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TMI Blog2018 (8) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... pharmaceutical company. Therefore, the Circular issued by CBDT cannot be applied. The ld. CIT(A) also observed that the assessee had not supplied any item free of cost to the hospitals, but these items were representing part of the machinery and equipments supplied to various parties. - order of CIT(A) confirmed - Decided against the revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... Forms 26A were to be filed with the DGIT (Systems) or any person authorized by DGIT (Systems) as per the Rule 31ACB of Income Tax Rule. However, this requirement to file the certificate to DGIT (Systems) was inserted on 19-02-2013. Thus, during the relevant time, there was no authority prescribed for filing the requisite form as discussed above. The assessee further submitted in respect of interest paid to the party mentioned at Serial No. 5 i.e., Barclays Investments and Loans (India) Limited that it had filed a certificate u/s 195(3) of the Act to the assessee for not deducting the TDS. Therefore, no TDS was deducted on the payment of interest to Barclays Investments and Loans (India) Limited. The ld. CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under : "4.4.1 A perusal of the submissions made by the appellant during the appellate proceedings shows that form No. 26A and Annexure A i.e. certificate of the accountant as required under the proviso to Section 201(1) has been furnished by the appellant in respect of interest paid to Tata Capital Financial Services Ltd., India Bulls Financial and Magma Fin Corp. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1)" Thus, since the appellant company was exempted from deduction of tax at source in respect of interest paid to Barclays Investments and Loans (India) Ltd., no disallowance u/s. 40(a)(ia) was called for. In view of the discussion above, the disallowance of ₹ 10,77,754/- is deleted. Ground of appeal No 1 is accordingly allowed." Being aggrieved by order of ld. CIT(A) Revenue is in appeal before us. Both the parties before us relied on the order of authorities below as favorable to them. 6. We have heard the rival contentions and perused the materials available on record. The issue in this instant case relates to the expenses claimed by the assessee without deducting TDS. The ld. AR before us inter-alia submitted that there is an amendment by the Finance Act 2012 which provides that no disallowance needs to be made if the recipient has included the payment made by the assessee in its receipts and has paid the taxes thereon. In this regard, we find force in the argument of the ld. AR. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the due date specified in sub-section (1) of section 139 :] 36[Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] The following second proviso shall be inserted in sub-clause (ia) of clause (a) of section 40 by the Finance Act, 2012, w.e.f. 1-4- 2013 : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1)of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso." The said proviso though inserted by the Finance Act 2012 w.e.f. 1-4- 2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and Loans (India) Limited, we note that it has filed a certificate u/s 195(3) of the Act to the assessee for the deduction of TDS at NIL rate. Therefore, in our considered view there was no liability for the deduction of TDS on the payment of interest to Barclays Investments and Loans (India) Limited. Accordingly, we do not want to disturb the finding of the ld. CIT-A. Thus we direct the AO to delete the same. Thus the ground of appeal of the Revenue is dismissed. 7. The second issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO for ₹ 47,20,260/- on account of infringement of the law. 8. The Assessee during the year has incurred an expense of ₹ 47,20,260/- under the head of sales promotion expenses. The assessee claimed that it had supplied UPS / Digital Thermal B/W Printer & Color inkjet printer to Central Medical Stores Organizations free of cost. The assessee further claimed that the material was supplied free of cost in pursuance of the purchase order received from Central Medical Stores Organizations. However, the AO was of the view that the gift given by pharmaceutical and allied health sector industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order shows that the AO had disallowed the amount of ₹ 47,20,260/- debited as sales promotion expenses in view of CBDT Circular No. 5 of 2012. This Circular was issued by the CBDT to curb the practice of pharma companies offering gifts for promotion of their products. The appellant has submitted during appellate proceedings that it was not a pharmaceutical company but was engaged in the business of supplying medical equipments imported from other countries. Hence, the said Circular was not applicable to it. After a perusal of the submissions made by the appellant, I am of the opinion that disallowance of sales promotion expenses by applying provisions of Circular No.5/2012 cannot be made since the appellant is not a pharmaceutical company. The items which were given by the appellant company were not free items but were part and parcel of the machineries and equipments that were supplied by it to various customers. Further, it is also seen that most of the expenses incurred is on account of sales made to Government hospitals. Most of these expenses pertain to the cost of accessories and peripherals supplied to customers and needed for the operation of the machines. Moreov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , AR further submitted that the Circular issued by the CBDT is not applied retrospectively. In this regard, the ld. AR relied on the order of Mumbai Tribunal in the case of Macleods Pharmaceuticals Ltd vs. ACIT reported in 161 ITR 291. The ld. AR in support of his claim also relied on the order of this Jurisdictional Tribunal in the case of M/s. Cadila Pharmaceutical Ltd vs. DCIT in ITA No.1117/Ahd/2012. The Ld. DR in his rejoinder submitted that if products were supplied to the Government Hospital in pursuance to the purchase order, then it should not be shown under the head sales promotion expenses. Rather it should have been shown in the financial Statement as purchase and sales of the goods. The ld. AR in his rejoinder submitted that the products supplied to Government Hospitals wrongly categorized under the head sales promotion expenses. In fact, it represents the purchases of the goods, which were subsequently sold to the Government hospitals. The ld. AR vehemently supported the order of Ld. CIT(A). 10. We have heard the rival contention and perused the material available on record. In the present case, the assessee has supplied certain products free of cost to the govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, much less the High Court, is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to the assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. But that is not the same thing as saying that such circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is, however, support of certain judicial observations for the view that such circulars constitute external aids to construction. In view of the above, we hold that no reliance can be placed on the CBDT circular as discussed above. Besides the above, we also note that in the case on hand the goods were supplied to the hospitals in pursuance to the purchase order which is placed on the pages 23 to 28 of the PB. The relevant extract of the purchase order is reproduced as under : "SCHEDULE TO ACCEPTANCE OF TNEDER NO : CMSO/INST/F.196/2010-11 PLACE WITH: M/s. Esaote India (NS) Limited, B-604/704,Oxford Tower, Gurukul, Ahme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d within 48 hours and standby color Doppler unit to be provided within one week. 20 Product should confirm to FDA/CE approval. All these certificate should be submitted in hard copy. 21 UPS for the machine with 60 Minutes battery Back up. 22 Digital Thermal B/W Printer & color inkjet printer. A.T. Holder must provide Original documentary proof of the date & place of Manufacturing of Supplied equipments otherwise stores will not be accepted by concern Consignee." In view of above, we hold that the circular as discussed above is not applicable to the case on hand. Similarly, the facts of the case are different with the order of Mumbai Tribunal in the case of Liva Healthcare Limited (supra) as relied on by the ld. DR. Accordingly no reliance can be placed on such order. The case relied on by the ld. DR in the case of Confederation of Indian Pharmaceutical Industry (supra) also does not support the Revenue. It is because this case does not talk about the applicability of the Circular issued by the CBDT rather it upheld the validity of the Circular issued by the CBDT. Thus, the argument of the ld DR is that the Circular is applicable with a retrospective date does not hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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