA procedure. Admittedly, the assessee was entrusted by the Government of Tamilnadu to procure medicines, surgical materials, napkins, medical equipments etc. The assessee being a Government Company, is expected to ensure supply of quality drugs to the Government Hospitals. Therefore, it may not be correct to say that the assessee was not required to act as a drug/medicine testing agency. The assessee being a Government Company, procuring medicines for the entire Government Hospitals in the State of Tamilnadu is duty bound to maintain quality control, therefore, it has to test the quality of the medicines purchased before supplying the same to the Government Hospitals. In fact, in the Directors' Report, it is clearly stated that the assessee-corporation has established a quality control section to ensure quality of the drugs procured. It is also stated that the samples drawn from various batches are tested in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the order of the CIT(A). The CIT(A) has allowed the claim of the assessee on the basis of the certificate said to be issued by the C AG u/s 619(3)(b) of the Companies Act, 1956. It is not in dispute that this certificate was not available before the Assessing Officer. A perusal of the CIT(A)'s order shows that the C AG has stated No Comment'. The CIT(A) without any further discussion, by placing reliance on the certificate said to be issued by the C AG allowed the claim of the assessee. The audit conducted by the C AG u/s 619(3)(b) of the Companies Act, 1956, is for a different purpose i.e to ensure the Government Company to maintain the books of account as required under the Companies Act. The Income-tax Act, 1961 is a special enactment for the purpose of computing the total income and levying tax thereof and collecting taxes. Therefore, the authorities established under the Income-tax Act, 1961 has to examine the material available on record for the purpose of computing the taxable income. The certificate said to be issued by C AG may be one of the factors that may be relevant for consideration while computing the total taxable income. However, the certificate iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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