9911796707
TMI Blog2018 (11) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... es as faculties -Rs. 33,30,321 * the expenditure incurred towards sponsorship of scientific and technical sessions -Rs. 78,76,556 * the expenditure incurred for sponsoring conferences at various medical colleges - Rs. 175,000 * the expenditure incurred towards sponsorship of registration fees of faculties at various conferences - Rs, 75,000 * the expenditure incurred for conducting clinical research - Rs. 379,500 * the expenditure incurred on setting up of stalls at conferences - Rs. 230,000 The Appellant prays that the Assessing Officer be directed to delete the aforesaid disallowance. 1.2 On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in holding that expenditure amounting to Rs. 33,30,321 incurred on doctors attending the medical conferences as faculties, did not result in any benefit to the Appellant. The Appellant prays that the Assessing Officer be directed to delete the aforesaid disallowance. 2. On the facts and in the circumstances of the case and in law, the Assessing Officer erred in holding that Circular No 5 of the Central Board of Direct Taxes dated ist August 2012 was applicable to the year under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was selected for scrutiny assessment vide notice dated 20/09/2011 issued u/s.143(2) of the IT Act. 4. During the course of assessment proceedings, the Assessing Officer ('AO') called various information/ documents, including information & submission in connection with allowability of advertising and sales promotion expenditure of Rs. 5,10,93,756. After considering the factual and legal submission made by the assessee, the AO completed the assessment proceedings and passed the assessment order dated 13 March 2014 under section 143(3) of the IT Act. In the said order, the AO without accepting assessee's contention made the following disallowances: (a) Conference expenses of Rs. 1,65,51,331 - Rs. 1,60,71,341 incurred from 14 December 2009 to 31 March 2010 - Rs. 4,79,990 disallowed on pro rata basis for the period 10 December 2010 to 13 (b) Entertainment expenses of Rs, 1,08,885 incurred from 14 December 2009 to 31 March 2010. 5. Against the above order of AO, assessee approached to CIT(A). 6. By the impugned order CIT(A) partly confirmed the addition on account of disallowance of expenditure of Rs. 33,30,321/- incurred towards appointment of faculty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the same by manufacturer is not prohibited under any law for the time being in force. Giving small gifts bearing company logo to doctors does not tantamount to giving gifts to doctors but it is regarded as advertising expenses. As regards sponsoring doctors for conferences and extending hospitality, pharmaceuticals companies have been sponsoring practicing doctors to attend prestigious conferences so that they gather contemporary knowledge about management of certain illness/disease and learn about newer therapies. We found that the disallowance was made by the AO by relying on the CBDT Circular dated 01.08.2012 onwards. However, the Circular was not applicable because it was introduced w.e.f.01.08.2012. i.e. assessment year 2013-2014, whereas the relevant assessment year under consideration is 2010-2011 and 2011-2012. Accordingly, we do not find any merit in the disallowance so made by the AO in both the assessment years under consideration." 11. Reliance was also placed by learned AR on the order passed by the Co-ordinate Bench on similar facts in the case of Solvay Pharma India Ltd., 169 ITD 13. As per learned AR, MCI guidelines cannot be applied to the pharma company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee vide letter dated 11 March 2014 submitted the details of conference expenditure and entertainment expenditure incurred post 14 December 2009 (i.e. from the date when the notification was published in the Official Gazette of India). Also, the assessee contended that the expenses incurred by the assessee were not hit by the Circular and accordingly, the alleged expenditure ought not to be disallowed in terms of the said Circular. 17. We found that the conference expenses of Rs. 1,65,51,331 represent the following: (i) Expenses incurred in connection with attendance of faculty doctor or appellant's consultant doctor in a medical conferences - Rs. 33,30,321 (ii) Expenses incurred by sales staff during conferences - Rs. 31,98,259 (iii)Expenses incurred for purchase/hiring of materials during conferences - Rs. 8,06,705 (iv Expenses incurred for participation/sponsorship of conferences - Rs. 87,36,056 (v)Pro rata disallowance of conference incurred from 10 December 2009 to 13 December 2009- Rs. 4,79,990/- 18. We observe that the nature of the expenses .itself demonstrates that the expenses incurred are outside the purview of the MCI guidelines. In respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onference attendance of faculty doctors or doctors who are consultant of assessee we found that the business exigencies demand updating of knowledge of the doctors/surgeons to implant/use assessee's products. To achieve this objective, the assessee has to incur expenses in connection with facilitation of doctors / surgeons to attend medical conferences organised by well known medical organizations like Indian Association of Cardio Vascular Thoracic Anesthesiologist, Indian Society of Critical Care Medicine, etc. In this regard, Clause 6.8.1.(b) of MCI guidelines which prohibit doctors from accepting travel facilities for conference where they are 'delegates'. The MCI guidelines do not prohibit the doctors from accepting the travel facility for conference where they are faculty. Also, clause 6.8.i(g) of the MCI Guidelines allows a doctor to work for a pharmaceutical and allied health sector companies in advisory capacity, as consultant, as researcher, as treating doctors or in any other professional capacity. Accordingly, the assessee has appointed certain doctors as consultant to the company. 23. From the record we also found that the assessee does not provide any per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso deliberated on the judicial pronouncements cited by learned AR and DR during the course of hearing before us as well as referred by CIT in his order passed u/s.263 of the IT Act, in the context of factual matrix of the case. In this case, we found from record that the assessee is engaged in the manufacturing of pharmaceutical products. In the course of its business it has incurred expenditure on advertisement and publicity. While framing the assessment, AO has called for the detail of expenditure so incurred and examined the nature of expenditure and thereafter only AO has allowed the expenditure as having been incurred for the purpose of business. We had also carefully gone through the notification dated 11/03/2002 notifying the regulations issued by the Medical Council of India (MCI). The code of conduct laid down in the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('MCI Regulations') issued with effect from 10th December 2009 applies only to doctors and not to Pharmaceutical and Medical device companies. Accordingly, MCI Regulations are not applicable to assessee, the question of assessee incurring expenditure in alleged violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The act of giving something free of charge is incidental to the main objective of product awareness. Accordingly, it does not amount to provision of freebies. Consequently, there is no question of contravention of the MCI Regulations and applicability of Circular no. 5 of 2012 for disallowance of the expenditure. 22. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner. On the contrary, the assessee has brought to the notice of the bench the judgment of the Delhi High Court in the case of Max Hospital v. MCI in [WPC 1334 of 2013, dated 10-1-2014], wherein the Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d health care sector industries. Such an enlargement of scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provisions either under the provisions of Income Tax Law or by any provisions under the Indian Medical Council Regulations. The CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like 'contemporanea expositio' in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving administrative relief or for clarifying the provisions of law and cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scope of a different regulation issued under a different act so as to impose any ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
