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TMI Blog2018 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... de available by the assessee to the AO. We therefore find it proper for the ends of justice to set aside the issue to the file of AO to verify the claim of the company towards the expenses incurred upon the persons other than the doctors as indicated by the authorities below in the order impugned before us. We make it clear that the assessee will co-operate with the AO by furnishing the details of those persons to ascertain the actual expenses incurred on the medical practitioners which only required to be allowed after being fully satisfied upon verification of the details to be furnished by the assessee at the time of assessment. Assessee is thus partly allowed for statistical purposes - I.T.A. No.3524/Ahd/2016 - - - Dated:- 26-10-2018 - SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER For The Appellant : Shri Rajendra |Rajpur, AR For The Respondent : Shri Lalit P.Jain, Sr. DR ORDER PER Ms. MADHUMITA ROY - JM: The instant appeal has been filed by the Assessee before us against the order dated 04.10.2016 passed by the Commissioner of Income Tax(Appeals)-1, Vadodara [Ld.CIT(A) in short] for Assessment Year (AY) 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the interest expenses and administrative expenses, the AO invoked Rule 8D and made disallowance of ₹ 1,54,414/-. 4. During the appellate proceedings, the Ld. CIT(A) granted partial relief to the assessee with the following observations: 4.2 During the course of the appellate proceedings, the AR of the appellant has submitted that the AO has not recorded any satisfaction as prescribed under section 14A and has straight away proceeded to disallow such expenses. Further, it was claimed that on those investment on which dividend was received should be considered for Rule 8D and not the entire investment made for the purposes of earning exempt income. Accordingly, it was submitted that out of total investments, ₹ 1,70,70,591/- in AY 2012-13 and ₹ 1,39,67,338/- in AY 2011012 pertains to investment on which no exempt income was earned. The appellant relied upon certain decisions. But, these decisions have been in cases were no exemption has been earned by the appellant. Whereas, in the current case, the appellant has earned exempt income and claimed such exemption also. Under such circumstances, the entire investments made for the purposes of earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A does not arise and therefore there was no question of any estimation of expenditure in respect of interest and administrative expenses under Rule 8D. 6. The Ld.DR relied upon the order passed by the authorities below. 7. We have considered the judgment cited by the Ld.AR in support of his case. While deciding the issue, the Hon ble High Court observed as follows: 9. Considering the aforesaid facts and circumstances, more particularly the fact that the assessee was already having its own surplus fund and that too to the extent of ₹ 2319.17 Crores against which investment was made of ₹ 111.09 Crores, there was no question of making any disallowance of expenditure in respect of interest and administrative expenses under Section 14A of the Act, therefore, there was no question of any estimation of expenditure in respect of interest and administrative expenses of ₹ 54,39,916/- under rule 8D of the Rules. Under the circumstances and in the facts of the case, narrated herein above, it cannot be said that the learned Tribunal has committed any error in deleting the disallowance of expenditure of ₹ 54,39,916/- incurred in respect of interest and admin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular he further submitted that though the approve of the trust expired on 31.03.2011, the same was automatically renewed in perpetuality since the same was not specifically withdrawn. Therefore, according to the assessee the said trust was eligible to receive donation relevant financial year 2011-12. He further added that the Ld. CIT(A) overlooked this particular Circular in the appellate proceedings and disallowed the donation of ₹ 15,75,000/- u/s.80G of the Act which is otherwise legally admissible to the assessee as claimed. The copy of the Trust Registration Certificate is also on record at page Nos.2 3 of the paper-book No.2 as pointed out by him. 12. On the other hand, the Ld. DR relied upon the orders of the authorities below. 13. We find from the order passed by the Ld. AO that the registration certificate was not provided to him by the assessee and practically on that basis deduction u/s.80G was not allowed. Subsequently, the Ld. CIT(A) deleted the addition made u/s.69C as made by the AO, but disallowed of deduction u/s.80G on account of payment of ₹ 15,75,000/- to Disable Welfare Trust of India where we joint issues. The CBDT Circular No.7/2010 [F.No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(4). To remove any doubts in this regard, it is reiterated that any approval under section 80G(5) on or after 1-10-2009 would be a one time approval which would be valid till it is withdrawn. 13.1. Taking into consideration the essence of the particular Circular, we are of the considered opinion that the assessee is entitled to get deduction u/s.80G of the Act since the Disable Welfare Trust of India was rightly eligible to receive donations as claimed by the assessee. 14. The third ground has not been pressed by the Ld. AR and therefore the same is dismissed. 15. The upholding of capital nature of expenses of ₹ 3,34,854/- made by the Ld. CIT(A) has been challenged in Ground No.4. 16. The assessee company regularly organizes academic conferences for doctors known as CARDCON i.e. Cardiac Conference. For such purchases, the company receives contributions from pharmaceutical companies. The assessee debited an amount of ₹ 28,36,700/- under the head travelling expenses . From the details furnished, it was found that the ledger of expenses was against the seminar arranged at Hong Kong. The details of purposes of such seminar names, addresses and PANs of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logists of the company through presentations/case study discussions/interactive sessions in order to provide correct diagnosis and treatment with the help of new technological developments in the field of cardiology; the same is conducted particularly to update the doctors with such latest developments in treating the patients. This surely enhances the knowledge and upgrading of skills of the professionals and thus upgrading the business of the company. The entire arrangements for the conference including Air ticket booking, hotel/conference venue booking/lodging and boarding/other travel arrangements/Visa and Passport were outsourced to SOTC Company. The expenditure incurred for the conferences have also been allowed as deductible expenditure over the years and the surplus earned by the assessee company in organizing such conference has been offered to tax. MCI guidelines and the Circular No.5 of 2012 dated 01.08.2012 has no role to play in deciding the issue since the same has not been issued with retrospective effect. In support of the same, he relied upon the judgement of Solvay Pharma India Ltd. vs. Principal Commissioner of Income-tax reported at (2018) 89 taxmann.com 249 (Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions') and has no jurisdiction to pass any order affecting rights/interests of any Hospital, therefore the MCI could not have passed and has not passed, any order against the petitioner which can be assailed before this Hon'ble Court in writ jurisdiction. ( iv) That a simple observation made by the Ethics Committee of MCI about the state of affairs in the petitioner Hospital has harmed no legal right/interest of the petitioner for which a writ can be issued by this Hon'ble Court against the answering respondent. ( v) That the petitioner contends that an adverse order has been passed by the MCI and that too without hearing the petitioner. Both these contentions of the petitioner are incorrect and frivolous as firstly, there is no adverse order made by the MCI against the petitioner as MCI does not have any such jurisdiction; secondly, the petitioner was throughout represented before the Ethics Committee of MCI during the proceedings initiated on complaint of one Mr. Sunil Manchanda against some of the doctors working in the petitioner hospital. The petitioner was heard through its advocates on several occasions and had submitted several documents also in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeks to disallow expenditure incurred by pharmaceutical companies inter-alia in providing 'freebies' to doctors in violation of the MCI Regulations. The term freebies' has neither been defined in the Income-tax Act nor in the MCI Regulations'. However, the expenditure so incurred by assessee does not amount to provision of 'freebies' to medical practitioners. The expenditure incurred by it is in the normal course of its business for the purpose of marketing of its products and dissemination of knowledge etc and not with a view to giving something free of charge to the doctors. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable to Pharma or allied health care companies. If section 37(1) is applicable to an assessee claiming the expense then by implication, any impairment caused by Explanation 1 will apply to that assessee only. Any impairment or prohibition by any law/regulation on a different class of person/assessee will not impinge upon the assessee claiming the expenditure under this section. 24. We observe that the CBDT Circular dated 1-8-2012 (supra) in its clarification has enlarged the scope and applicability of 'Indian Medical Council Regulation 2002' by making it applicable to the pharmaceutical companies or allied 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 circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve effect so as to apply the same in the case of the assessee for the AY 2012-13 answered by the ratio laid down in the judgement of Cadila Pharmaceuticals Ltd. vs. DCIT, Range-1 Circle-1(1)(2), Ahmedabad by the Co-ordinate Bench in favour of assessee. The relevant portion dealing the issue in such judgment is as follows: 28. We have heard both the parties. Mr. Soparkar is very fair in pointing out at the outset that this tribunal's decision in Asstt. CIT v. Liva Healthcare Ltd. [20161 161 1TD 63/73 taxmann.com 171 (Mum. -Trib.) upholding such a disallowance in case of pharmaceutical companies offering free samples to doctor post introduction of the relevant product in market after establishing end use; is hit by Section 37(1) explanation. He however refers to another co-ordinate bench decision in Macleods Pharmaceuticals Ltd. v. Addl. CIT [20161 161 ITD 291/74 taxmann.com 250 (Mum. - Trib.) holding that the above Board's circular dated 01.08.2012 would not have any retrospective effect since not operating in assessment years 2010-11. He further quotes another co-ordinate bench decision in Dy. CITv. PEL Pharma (P.) Ltd. [20171 163 ITD 10/78 taxmann.com 36 (Mum. - Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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