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TMI Blog2017 (9) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... keting, presales and related activities for medical products/ instruments sold by the BSI in India. Such products include wide range of cardiology and related medical devices. It is stated that subsequent to the AY in question, the Appellant also started trading in such products in India. 4. On 9th May 2012 the Assessee filed its return of income for the AY in question declaring an income of Rs. 69,48,386. Notice under Section 143 (2) of the Act was issued to the Assessee by the AO on 7th August 2013 and the return was picked up for scrutiny. A reference was made by the AO to the Transfer Pricing Officer ('TPO') under Section 92CA (1) of the Act for determination of the Arm's Length Price ('ALP') of the international transactions undertaken by the Assessee with its Associated Enterprise ('AE'). 5. The TPO passed an order on 7th January 2015 recommending TP adjustment in the sum of Rs. 1,50,76,722. On the basis of the said order of the TPO, the AO passed a draft assessment order under Section 144C of the Act on 20th February 2015 making a TP adjustment as proposed by the TPO. 6. The Assessee filed objections before the Dispute Resolution Panel ('DRP') on 27th March 2015 challengi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of the draft assessment order. (ii) Such expenses were not in the nature of 'freebies' or 'gifts' given to medical personnel and ex facie not covered by the CBDT Circular No. 05 of 2012. (iii) CBDT Circular No. 05/2012 was not applicable to the year under consideration i.e. A Y 2011-12. (iv) The MCI Guidelines were applicable to the doctors/medical practitioners and not the Assessee. (v) Without prejudice to the above contentions, the expenditure in question was wholly and exclusively for the purposes of business of the Assessee. 10. By the impugned order dated 30th November 2016, the ITAT set aside the determination of interest chargeable on receivables and remanded the issue to the file of the TPO. The disallowance of Rs. 13,14,548 on account of expenditure incurred on (i) consultancy/honorarium fee (ii) registration, sponsorship and training, was upheld. The ITAT held that the aforementioned CBDT circular prohibited such expenditure. 11. At the outset Mr. M.S. Syali, learned Senior counsel appearing for the Assessee, pointed out that the ITAT failed to deal with the challenge raised by the Assessee to the disallowance of other specific items of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the MCI Guidelines need to be understood. This is contained in the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('IMC Regulations'), which govern the expenses, conduct and professional etiquette of medical personnel. Under Article 6.4.1 of the IMC Regulations 'a physician shall not receive, solicit, or receive nor shall he offer to give solicit or receive any gift, gratuity, commission or bonus in consideration of a return for referring, recommending or procuring of any patient for medical, surgical or other treatment. Further Regulation 6.8.1 which was inserted in terms of the Notification published on 14th December 2009 in the Gazette of India states, as under: a) Gifts: A medical practitioner shall not receive any gift from any pharmaceutical or allied health care industry and their sales people or representatives. b) Travel facilities: A medical practitioner shall not accept any travel facility inside the country or outside, including rail, air, ship, cruise tickets, paid vacations etc. from any pharmaceutical or allied healthcare industry or their representatives for self and family members for vacation or for attending conferen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the officers of the charge for necessary action." 18. Although the Assessee had raised an issue before the ITAT that the above Circular is prospective and does not apply to the AY in question, that issue appears not to have been examined by the ITAT. 19. From the written submissions filed by the Assessee before the ITAT, apart from contending that CBDT's circular did not apply to the AY in question, it was also stated that a consultancy agreement had been entered into by the Assessee with Dr. Anil Saxena, who is a renowned name in the field of electrophysiology in North India, for providing consultancy/advisory services to the Assessee. A copy of the consultancy agreement with Dr. Anil Saxena for the AY 2011-12 was placed before the ITAT. It was pointed out that honorarium was paid to Dr. Saxena during the AY in question for the consultancy services provided by him under the said consultancy agreement after deducting tax at source. The said expenditure was therefore stated to be genuine business expenditure. It was contended that the payment of such consultancy fee does not fall within the purview of MCI Regulations. A reference was made to Clause (g) of the MCI Regulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the services provided by Dr Anil Saxena. However from the records placed before us we do not find any search details that has been provided in order to establish that Dr Anil Kumar Saxena has actually delivered any lectures, attended any meetings, provide training courses and seminars for Assessee etc. It is further pertinent to note that Dr Anil Kumar Saxena is associated with Escorts Heart Institute and Research Centre. Similar is an agreement entered into by Assessee with one Dr Shakir Hussain who is associated with Max Super Speciality Hospital. From these agreements it is difficult to make out whether these doctors have entered into agreements with Assessee in their individual capacity or on behalf of respective hospitals with whom they are associated, as its representative. 52. As the Assessee has incurred expenses in the garb of marketing the cardiac machine, onus is upon the Assessee to prove that the expenses incurred do not violate any law that may be applicable. The burden lies upon the Assessee which has not been evidences/ materials. Merely by placing the bills of payments, the travel details, the hotel details where the doctors were stationed and the seminars/ c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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